by

Filed under: Development 2.0 Peace and security Poverty Social inclusion

Global leaders are once again meeting this week in Davos, Switzerland to discuss and – one hopes – find solutions to the increasingly volatile economic and political forces shaping our world.

In a marked change from past get-togethers, mainstream economists will be talking about something more usually associated with the development community: Rising socio-economic inequality.

We have known for some time that the world is getting less equal; so much so that, today, we are hardly surprised to learn that one percent of the world’s population controls 44 percent of the world’s wealth (Global Wealth Report pdf).

Even during the heydays of the great industrialists in the United States – when the Rockefellers and Carnegies were carving up the oil and steel sectors – the richest one percent ‘only’ controlled a third of the wealth.

In short, the ‘haves’ have never had it so good, with the trends in southeast Europe and Central Asia mirroring those in other developing regions. Until very recently, the increasing level of inequality was broadly accepted by most of those living in developed and developing societies alike, as the poor and middle class saw some prospect of social mobility and advancement of the type which could pull them up and afford them a better quality of life than their parents.

So what has changed?

For the poorest of the poor: Not much. The very poor remain so. What is different about this crisis is that it is not just the very poor that are being affected. In Europe – where the crisis is at its most intense – hard working, aspirational young people no longer see themselves advancing; in many middle-income countries, families who had just pulled themselves into the middle class are now contemplating falling out of it. This predicament is particularly apparent in those economies – like Hungary and Romania – with large external trade imbalances, indebted consumers and a high vulnerability to further fiscal shocks.

Part of the problem is connected with the consequences of global shocks on volatile economies. As the credit crunch morphed into the financial crisis; the contagion of which has led to sovereign debt crises, countries with expansive welfare systems across this region started to slash social cushions, while employers in all but the most recession-proof industries and economies, began cutting their workforces.

The sobering reality is that now the majority of the low and middle class – no longer see themselves advancing socially or economically. An increasing number of people – particularly in developed economies, but increasingly in developing countries – are no longer willing to accept what they regard as gross inequalities perpetuated by the privileged elite (See: People or $: Will Davos answer the call?) . The radicalization of the middle class appears a very real phenomenon.

This is now much more than an economic problem. Economists and sociologists speak of purchasing power, deflation, liquidity crises and negative equity but this terminology masks the deeply human impact that political and economic mismanagement is having on people.

It is apparent that governments in particularly unequal societies have taken for granted that there is nothing particularly volatile or dangerous about the long-term poor. The same complacency soon dissipates when growing middle-class anxiety turns into popular protest about the dysfunctional political economy in developed countries.

What is different now is that those people who were recently climbing into the middle class in Bucharest or Aktau (Kazakhstan), for example, now see no way in; and they are angry. What is emerging in this region and beyond are dangerous fault lines between the elites and the rest which are manifesting in protests, crime, and violent disorder – and in the case of the Middle East – regime change. With the right trigger this discontent looks capable of morphing into a much broader, more radical movement.

The voice of the discontent

The response from affected governments has been entirely mixed. While the G20 and International Monetary Fund (IMF) discuss attempts to marshal the insolent financial sector into some type of compromise (haircuts, write-offs and deleveraging in the terminology of the money-men), on the streets, governments have been meeting social unrest with a reactionary mix of surprise, denial, repression, faux reform and – less commonly – with tentative steps to restore the social contract’ between individuals and government.

People’s discontent with their governments’ elitism, corruption and cronyism is a plea for genuine constitutional liberalism – a political system that sees revenue from state oil firms benefit public infrastructure; a government that is itself beholden to the rule of law and subject to censor by an independent judiciary; and a progressive tax system which funds services and sustainably expands the middle class.

From a peace and stability perspective this makes sense as a large middle class is one of the best indicators of a stable society. Indeed, the fact that democracies rarely go to war with one-another is well known; however, the statistics are even more compelling when one looks at the unwillingness of states with large middle-classes to risk it all and engage in conflict.

As 2012 gets underway and the financial crisis rolls on, regimes that respond with denial, repression or faux reform do so at their peril and stand to make their hold on power all the more brittle. What is for certain is that the ubiquitous nature of social media will continue to give a forceful – and potentially violent – voice and organizing platform to the ‘have-nots’. The era of the radical middle may have arrived in earnest.

  • Tan

    Communities are often forged in crisis, and then disbanded in times of peace. This recession, which impacts everything from our housing security to our supermarket shops, childcare options and further education (increasing by 20 per cent) has the unsettling effect of neither being a crisis, nor particularly peaceful and ensures we concentrate our full attention on the matter of daily survival. The middle classes experience of recession has become a dirty little injury to be nursed by individual households in private. More depression than recession. The author is right, we need to be reminded of the bigger picture, whenever possible, and of this time as an opportunity to collect, connect, convene and strengthen community the better to have a voice. A few protest tents in a few squares is great but removed from the middle class. What we really need is a self-awareness, is to talk to our neighbours, is to rely on each other, draw strength from each other and begin to challenge our governments. What we don’t need a big glass of red and a DVD but increasingly that is what happens. We need reminding, so remind us, remind us, remind us.

  • Albert Soer

    Zack,

    This is a neat effort to link global crises and trends with (potential) social unrest and discontent. I don’t have much to add to what you say. Maybe that falling back into poverty is somewhat different from stagnating in the relatively same position and not realizing your own aspirations of social and economic upward mobility, but that’s ‘marginal’. The question is what do we do? How do we as UNDP respond to this? Are we sufficiently well connected to be able to play a role? Do we have our ‘feelers’ out in society to spot and understand trends? Do we have response mechanisms in our toolbox we can deploy?

    Albert

    • Zack Taylor

      Albert, thanks for the question

      In terms of what we can do, I think the short – and honest – answer is very little by ourselves. Sure, UNDP has a lot of expertise in important issues like poverty reduction, rural development, social inclusion, crisis prevention and this technical expertise – when properly directed – can have an important impact in mitigating inequality. Too often, however, these “service lines” are directed in a way that – for example – addresses Roma exclusion from social services, but doesn’t tackle, for example the drivers behind why the rural population is en masse migrating to poor, badly managed slums (compounding inequality and exclusion). To be effective, our advisory services and programmes need to be imbedded across ministries.

      I should also add that UNDP is only one actor amongst many active in the development sector and organizations like the World Bank, the EU and the regional banks are increasingly active and influential in these sectors. That said, UNDP – as the custodian of the UN coordination system – has an important role to play in ensuring that the collective expertise and assets of the UN’s agencies are strategically presented to affected governments and that we do not all go off and pursue our own narrow agendas. I think there is a growing global awareness that tackling this gross inequality must be a priority. Personally, I would like to see a common, specific articulation from the SG on how the UN’s advocates doing that.

      None of this will really be relevant, however, unless there is a conscious willingness on behalf of those governments we serve to tackle these complex issues. The UN will never be (and should never be) telling Governments how to run their countries, but what we can do quite successfully is offer pragmatic solutions based on sound evidence.

  • Millie

    Great, thought provoking piece- well done.
    Ill offer my two cents on one aspect of your blog where you say =with the right trigger this discontent looks capable of morphing into a much broader, more radical movement.
    I think this is what we focus on- the triggers. Some of the possible triggers we already know from the vast literature on how conflicts start and we track those in our regular work. But others- triggers and signals- are we well positioned to observe, track and analyze the real time data on how people’s habits and behavior is changing as a result of various economic and social pressures, who do they turn for help, how do they communicate, how is their network of support affected? Chances are that the analytics behind this data could help us feel the pulse of the communities better in the immediate term, and in medium-to-long term it may provide us with information that we could use to design programs on the ground that will address the fault lines and realities on the ground in a more effective way.

  • Olga Papadopoulou

    Mr. Taylor.
    Firstly many congratulations for your article, on which I agree with many parts. However, in the economic crisis, that all european countries face, sometimes economic stimulus may become their main priority and not the human aspect of development. Of course, I disagree with this view, but unfortunately it happens.
    So, I would like to ask you do you believe that monetay policy can stimulate a future economic recovery? And according to you what other processes other than the reformation of a monetary policy could be effective during the current financial crisis?
    Thank you in advance for your reply.