What do we know about the politics of reducing inequality? Not much – it’s time to find out

February 13, 2015 5 By Duncan Green

Spent a fun day at the Developmental Leadership Program annual conference in Birmingham yesterday. I was on a panel pitching an idea for a research programme thatKATL has got me very excited (along with David Hudson and Niheer Dasandi from University College London). Here’s my pitch.

One of my formative influences as a policy wonk was watching the impact of Ha-Joon Chang’s great book Kicking Away the Ladder on the Doha round of global trade talks. Ha-Joon showed how all the rich countries that were using the WTO to urge poor countries to liberalize had done precisely the opposite when they themselves were on the way up. Germany protected infant industries, while in the US Alexander Hamilton more or less invented industrial policy.

The book came out in 2002, shortly after the launch of the Doha Round, and Ha-Joon was a regular visitor to the WTO in Geneva, where developing country delegates lapped up his message. We even co-authored a paper on the rich countries’ efforts to introduce investment rules at the WTO with the subtitle ‘Do as we Say, Not as we Did’. I have no idea how you would set about proving it, but I am sure Ha-Joon’s writings helped strengthen their resolve to resist the pressure for premature liberalization.

pikettymaniaA few other books have similarly mined history to discover the policies of now successful countries – Oxfam used Development with a Human Face by Santosh Mehrotra and Richard Jolly, as a key source for understanding how countries achieved universal access to health and education. Then last year of course, we had Thomas Piketty, and suddenly everyone was talking about the history of inequality and the case for redistribution, wealth taxes etc.

The point about looking at the origins of historical success on any given topic is that it liberates us to think about, and propose a wider range of policy options than whatever is the received wisdom of the day. I would love to see a whole series of ‘lessons of history’ books – on tax reform, welfare systems, rights etc etc. So let’s start with inequality, given that it is top of everyone’s agenda right now.

The historical narrative we currently use to discuss what to do about inequality is limited and Northern – the New Deal in the US and the origins of the UK welfare state are far too prominent, perhaps with recent improvements in Brazil lobbed in. But a quick scan of the numbers shows that there are many more episodes of redistribution to look at (see table for some other candidates).

But as well as looking at the policies involved, we want to go one step further. What were the politics that meant that these countries, 5 countries for politics of Redistributionat these moments, started to tackle inequality? And what were the politics that led to the end of those efforts?

As a warm up I spent a day in the British Library and looked at the 5 countries in the table. On a quick skim of the history of their redistributive experiments, I identified some possible common factors for further study:

  • New political parties, often linked to social movements (Brazil, Bolivia) and/or peasant parties (Sweden)
  • Shocks (race riots in Malaysia) and big political transitions (demilitarization in Brazil)
  • Existential threats (Russian Revolution in Sweden)
  • New constitutions that changed the nature of politics (Brazil, Bolivia)
Malaysia's shock, 1969

Malaysia’s shock, 1969

 

And some things which you might have expected to be a problem, but weren’t

  • Curse of Wealth – big commodity booms in Bolivia and Brazil coincided with redistribution
  • Ethnic Diversity: Malaysia and Mauritius were both ethnically divided, but able to redistribute. In fact it may even be the case that having political and economic power in the hands of different groups can lead to them having to do a deal (though it can also lead to conflict – we need to try and understand what determines the way it goes).

 

The discussion in Birmingham added a lot of new angles to this initial pitch:

  • Decentralization in the run up to the distribution period, in encouraging localized policy experimentation, which helped develop tools like cash transfers and participatory budgeting in Brazil
  •  ‘Coalitions of commitment’ bringing together state insiders and grassroots outsiders to push through redistributive programmes.
  • Narratives, national myths, and the use of symbols to generate momentum and weaken opposition to reforms.
  • The spread of primary and secondary education in reducing the return to skills (i.e. more educated people, so the wage differential between skilled and unskilled falls, bringing down income inequality). Big factor in Brazil, apparently.

 

But perhaps the biggest new element was Frances Stewart’s work on horizontal v vertical inequalities. Horizontal inequalities affect groups – based on ethnicity, gender, region etc, whereas vertical inequalities are between individuals, e.g. income, wealth. Frances thinks we will find that horizontal inequalities are often the triggers for redistribution (eg race riots in Malaysia), but the impact of subsequent reforms affects both. We’ll need to explore both kinds of inequality in the case studies.

There were some other intriguing questions raised, which hopefully the research can try to answer – was falling inequality a conscious aim of the government, or an unintended, but happy consequence of something else, eg a shift to labour intensive manufacturing in pursuit of growth (Mauritius, Malaysia)? How much of this was about serendipity – a fortunate combination of circumstances, rather than conscious politics or policy?

Over the next few months, we’ll be refining the methodology for the case studies and looking for authors with specialist knowledge of the countries concerned – get in touch if you’re interested, or have any suggested reading (preferably on the politics – I think we’ve got the policies covered).