New Oxfam analysis reveals that global Commitment to Reducing Inequality (CRI) has just hit a new low. Anthony Kamande shares insights from Oxfam’s biannual CRI report that ranks 164 countries’ policies – and offers three big policy changes that should be firmly on the agenda at this week’s World Bank/IMF annual meetings.
Across the world, citizens fed up with inequality and austerity are taking to the streets. In June, youthful protesters swept Kenyan streets to express their dissatisfaction with an oppressive finance bill, with dozens killed and many more injured. The finance bill was later ditched, and a new cabinet formed. Similar protests have occurred in Angola, Bangladesh, Nigeria, Pakistan and Argentina.
Behind the protests is a context of growing inequality, hikes in taxation on ordinary people and essential goods, poor provision of essential social services, joblessness and the opulence of the rich ruling class. And a significant cause of all these are the policies of the IMF, which as part of its lending conditions has imposed oppressive austerity measures, including higher taxes on essential goods, removal of subsidies and privatisation of public institutions.
The worst results ever on commitment to reducing inequality
For the past five years I have been working on Development Finance International and Oxfam’s Commitment to Reducing Inequality (CRI) Index , which assesses 164 governments’ commitment to tackling inequality in three critical areas:
- Essential public services encompassing education, health and social protection;
- Progressive taxation; and
- Progressive labour rights, quality jobs and fair wages
The 2024 index shows the worst results ever since our analysis started in 2017. About nine in ten countries are implementing policies that are likely to widen the gap between the rich and poor.
For instance, at a time when countries are supposed to strengthen essential social services, about 84% of countries, including Kenya, have cut spending on education, health and/or social protection since 2022. The cuts are biggest in countries where spending is needed the most; 95% of the world’s poorest countries have cut. Most countries are scaling down their spending to service costly debt.
As ordinary people, we are increasingly overburdened with taxes that are not proportionate to our incomes, while the richest are paying far less in tax. The CRI 2024 reveals that about four in five countries have seen their tax system become regressive since 2022. Tax collection from regressive sales tax/VAT, which disproportionately impacts low-income earners, is on the rise.
This horrible trend does not stop at cuts in spending or a rise in regressive taxation. About 90% of countries have backtracked on progressive labour policies, minimum wages, and quality jobs since 2022. For example, minimum wages fell or stagnated relative to per-capita GDP in about half of countries, meaning that economic growth is not translating to higher pay for workers. The United States particularly stands out as the rich country with the lowest minimum wage as a ratio of per-capita GDP.
Hope in a handful of countries
But a handful of other nations are showing what’s possible. For instance, despite multiple crises, Somalia has the third highest social protection budget in Sub-Saharan Africa and has a relatively progressive tax system. Similarly, Chile has been increasing spending on free healthcare as it moves people from private to public healthcare. It has moved up nine places in this year’s CRI ranking.
‘Despite multiple crises, Somalia has the third highest social protection budget in Sub-Saharan Africa and has a relatively progressive tax system.’
Practical policies to reduce inequality
Time is running out for the world to implement policies that work for the majority of us, not a handful of rich people. As the world gathers in Washington DC this week for the IMF and the World Bank annual meetings, inequality should be at the top of the agenda. Governments, the IMF, the World Bank and the UN must find practical solutions to address the inequality crisis. This will solve most of the challenges the world is facing, such as climate change, hunger, diseases, and other development challenges.
In the CRI 2024 report, we offer three concrete recommendations on how this can be done.
- Countries should develop clear, achievable and time-bound national inequality reduction plans (NIRPs) with clear strategies to reduce inequality. The NIRPs should be adopted based on each country’s specific needs. All countries should aim for an income Gini index of 0.3 or less and a Palma ratio of 1 or less. The IMF and the World Bank should ensure that their policy advice and loan conditionalities align with the NIRPs.
- Investing in essential social services key in reducing inequality, implement fair taxation regimes and tackle inequalities in the world of work.
- Spending and coverage on education, health care and social protection systems should be increased. All efforts should be made to ensure that the neediest people are benefiting. For instance, the health budget should not be less than 15% of the government’s total spending.
- Countries should ensure that the rich are paying their fair share of taxes. For example, capital gain taxes should not be lower than corporate income taxes. Tax rates for the richest people from their income and wealth should be high enough to curb economic and political power concentration at the top.
- Tackling inequality in the world of work through the provision of quality jobs, living wages, and protection of workers from exploitation and discrimination is a must to address economic inequality. This is especially needed for the countries of the Global South.
- More international cooperation is urgently needed. Both the World Bank and the IMF need to support countries to overcome the debt crisis and work with governments to regularly produce more inequality data.
The clock is ticking towards the SDG2030 deadline. Inequality-busting policies are needed more than ever to avoid irreversible damage to people’s lives.
Author
Read the press release about the new Commitment to Reducing Inequality index, which is put together by Oxfam and Development Finance International.
And you can download the “Commitment to Reducing Inequality (CRI) Index 2024” report at www.inequalityindex.org.
Join the debate about the new report on From Poverty to Power.