In 2010, the G20 committed themselves to promoting inclusive and sustainable economic growth. They argued that ‘for prosperity to be sustained it must be shared’ and also endorsed ‘green growth’, which promises to decouple economic expansion from environmental degradation. But G20 countries have some way to go to match this commitment. This paper assesses their record, and points the way forward.
The stakes are high: over half the world’s poorest people live in G20 countries, and rising inequality threatens to prevent them benefiting from economic growth. Income inequality is growing in almost all G20 countries, even while it is falling in many low- and lower middle income countries. Meanwhile, G20 countries alone consume almost all the natural resources that the planet is capable of replenishing each year. Unsustainable patterns of usage are driving dangerous climate change and depleting the natural resources upon which poor people depend for their livelihoods.
This means that many of those living in poverty will miss out on the benefits of growth, yet also bear the costs of this economic expansion through the impacts of climate change and environmental degradation.
If G20 countries are to secure a prosperous future for all their citizens, they must now practice what they preach and tackle these linked, but distinct, challenges of equality and sustainability.
Inequality erodes the social fabric, and severely limits individuals’ opportunities to escape poverty. Where income inequality is high or growing, the evidence is clear that economic growth has significantly less impact on poverty: a trickle-down approach does not work.
Moreover, recent research indicates overwhelmingly that inequality is detrimental to economic growth itself. Inequality leads to instability, prevents productive investment and undermines the institutions of government. Protests emerging around the world show the extent to which citizens are concerned about inequality’s corrosive power.
And yet, inequality is growing in most G20 countries. Using a new dataset, we show that only four G20 countries – including just one high-income country, Korea – have reduced income inequality since 1990. In this, the G20 is being outdone: a large number of others, including low-income and lower middle-income countries, have reduced income inequality in this period.
Our analysis illustrates just how dangerous this trend is. In South Africa, our model predicts that more than a million additional people will be pushed into poverty between 2010 and 2020 unless rapidly growing inequality is addressed. The rewards flowing from increased equality are similarly dramatic. In Brazil and Mexico, bringing inequality down to the level in Indonesia (close to the G20 median) could, according to our calculations, reduce the number of people in poverty by 90 per cent in the space of a decade.
This analysis focuses on income inequality, which though important is just one of the many inter-related forms of inequality. In its broadest sense, inequality denies the rights of whole sections of society to be treated with dignity and respect. In many G20 countries, at least half the population are affected: the often subordinate status of women and girls translates into less access to health and education, lower incomes, and poorer life chances than men.
Life depends on the planet’s natural capital, the natural resources that we use to produce food, water and energy. But the current trajectory of usage is deeply disturbing. No country (in the G20 or outside) has yet demonstrated that it is possible to combine high average incomes with sustainable natural resource use.
However, several middle-income countries have succeeded in reducing the resource-intensity of their economic growth. Between 1991 and 2007, Mexico’s gross domestic product (GDP) grew four times faster than its CO2 emissions. China’s grew two and a half times faster. By contrast, the G20’s high-income countries have on the whole performed very poorly. Only four G20 countries have reduced their carbon emissions since the Rio Summit in 1992.
The dangerous climate change and environmental degradation that results hits the poor hardest. The poor not only depend most on natural resources for their livelihoods, but also tend to live in places disproportionately affected by climate change. They can also lack the rights or power to secure access to resources in times of scarcity.
Oxfam’s recent report Land and Power documents detailed cases of land grabs depriving the poor of access in Uganda, Indonesia, Guatemala, Honduras, and South Sudan.
The G20 member countries must therefore act far more decisively to bring their use of natural resources back within sustainable limits. The high-income countries among them must lead in demonstrating that environmentally sustainable economic growth is possible.
- Extracted from the summary of the report: Left Behind by the G20? How inequality and environmental degradation threaten to exclude poor people from the benefits of economic growth, Oxfam, January 2012. The summary and full length report (with French, Spanish and Portuguese translations) can be accessed here.