Statement by Mr. José Antonio Ocampo, Under-Secretary-General for Economic and Social Affairs to the Hilton International Humanitarian Symposium “The Global Challenge of Inequality”
New York, 30 October 2006

In the United Nations Millennium Declaration, World Leaders made a bold statement on globalization: “We believe that the central challenge we face today is to ensure that globalization becomes a positive force for all the world’s people”. Yet, the implied vision remains a distant reality. The most disturbing aspect of the current globalization process is, indeed, the uneven and unbalanced distribution of its benefits.

We see this, first, in growing international inequality. Within the booming world economy of the past three years, most developing countries have been growing rapidly. This is a welcome development, but one that has taken place within the context of the significant worsening of the gap between industrial and developing countries during the previous quarter century. Particularly troubling is the large and growing income gap between the industrial world and Sub-Saharan Africa. But equally worrisome is the large number of “growth collapses” experienced in the developing world during the final two decades of the twentieth century, with only a few developing economies, in East and South Asia, able to sustain high rates of growth.

We also see widening inequality within countries. According to research undertaken by the United Nations University’s World Institute for Development Economic Research, 48 out of 73 countries for which such information is available experienced a deterioration of income distribution during the last three decades, and most of them in a substantial way, including major economies such as China, Russia, and the United States. And those 48 countries contain 87.5% of the population of the sample countries. Only nine countries, representing 2.7% of the sample population, experienced a clear improvement in income distribution. In the rest, income distribution remained essentially unchanged.

What these numbers mean is that approximately nine out of ten citizens in the world live in countries where income distribution has deteriorated. This is a staggering figure. Rising inequality has truly become a global pandemic. And it is undercutting efforts to secure human rights and fundamental freedoms for all — civil and political rights, and economic, social, and cultural rights.

Making globalization “a positive force for all” thus means, first and foremost, making it more equitable. And that requires an end to approaching the social dimensions of globalization as an afterthought to the economic. Such was the essential message of the World Commission on the Social Dimensions of Globalization, convened a couple of years ago by the International Labour Organization.

This revolution in approach will require active and consistent human development efforts, supported by adequate fiscal resources. The experiences of developing countries show that major advances in human development can be achieved, even at relatively low levels of income. The same is true of the allocation of fiscal resources to social spending, which is, in a significant sense, a policy choice. For example, in my native region, Latin America, some countries assign only 6 per cent of GDP to social spending, while others allocate over 20 per cent. Yet, for low-income countries, this requires consistent provision of official development assistance, and thus the meeting by all industrial countries of the UN target of 0.7% of the GNI in ODA. Other international factors may also be crucial. It is important, in particular, to reflect on whether the adequate allocation of government revenues for social spending has become increasingly constrained by the world competition in place to reduce taxation of capital income.

Progress in human development, while essential in itself and necessary to guarantee access to economic opportunities, cannot alone bring social progress. Equally, and perhaps even more important, is to guarantee that economic growth is inclusive. The “inclusiveness” of economic growth is certainly not an automatic outcome of market forces and must be ensured through explicit public choices. And these choices involve at least three dimensions.

First is placing employment at the centre of economic policy, including the actions of independent central banks. The capacity of economic growth to generate decent and productive employment, especially for the poorest, is just as important as growth itself. Employment generation is, in fact, the key link between economic and social progress. Unfortunately, we are seeing, in every region, inadequate generation of quality employment, even in developing countries experiencing rapid economic growth. And the growing under-utilization of labour has exacerbated productivity gaps between different economic agents in developing countries, particularly between workers engaged in formal economic activities and those engaged in informal ones.

Second is to address the growing vulnerability to risks faced by workers and, more generally, by the poor, including: the insecurity in incomes and jobs generated by more competitive environments, the more volatile economic growth environment experienced by many developing countries, the underdevelopment of social protection systems in most developing countries, and the difficulties experienced by many social security systems in middle- and high-income countries, which has led to privatization of risks. This means moving beyond the narrow conception of social protection systems as compensatory mechanisms for adverse social effects generated by economic processes — that is, as mere “social safety nets”. It requires integrated economic and social policies that aim at preventingcrises and developing permanent social protectionsystems, based on the principles of solidarity and universal coverage, and that manage basic risks in an integrated way, particularly nutrition, health, disability, ageing, and unemployment. It will, admittedly, take longer to develop such systems in countries where the labour force is largely rural or informal, but this should be the ultimate objective of efforts in this area.

The third dimension is placing the issue of growing income and wealth inequalities at the centre of economic policies. A comparison of income inequality among industrial countries shows that those with a better distribution of income also have a more developed social welfare state. But this means confronting the growing share of capital income that characterizes the world economy today and the bias in demand for labour towards high skills, which has led to a worsening distribution of labour income between skilled and unskilled workers. Progressive income taxation is essential for this task, but an instrument that seems to be under increasing stress in the current global environment. Perhaps we need even more ambitious policies on that front. And helping the poor and even the middle classes to build assets should be a priority of economic policies. This includes access to housing and the development of productive assets, which will be critical for the development of small and medium enterprises. As we well know, these firms and productive self-employment are major mechanisms for job creation worldwide.

Cutting across these three dimensions of public choice is the essential need to develop a genuinely integrated approach to economic and social development. This will in turn require not only a change in outlook, but new institutions to support the development of integrated policy frameworks. At the national level, these integrated frameworks ought to start by designing rules to ensure the “visibility” of the social effects of economic policies and by asking macroeconomic authorities (including independent central banks) regularly to examine the effects of policies on the main social variables, particularly employment and incomes of workers. Similarly, finance ministers should be asked to include analysis of likely distributive effects in any budgetary or tax reform initiative presented to their legislatures. And public entities entrusted with technological, industrial, or agricultural policies ought regularly to evaluate the distributional consequences of their programmes. The integrated frameworks should ultimately be developed into efficient coordination systems between economic and social authorities, in which social objectives are effectively mainstreamed into economic policy decision making — that is, into monetary, fiscal, trade, production, and technology policies.

At the international level, the most visible manifestation of globalization’s economic dimensions are the global integration of financial markets, the liberalization of trade, the hegemonic presence of large multinational firms, and the growing importance of intellectual property rights. These trends, too, must be evaluated in terms of their economic and social implications. The United Nations is the central place to bring these two dimensions of globalization together. And, indeed, the UN Development Agenda which has been developed through the UN global Conferences and Summits since the 1990s provides the best available framework for integrating the three dimensions of sustainable development — economic, social and environmental — and for pursuing a comprehensive approach rooted in respect for all human rights. In this task, international civil society has been always an essential ally of the United Nations.

I thank you for your attention, and I thank our generous hosts for bringing all of us together for this years’ Hilton International Humanitarian Symposium. I very much look forward to the outcome of the Symposium.