The problem with inequality in developing countries

Inequality and climate change: Two new and pressing challenges to global development which, together, form a heady mix for researchers, governments and NGOs striving to address global inequalities.

Professor David Hulme’s recently launched book, ‘Should Rich Nations Help the Poor?” prominently features these two issues. The challenges around the inequality element in particular are further reinforced in a recent Policy Brief by Professor Stephan Klasen — a research collaborator of the Global Development Institute and the University of Manchester’s Chronic Poverty Research Centre with particular expertise in gender, chronic poverty and poverty measurement.

What do we know about the rising inequality in developing countries?

Since the 1980s the rising inequality within developing countries has been a key factor in the increase in social and political instability, making it no surprise that reducing inequality became a new goal within the Sustainable Development Goals.

Stephan Klasen comments that within-country inequality is responsible for the sharply rising share of all global inequality. Through the decomposable inequality measure (seen below) an underlying trend shows that between-country inequality has been falling since the 1970s whilst since 2000 the marked improvement in higher growth rates in many poor African countries also contributed to falling inequality overall. In contrast, in-country inequality has been rising substantially since 1980 and — if estimates for the top 1% were also included — the rise in overall inequality would be even faster.

So what does this mean for the world?

In harmony with the views of Professor Hulme’s book, Stephan Klasen clearly states in his latest policy brief that one of the biggest changes of recent times in terms of inequality is that we now live in a world where it matters nearly as much for your economic fortune if you are born rich or poor within a country as it matters whether you are born in a rich or poor country. This is a situation which means we should rightly be concerned about the rise of within-country inequality and the huge impact this type of inequality is having on lives and on the wider global inequality picture.

“We now live in a world where it matters nearly as much for your economic fortune if you are born rich or poor within a country as it matters whether you are born in a rich or poor country”
– Stephan Klasen

And this is where policymakers come in. These new inequality trends are not related to unchangeable economic forces. They depend to a great extent on the policy choices by governments. This means there is scope and opportunity for more a pro-active inequality reducing agenda. One which Stephan Klasen argues should be developed and led by the countries in question and one which, as David Hulme argues, other richer countries can and should support.