Ricardo Fuentes-Nieva draws on his experiences with inequality and Oxfam’s Even it Up Campaign

What are the links between inequality and development?

Inequality is a central part of development and this has changed in recent years. 20 years ago, if you had asked this question in the corridors of any multilateral organization in Washington, people would have said that inequality was a distraction, a red herring. Today, people realize that the extreme concentration of income and wealth comes with the extreme concentration of political power to decide the institutional setup of different countries. Inequality determines economic and political systems and the narratives around societies. It creates a gap between the societies we want and the societies we have. This is very dangerous as it undermines the social contracts in different societies.

There has been a change. The level of discussion around the topic of inequality is high up the policy agenda. Changing the structures that permit high levels of inequality would mean that we need to challenge certain privileges and redistribute not only income and wealth but also power. We are in a situation where high level leaders might recognize the problem but do not have the political capital or will to actually go through the changes that would reduce inequality. We are one step closer but we are not there yet.

What are the challenges in measuring inequalities?

First, there are different dimensions of inequality. We initially focused on income and wealth inequality because there was more information available. But when you look at the disparities in standards of living between women and men for example, there is a lot less systematic information across countries. Part of the challenge in measuring inequality is that it is a multidimensional problem. There are multiple faces of inequality and discrimination and some of them are really hard to capture in measurable indicators. While these faces of inequality are not the same, they are closely related. Therefore, we need to use the proxies of the indicators that we have to understand the challenges of these intersectional inequalities. At the same time, we need to invest more in creating the databases to measure the different dimensions of inequality.

Is GDP a good measure to monitor inequality? Are there better indicators, and which ones?

GDP was not constructed to measure inequality, but rather to measure economic activity. Any indicator used to measure economic activity will not give you a sense of the distribution. There are several other indicators, the most common being the GINI coefficient and the shares of income between the top and bottom segments of the population. The work of individuals such as Thomas Piketty and Tony Atkinson have helped to illustrate top end income distributions, and we are learning a lot more about wealth distribution. But again, there are a lot other dimensions of inequality, and there is not one single indicator. It is important to start thinking of dashboard indicators that would allow us to distinguish the different facets of inequality.

Have there been changes in how inequality is measured over time? How is the data revolution relevant to assessing inequality?

There are two ways that stand out in having changed the way we see and understand inequality. One is the use of fiscal data to look at what is happening at the top end of the distribution and how that is expanding across countries. This happened because household surveys, which are often used to calculate the distribution of income, don’t access the richest people in society. So the levels of inequality that we were calculating with household surveys were underestimated. The work of Lucas Chancel, Thomas Piketty, Facundo Alvaredo, Gabriel Zucman, and Emmanuel Saez using fiscal data reveals not only the share of income but what was happening over time to that share of income. The second is looking at the distribution of wealth, because this was not considered in household surveys. The work done by Anthony Shorrocks, published by credit Suisse, was really important and was used in the Oxfam papers.

What are the key messages from the latest OXFAM “Even it up” report?

Our message is very clear. Inequality is the result of political decisions. The changes required to reduce inequality will require political will and political capital. There are many different policies that have been tested over time but these require us to rethink our social contract and the nature of our democracy. It would also mean that we rethink the relationship between the state and citizens. Nonetheless, there are signs that societies are ready to undertake these conversations.

What does data on extreme wealth say about gender?

The large majority of billionaires in the world are men. This is a representation of a society that was constructed by men for men. This is reflected also by the evident pay gaps across the world and at different levels. It is important to bring this at the centre of the discussion.

Is it useful to compare inequality between and amongst countries, (for example in Europe or North America?

Inequality between countries has been falling in the past 25 years, and that is the result of globalization. If you look at GDP per capita, the gap between the richer and poorer countries has been decreasing. That is a reason why GDP is not a good measure of inequality, because when you look at what is happening within countries, you see that in most countries inequality is increasing. This is a problem because societies are organized around nation states and it is nation states which have the power to implement policies to reduce the gaps between the rich and the poor. When we see these gaps increasing at the national level, it weakens the social contract, credibility and legitimacy of democracies across the world. Furthermore, it creates the process of political capture, when people with more economic resources have more influence in politics and can transform political decisions in their favour. It’s a huge issue. So we need to distinguish the inequality between countries from the one within countries which creates problems for the way we understand societies.

Which policies can be used to address inequality? Do you know any concrete examples of successful policies?

There are many successful examples in history. For instance, minimum wage policies have been really important in reducing inequality. The strengthening unions have contributed to creating a balance of power between capital and labour. Child benefit support, inheritance taxes, higher top marginal taxes rates for income, capital endowments are all policies that have worked to reduce inequalities. The real question is not whether there are policies that can be successful but rather what is the context in different national settings that would allow these policies to be implemented in a sustainable way. For instance, public investment in education is an investment that takes decades to pay off and reduce inequality. This is part of the conversation we need to have - how to create the political understanding, capital and will to implement these policies sustainably and over sustained time periods. The national fight to reduce inequality does not only concern developing or emerging economies, it concerns developed countries too. At the centre of the conversation is, what kind of societies do we want to be?

Do you see any potential links between the agenda on social and economic inequality and environmental issues, for example environmental taxes on mineral extraction or carbon emissions?

Carbon emissions is a very regressive activity, because the richer you are the more carbon you emit. That holds for individuals and for countries. A carbon tax that would be environmentally good would also be redistributed. I have not thought about taxing minerals but it is definitely an idea to be explored.