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At the United Nations Millennium Summit in September 2000, UN member states took a dramatic step by putting people rather than states at the center of the UN's agenda. In their Millennium Declaration, the assembled world leaders agreed to a set of breathtakingly broad goals touching on peace through development, the environment, human rights, the protection of the vulnerable, the special needs of Africa, and reforms of UN institutions. Particularly influential was the codification of the Declaration's development-related objectives, which emerged in the summer of 2001 as the now familiar eight Millennium Development Goals (MDGs), to be realized by 2015.
1 General Assembly Resolution 55/2, “United Nations Millennium Declaration,” UN document A/RES/55/2, September 8, 2000, www.un.org/millennium/declaration/ares552e.pdf.
2 As announced in the appendix to the “Road Map Report,” UN document A/56/326 of September 6, 2001. The UN member states tasked the UN Secretary-General with preparing a “road map” that would develop and monitor “results and benchmarks” (“Follow-up to the Outcome of the Millennium Summit,” UN document A/RES/55/162, December 18, 2000). For an analysis of the origins and significance of the MDGs, see Doyle, Michael, “Dialectics of a Global Constitution: The Struggle over the UN Charter,” European Journal of International Relations 18, no. 4 (2012), pp. 601–624.
3 The original indicator was $1 a day, which has since been raised to $1.25 to reflect inflation.
4 Annan, Kofi, with Mousavizadeh, Nader, Interventions: A Life in War and Peace (New York: Penguin, 2012), pp. 244–50.
5 United Nations, The Millennium Development Goals Report 2013, pp. 4–5. For more information on the status of the Millennium Development Goals, see the full 2013 report: www.un.org/millenniumgoals/pdf/report-2013/mdg-report-2013-english.pdf.
6 The original goals did not include access to reproductive rights, which was corrected in 2005. See General Assembly Resolution 60/1, “2005 World Summit Outcome,” UN document A/RES/60/1, paragraphs 57(g) and 58(c): mdgs.un.org/unsd/mdg/Resources/Attach/Indicators/ares60_1_2005summit_eng.pdf. These goals also lacked the governance goals being considered today. See the Report of the High-Level Panel of Eminent Persons on the Post-2015 Development Agenda, A New Global Partnership: Eradicate Poverty and Transform Economies through Sustainable Development, Annex II, p. 50: www.un.org/sg/management/pdf/HLP_P2015_Report.pdf.
7 For a more thorough discussion of the adverse economic consequences of inequality, see E. Stiglitz, Joseph, The Price of Inequality (New York: W. W. Norton, 2012), and the references cited there.
8 Stiglitz, The Price of Inequality, ch. 4, pp. 83–117.
9 Berg, A., Ostry, J., and Zettelmeyer, J., “What makes growth sustained?” Journal of Development Economics 98, no. 2 (2012). For a more theoretical treatment of the links between inequality, instability, and human development, see Stiglitz, , “Macroeconomic Fluctuations, Inequality, and Human Development,” Journal of Human Development and Capabilities 13, no. 1 (2012), pp. 31–58. Reprinted in Nayyar, Deepak, ed., Macroeconomics and Human Development (London: Routledge, Taylor & Francis Group, 2013).
10 Easterly, William, “Inequality Does Cause Underdevelopment: Insights from a New Instrument,” Journal of Development Economics 84, no. 2 (2007). The Council on Foreign Relations reported this year that there are enormous gaps in American students' achievement depending on their socioeconomic background, and found that parental wealth exerts a stronger influence on achievement in the United States than in almost any other developed country. See Council on Foreign Relations, Remedial Education: Federal Education Policy, June 2013, www.cfr.org/united-states/remedial-education-federal-education-policy/p30141.
11 Easterly, “Inequality Does Cause Underdevelopment.”
12 Bartels, Larry, Unequal Democracy (Princeton, N.J.: Princeton University Press, 2008).
13 We would prefer a measure of post-tax (after all income and other taxes) and post-transfer incomes (after housing, child care, social security and other subsidies), but this is not yet widely available. Unofficial Palma Ratios by country available upon request. To request this unofficial data, please contact Alicia Evangelides at firstname.lastname@example.org.
14 Østby, Gudrun, “Inequalities, the Political Environment and Civil Conflict: Evidence from 55 Developing Countries,” in Stewart, Frances, ed., Horizontal Inequalities and Conflict: Understanding Group Violence in Multiethnic Societies (Basingstoke: Palgrave Macmillan, 2008), pp. 136–157, p. 149.
15 Østby, Gudrun and Strand, Håvard, “Horizontal Inequalities and Internal Conflict: The Impact of Regime Type and Political Leadership Regulation,” in Kalu, K. et al. , eds., Territoriality, Citizenship, and Peacebuilding: Perspectives on Challenges to Peace in Africa (Pietermaritzburg, South Africa: Adonis & Abbey, 2013).
16 Cederman, Lars-Erik, Weidmann, Nils B., and Gleditsch, Kristian Skrede, “Horizontal Inequalities and Ethnonationalist Civil War: A Global Comparison,” American Political Science Review 105, no. 3 (2011), pp. 487–89.
17 The World Bank's classic study Voices of the Poor highlighted that the poor suffered not just from a lack of income but from insecurity and a lack of voice. This was subsequently reflected in the decennial World Bank's World Development Report on Poverty in 2000. The International Commission on the Measurement of Economic Performance and Social Well-Being (2010) emphasized that metrics of performance (including output and inequality) had to be expanded beyond just conventional measures of GDP and/or income. The OECD has carried on this work in their Better Living Initiative, including the construction of the Better Life Index. An important part of the agenda of the OECD High Level Expert Group on the Measurement of Economic Performance and Social Well-Being is the construction/evaluation of alternative measures of inequality.
18 Alan B. Krueger, “Land of Hope and Dreams: Rock and Roll, Economics, and Rebuilding the Middle Class” (remarks, Rock and Roll Hall of Fame and Museum, Cleveland, Ohio, June 12, 2013), www.whitehouse.gov/blog/2013/06/12/rock-and-roll-economics-and-rebuilding-middle-class#fulltext.
19 Corak, Miles, “Income Inequality, Equality of Opportunity, and Intergenerational Mobility,” Journal of Economic Perspectives 27, no. 3 (2013), pp. 79–102.
20 Alex Cobham and Andy Sumner, “Putting the Gini Back in the Bottle? ‘The Palma’ as a Policy-Relevant Measure of Inequality,” King's College London, March 15, 2013, www.kcl.ac.uk/aboutkings/worldwide/initiatives/global/intdev/people/Sumner/Cobham-Sumner-15March2013.pdf. The Palma ratio is "the ratio of the top 10% of population's share of gross national income (GNI), divided by the poorest 40% of the population's share of GNI." We would prefer a measure of post tax (after all income and other taxes) and post transfer incomes (after housing, child care, social security and other subsidies), but this is not yet widely available.
21 This is not true, however, for all countries. In the United States, for instance, there has been a hollowing out of the middle class, with a declining fraction of the population between, say, twice and half the median income and a declining fraction of income going to this group. It has long been thought that a stable democracy depends on a thriving middle class. If so, the decline of the middle class should be of special concern. (For a fuller discussion of these issues, see Joseph E. Stiglitz, The Price of Inequality.) Part of the national dialogues on inequality that we recommend below would focus on the nature of the inequality that is emerging in various countries.
22 José Gabriel Palma, “Homogenous Middles vs. Heterogeneous Tails, and the End of the ‘Inverted-U’: The Share of the Rich Is What It's All About,” Cambridge Working Papers in Economics (CWPE) 1111, January 2011, www.econ.cam.ac.uk/dae/repec/cam/pdf/cwpe1111.pdf.
23 Moene, Karl Ove, “Scandinavian Equality: A Prime Example of Protection Without Protectionism,” in Stiglitz, Joseph E. and Kaldor, Mary, eds., The Quest for Security: Protection Without Protectionism and the Challenge of Global Governance (New York: Columbia University Press, 2013), pp. 48–74.
24 For instance, in the United States such a dialogue would note inequalities in access to education and health; a bankruptcy code that gives first priority to derivatives and makes student loans difficult to discharge, even in bankruptcy; a tax system that taxes income of the rich derived from speculation at much lower rates than wage income; a minimum wage that, adjusted for inflation, has not increased in half a century; and a system of social protection that does a much poorer job in “correcting” inequalities in income than systems in other advanced industrial countries. It would analyze the extent to which disparities in income are a result of differences in productivities, with differences in productivity in turn partly explained by disparities in access to quality education; the extent to which disparities in income are related to rent-seeking; and the extent to which such disparities can be accounted for by inheritances.
25 Alex Cobham and Andy Sumner, “Is It All About the Tails? The Palma Measure of Income Inequality,” Center for Global Development, Working Paper 343, September 2013, www.cgdev.org/sites/default/files/it-all-about-tails-palma-measure-income-inequality.pdf.
26 See the letter to Dr. Homi Kharas of the Brookings Institute from ninety economists, academics, and development experts supporting the use of the Palma ratio as a measure of inequality at: www.post2015hlp.org/wp-content/uploads/2013/03/Dr-Homi-Kharas.pdf.
28 Michael Shear and Peter Baker, “Obama Focuses on Economy, Vowing to Help Middle Class,” New York Times, July 24, 2013, www.nytimes.com/2013/07/25/us/politics/obama-to-restate-economic-vision-at-knox-college.html?_r=0.
29 Pope Francis, “WYD 2013: Full text of Pope Francis's address in Rio slum,” Catholic Herald, July 25, 2013, www.catholicherald.co.uk/news/2013/07/25/wyd-2013-full-text-of-pope-franciss-address-in-rio-slum/.
* The authors have benefited from the research assistance of Alicia Evangelides, Eamon Kircher-Allen, and Laurence Wilse-Samson.
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