At this week's annual meetings of the World Bank Group and International Monetary Fund (IMF), the topic of inequality is buzzing. And rightly so given that extreme economic inequality is one of the largest barriers to ending extreme poverty. Buzz is great, but urgent and concrete actions are what we need to make a dent in the gap between the rich and poor.
The root of the problem is that in today's global economic and political system, the rules are rigged in favor of the very rich and hard working poor families around the globe are finding it harder and harder to simply survive. Stunningly, 85 individuals own the same amount of wealth as 3.5 billion people on this planet. Such wealth concentration slows down growth, impedes poverty reduction and compounds other inequalities.
For too many years at the IMF and the World Bank, the blind belief that growth "trickles down" ruled the day. But action at this year's annual meetings could - and should - signal the start of a new era focused on policies that deliver for the poorest people and, therefore, for all of us.
The topics lined up for discussion this week look good on paper and in rhetoric, but action must prevail. The IMF has started to put proposals on the table with its fiscal policy and inequality paper, and Christine Lagarde has insisted on the need to invest in health and education. But we have yet to hear how this new focus will be put into practice and how it's going to change the guidance given to countries. A recent report by the European Network on Debt and Development on conditionality shows that there is still a discrepancy between positions held by the IMF's headquarters in Washington, DC and its practices on the ground. For example, the IMF's advice to countries such as Spain to increase the VAT and decrease corporate income taxation raises doubt on whether the IMF has yet really changed.
Concrete proposals have been missing at the World Bank, but there's talk that perhaps President Kim will unveil a new plans to tackle inequality this week. They are overdue.
As the global institutions mainly responsible for promoting policies that have increased inequality, such as cuts in social spending and increased privatization, the World Bank Group and the IMF have a special responsibility to do a U-turn toward repairing their mistakes. And they must put inequality and poverty at the center of discussions on the state of the global economy. This is essential to put the world economy in order and to achieve their goal of ending poverty by 2030.
Concrete actions they must consider in their necessary U-turn include:
•Committing to measuring the gap between the richest 10 percent and the poorest 40 percent;
•Advising countries to invest more in free and public health and education and to make their tax and fiscal systems more progressive;
•Helping countries fight corporate tax avoidance and tax evasion;
•Increasing support for small holder farmers, who provide the majority of food in developing countries, but earn the least income globally;
•Developing more research on the impact of different types of policy intervention including health, education, agriculture, and the role of the private sector on inequality;
•Promoting investment in a private sector that has development objectives in mind and respect the environment and the right of the poorest people; and
•Ending support for the International Monetary Fund's austerity measures that cut programs that benefit the poor and asked for privatization of services that increase inequality.
Back at the Spring Meetings in April, World Bank President Jim Kim suggested we should recruit more people in "pinstriped suits" to find ways to get billions and even trillions of dollars from corporate wealth into struggling economies by wisely invested in health and education programs. Pinstriped suits or not, by shutting down off-shore tax havens and ending corporate tax dodging, which costs developing nations $100 billion every year, we could make a huge difference. It's time to take action.