IMGXYZ915IMGZYXOn July 10, 2008, the Carnegie Endowment hosted the launch of a new task force report on global inequality from the American Political Science Association. The Persistent Problem: Inequality, Difference, and the Challenge of Development explores institutional and economic inequalities at the national and international levels and examines how those inequalities affect development. Task force chair John Echeverri-Gent presented the main findings of the report and AEI visiting scholar Gerard Alexander offered comments. George Perkovich of the Carnegie Endowment moderated the event.

Echeverri-Gent opened with a discussion of historical trends in global inequality. The differential in per capita income between the richest and poorest countries has increased from 35 to 1 in 1960 to 63 to 1 in 2005. Disparities in net wealth per capita have followed this trend. These income and wealth inequalities are reflected in international and national institutions.

As developing countries integrate into the global trade and finance regimes, they face import tariffs from developed countries that are significantly higher than those that developed countries face and are twice as likely to suffer a financial crisis. Surveys show that citizens of developing countries feel increasing economic and physical threats as inequality grows. The task force argues that democracy and capitalism have the potential to alleviate inequality in developing countries; however, these processes are most effective in doing so when economic and political institutions reflect the history and culture of the country they serve.

Gerard Alexander praised the APSA task force for its innovative and open-minded approach to exploring the effect of inequality on developing countries. Yet he argued for further research on the relationship between inequality and growth. The case-studies of China and India demonstrate that societies can move independently on the metrics of distribution and growth, and it may be dangerous to restrain growth in pursuit of equality.

Alexander also emphasized that international impacts on inequality are filtered through national institutions; thus national-level factors are the primary cause of inequality or lack of growth within developing countries. He agreed with the task force that agricultural subsidies and import tariffs distort markets, but argued that the report neglected to highlight two important inequality-reducing processes of globalization: increased trade transfers income to middle-income exporters in developing countries and open borders allow immigrants to send remittances to family members at home.

In the subsequent question and answer session, Echeverri-Gent expanded upon the task force’s recommendation that democracy and capitalism will be most effective in reducing inequality when economic and political institutions reflect the local culture. Echeverri-Gent pointed to Iraq as a country that has suffered from the imposition of democracy from an outside force and to China as a country that has successfully expanded economic markets while taking into account local networks.

In response to other questions, he discussed the importance of recognizing different types of democracy, the value of considering inequality as an inherent good and the distinction between inequality of outcomes and inequality of opportunities. Echeverri-Gent closed the discussion with some personal insights on how to address global inequality. He argued that international and national economic policies must be sensitive to local conditions and emphasize bottom-up institutions. He also highlighted the importance of technical assistance to developing countries, the need for independent oversight of international development institutions and the value of public finance laws for elections in developing countries. One program he suggested was a “development voucher program,” through which the central government would distribute vouchers to local governments to enable them to purchase needed services from the central government or NGOs.

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