This document summarizes the key issues around global inequality. It finds that inequality exists between people, countries, and globally and has been increasing in many places. Common causes of inequality include political choices that favor neoclassical economic theories and "winner-take-all" politics. Contrary to economic theories, inequality hinders growth and globalization has increased within-country inequality. High inequality correlates with financial instability and social problems. To address inequality, the document calls for reshaping global capitalism to be more inclusive and sustainable through new policy goals, theories, and political alliances.

1. Reshaping global
capitalism
Addressing the causes of inequality
Monika Sie Dhian Ho
Frans Bieckmann

2. http://www.thebrokeronline.eu/en/Dossiers/Inequality

3. Debate at The Broker

4. http://www.thebrokeronline.eu/Blogs/Ine
• more than 40 opinion pieces
• Rolph van der Hoeven, Stephan Klasen, Harry
Boyte, Francine Mestrum, Charles Gore, David
Woodward, Andrew Berg & Jonathan Ostry,
Martin Ravallion, Adam Wagstaff, Ricardo
Fuentes Nieva, Andy Sumner & Alex Cobham,
Amanda Lenhardt & Andrew Shepherd, Lars
Engberg-Pedersen, Francisco Ferreira, Nick
Galasso, … and many others

5. Introduction
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•
•
•
different forms of inequality: the numbers
explaining inequality: some common causes
broken promises of economic theory
the urgency of reshaping global financialized
capitalism
• towards a more inclusive and sustainable
capitalism

6. different forms of inequality

7. Inequality: the numbers
1.
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Unequal people:

80 percent of the world’s population now live in very unequal places.

In many countries, levels of inequality have risen over the past decades
Unequal countries:

If we count each country the same, inequality between countries continues to
rise,

High growth rates in China and India exert downward pressure on populationweighted intercountry inequality
Unequal world:

Global inequality is extremely high

Global inequality has increased steadily since the 19th century, with China and
India exerting downward pressure however on global inequality since mid-1980s
Unequal tails:

Middle income groups (deciles 5 to 9) capture around half of GNI.

Rest is shared between the richest 10 percent and the poorest 40 percent, but
the share of those two groups varies considerably across countries

9. Explaining inequality
Man-made forces of politics rather than
‘unavoidable and economic’ forces of nature:
 Historical and unique explanations (e.g. Latin
America)
 Our focus: common driving forces:
 Political choice to apply neo-classical theory
 Winner-take-all-politics (Palma: ‘its the share of the
rich, stupid’)

10. Broken promises of economic theory
Inequality is good for growth
Wealth accumulation at the top will trickle-down
‘Things have to get worse before they can get
better’
Globalization will be accompanied by convergence
in countries’ incomes
Globalization will have a positive effect on withincountries inequality

11. The urgency of reshaping global capitalism
Normative reasons
Instrumental reasons
 High inequality hinders growth


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It hinders the development of human capital
It negatively affects aggregate demand
It negatively affects entrepeneurship
It leads to political polarization, lower social trust, excessive rentseeking by a rich elite
 High inequality correlates with financial instability
 High inequality correlates with social problems
 High inequality (high Palma values) correlates with slow
progress on MDG poverty targets

13. some points for debate
• how to combine the many separate discussions
and more or less loose academic debates into
one coherent and comprehensive narrative with
real political appeal, that can seriously challenge
the prevailing economic model and policies?
• What elements are lacking for such a narrative?
What are the contradictions, dilemmas,
obstacles, incoherencies in thinking?
• What concrete policies can we propose? At the
national level and at the global level (Post 2015)?

14. Towards a more inclusive and
sustainable capitalism
• Broadening our policy goals: inclusive and
sustainable global development
• Improving our policy theory to achieve these
goals
• Creating new alliances and breaking the
mechanisms of winner-take-all-politics

15. Post 2015