Growing Inequalities: Closing the Widening Inequality Gap Between Rich and Poor Countries

Growing Inequalities: Closing the Widening Inequality Gap Between Rich and Poor Countries

Goal 10 of the Sustainable Development Goals is reducing inequalities. It’s complete title is, “Reduce inequality within and among countries.”

The United Nations website states: “Inequality within and among countries is a persistent cause for concern. Despite some positive signs toward reducing inequality in some dimensions, such as reducing relative income inequality in some countries and preferential trade status benefiting lower-income countries, inequality still persists.”

Coincidentally, the aim is to achieve this goal by the end of this decade yet it doesn’t take a genius to realize that that the reverse is true, the income inequality and wealth gap among nations is growing.

According to the UN, two-thirds of the global population is affected by inequality. Its World Social Report 2020 reveals that the richest one percent of the population are the “big winners” in the changing global economy, increasing their share of income between 1990 and 2015. reports that the “global 1% captured twice as much growth as the bottom half” with economic gains being concentrated in a few nations such as the United States, Switzerland and Germany.

The World Inequality Lab, an organization that works with the UN to track distribution of economic growth, inequality and poverty, reports that Latin America, Middle East, and Africa are the most unequal region, with the top 10% of the income distribution capturing between 54% and 56% of the average national income.

Growing inequality between countries not only impacts the economic and social development of affected nations; it also creates a cruel cycle of frustration and discontent with inequality persisting across generations; an an outcome difficult to change when the national income is controlled by the richest 10%. These are the “harsh realities of a deeply unequal global landscape” as UN Chief Antonio Guterres puts it.

Vietnamese women repair fishing nets. Photo: Gin Patin.

As expected, COVID-19 has further exacerbated the inequality gap between countries. A new Oxfam report titled ‘The Inequality Virus‘ highlights the momentous destitution wrought by the virus, declaring that history will “likely remember the pandemic as the first time since records began that inequality rose in virtually every country on Earth at the same time.”

The report finds that the wealth of the world’s billionaires earned increased by $3.9 trillion between 18 March and 31 December 2020, with the world’s 10 richest billionaires seeing their wealth increase by $540 billion over this period.

At the other end of the spectrum, the UN’s International Labour Organization (ILO) estimated workers across the globe lost $3.7 trillion in earnings.

So the world’s billionaires earned trillions while workers lost the same amount of money due to the pandemic’s economic fallout while millions at the bottom lost their jobs – a textbook example of how the rich get richer and the poor get poorer.

This year, international economists forecast that the “world’s 20 largest economies are in a strong position to recover from the pandemic’s fallout” while COVID-19 pushes the rest of the world into the worst economic recession since World War II.

Then there is the issue of vaccine inequity. Access to the COVID vaccine highlights the inequality gap between the developed and developing countries, with high-income nations accounting for more than half of the doses injected worldwide while only 0.1% have been administered in low-income countries. Dr Tedros Ghebreyesus Adhanom, Director-General of the World Health Organization, said that the inequality is growing “more grotesque every day” and would lead one to question “whether rich countries really mean what they say when they talk about solidarity.”

Related Post: Vaccine Equity: How Developing African Nations Are Being Left Behind, Again

Mind the Gap

Member countries of the United Nations have pledged that “no country be left behind” and while there is no magic wand that would instantly make all nations prosper, there are structural changes that can be implemented so that people in developing countries have a decent quality of life – with access to sustainable livelihoods, education, healthcare, food and water. And there is also a consensus among member states that wealthy nations have a moral obligation to help poorer countries.

Women pumping clean water. Photo: UN/Flickr.

Bridge the Gap

One of the ways rich nations help out poorer ones is through development aid or official development assistance. These are funds intended to help enhance the quality of life of people living in less developed countries. Development aid can be given in the form of a grant or a loan with a favorable rate to make repayments more affordable for recipient countries. The funds are used to support programs that will improve people’s access to clean drinking water, quality health care and education, provide decent housing and livelihood, and environmental conservation. Development aid is also given to provide relief during national emergencies. This can be done through a bilateral agreement between the donor and beneficiary countries. Or it can also be coursed through international organizations such as the World Bank, USAID, and UNICEF who work with local partners to alleviate poverty in poor communities. The bottom line is, help should reach the people that need it to improve their quality of life and bridge the inequality gap.

Does development aid work?

Development aid has been the subject of numerous studies to determine its effectiveness and impact in bridging the gap between rich and poor nations. Many studies lend evidence that aid boosts economic growth in the recipient countries. In paper title ‘Assessing Foreign Aid’s Long-Run Contribution to Growth and Development‘ researchers Ardnt, Jones and Tarp concluded that “a sustained inflow of foreign aid equivalent to 10% of GDP is roughly expected to raise growth rates per capita by 1% on average.” Keep in mind that this 1% would mean a lot for developing countries with reported per capita growth rates of 3% to 4% per annum.

Development aid has also been beneficial in improving global health and saving lives. Deaths caused by HIV, malaria, and tuberculosis have been reduced significantly. Maternal deaths have also declined and we’re close to eradicating polio all over the world. It is undeniable that development aid has positive impacts on improving the quality of life of recipient nations. However, these funds only play a supporting role in the overall development of these countries. Ultimately, it will depend on the nation’s economic and political institutions to facilitate long-term development in their respective countries. So in effect, development aid is not enough to reduce poverty and close the gap between the rich and poor nations, good governance plays an important role too.

The problems of development aid

Studies also reveal problems with development aid, highlighting issues regarding the questionable motives of donor countries who seem to be pursuing their interests in the guise of helping recipient nations. Let’s take the US for example. In 2019, the US spent $47 billion on development aid and a big chunk of this budget went to Afghanistan, Israel and Jordan. Some experts say that the primary aim of this aid is not to help alleviate poverty in these countries but to reinforce its geopolitical aims.

Research also shows that many development aid programs come with strings attached, again to favor the donor country. For example, some countries would require that the funds be used to purchase goods that were produced by the companies in the donor country.

Women in India farming land. Photo: Flickr.

There are also reports suggesting that a “substantial amount of aid is pocketed by elites in recipient countries”, money which could have been used for health, education and infrastructure and help alleviate poverty.

Another concern is the growing dependence of poor countries on development funds from richer nations; the concern being that they recipient country will no longer exert enough effort to implement reforms and policies that would strengthen their economies or in other words, become reliant on a handout.

Finding a new approach to development aid

The ongoing issues of development aid indicates an ineffectiveness in closing the inequality gap among nations and understandably there are numerous calls for overhauling the system, improving development aid so that it is more effective and brings about lasting changing.

So what can be done? Research studies and experts offer up some suggestions:

First, a new framework is needed for understanding development aid. It shouldn’t be approached as rich nations extending assistance to poor nations. As prominent global development platform Devex puts it, “the future is much more about global and regional solidarity and countries being both aid providers and recipients simultaneously.” There is mutual prosperity to be gained from this agreement. This also balances the power issue between two or more nations who are involved in development aid.

With a new framework also comes new key indicators for designing, implementing, monitoring, and evaluating development aid. From poverty alleviation, the focus can be broadened to reducing inequalities at all levels and elevating standards of transparency and accountability to prevent corruption and abuse of power should also be

The U.S. Center for Strategic and International Studies also recommends conducting multilateral assistance reviews to identify strategic openings and opportunities and targeting aid where it is needed the most. It can be at the regional, national or local level. This will allow development aid programs to be tailored according to specific needs. Credibility of institutions facilitating development aid should also be considered. Leadership is critical as is encouraging more development actors into this new playing field.

Lastly, some experts want development aid to focus on economic goals such as job creation, prioritising workforce development and pioneering businesses to “crack the problem of getting fragile countries on track to develop.” There should be investments and innovations across various sectors because a stronger economy and a vibrant market, is the key to closing the inequality gap among nations.

Closing the gap

Our world today is significantly different from the post-World War II era when nations committed to helping each other to promote peace, safeguard human rights, and improve the living standards of everyone. The United Nations itself was founded in 1945 after World War II for this very reason, to improve relations and understanding between all nations and avoid serious conflicts that would give rise to another world war. Development aid has the power to promote global and regional solidarity and ensure no country will be left behind but needs to be drastically overhauled before climate change, COVID-19 and poverty threaten to intensify the already huge divide between the rich and poor.

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Cover image of drag netting on a beach in Ilocos Norte, Philippines by Bernard Spragg.

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