SDGs And Inequality

2015 saw a resurgence of multilateralism, with global consensus achieved on the ambitious Sustainable Development Goals (SDGs) in September and then on the climate change agenda in December. 193 countries came together and formally adopted the SDGs at the United Nations. The SDGs have 17 goals and as many as 169 targets to be met between 2015-2030. What is remarkable is what some of these goals consist of.

The SDGs are much bolder and more aspirational and differ from the Millennium Development Goals (SDGs) which were adopted in 2000 for the period 2000-2015 in several important ways:

Firstly, the SDGs bring together the "development agenda" with the "sustainability agenda" to come up with one integrated set of goals instead of presenting these two as separate goals and sustainability has been integrated into many of the other goals such as on sustainable agriculture (Goal 2) or sustainable management of water and sanitation (Goal 6).

Secondly, the SDGs go beyond purely "economic" goals and aim to bring about social transformation, for example in Goal 5 that aims to "Achieve gender equality and empower women and girls" and has a goal to "End all forms of discrimination against all women and girls everywhere (Goal 5.1) or even bolder to "Eliminate all forms of violence against all women and girls in the public and private spheres, including trafficking and sexual and other types of exploitation (Goal 5.2).

Thirdly, the SDGs aim to tackle income and other inequality and not only poverty. Goal 10 says "Reduce Inequality within and among countries" and goes on to adopt pro-poor growth as one of the targets "progressively achieve and sustain income growth of the bottom 40 percent of the population at a rate higher than the national average" (Goal 10.1). There is also a bold goal on inclusion "By 2030, empower and promote the social, economic and political inclusion of all, irrespective of age, sex, disability, race, ethnicity, origin, religion or economic or other status" (Goal 10.2).

These goals are nothing short of miracles and show how far we have come in our understanding of what development consists of, especially in the short span of 15 years since the MDGs were adopted. The world has been seeing sharply rising inequality for some time but it is only in the last decade that discussions on inequality-rather than poverty-have entered the popular mainstream. For example, in 2006, a documentary was made entitled "The One Percent" about the growing wealth gap between the wealthy elite compared to the overall citizenry in the US. In September 2011, we saw the "Occupy Wall Street" protest movement that received global attention and spawned the Occupy movement against social and economic inequality worldwide. These terms suddenly became part of the popular vocabulary, but consensus that inequality needed to be tackled was still work in progress. In August 2013, Thomas Piketty's blockbuster book "Capital in the Twenty First Century" came out and discussions on inequality have since taken center-stage. On May 18th, 2014, the English edition reached number one on the New York Times Best Seller list for hardcover nonfiction and became the greatest sales success of academic publisher Harvard University Press. As of January 2015, the book had sold 1.5 million copies in French, English, German, Chinese and Spanish.

Why did inequality suddenly become such a hot topic? From Ghana to Germany, South Africa to Spain, the gap between the rich and the poor is rapidly increasing, and economic inequality has reached extreme levels. The vast and growing gap between rich and poor has been laid bare in a new Oxfam report "An Economy for the 1%" showing that the 62 richest billionaires own as much wealth as the poorer half of the world's population. Timed to coincide with the gathering of many of the super-rich at the annual World Economic Forum in Davos in January, the report calls for urgent action to deal with a trend showing that 1% of people own more wealth than the other 99% combined. In India, wealth is even more concentrated than at the global level: only 53 billionaires own as much as the bottom 50% of India's population.

Why does inequality matter? Because the consequences are corrosive for everyone. Extreme inequality corrupts politics, hinders economic growth and stifles social mobility. It fuels crime and even violent conflict. It squanders talent, thwarts potential and undermines the foundations of society.

Crucially, the rapid rise of extreme economic inequality is standing in the way of eliminating global poverty. Today, hundreds of millions of people are living without access to clean drinking water and without enough food to feed their families. We can only improve life for the majority if we tackle the extreme concentration of wealth and power in the hands of the elites. If India stops inequality from rising, it could end extreme poverty for 90 million people by 2019. If it goes further and reduces inequality by 36%, it could lift a further 83 million people out of poverty and virtually eliminate extreme poverty. The Brookings Institution has also developed scenarios that demonstrate how inequality is preventing poverty eradication at the global level. In a scenario where inequality is reduced, 463 million more people are lifted out of poverty compared with a scenario where inequality increases.

The potential benefit of curbing runaway wealth by even a tiny amount also tells a compelling story. Oxfam has calculated that a tax of just 1.5% on the wealth of the world's billionaires, if implemented directly after the financial crisis, could have saved 23 million lives in the poorest 49 countries by providing them with money to invest in healthcare. The number of billionaires and their combined wealth has increased so rapidly that in 2014, a tax of just 1.5% could fill the annual gaps in funding needed to get every child into school and deliver health services in those poorest countries.

What are Piketty's lessons for India? Ajit Ranade, Chief Economist at the Aditya Birla Group, sums them up in a recent article (Mint, Feb 3, 2016). On Piketty's visit to India in January 2016, he said that India needs to address increasing inequality by increasing its tax to GDP ratio, which at 11%, is well below that of the OECD and most emerging market economies. The increase in taxes should also come from direct taxes which are more progressive but account for only 50% of our total taxes. This should go up to above 80%. The tax net needs to be cast wider. India needs to tax capital at higher rates instead of contemplating extending capital gains tax exemption. Piketty also argued for increased public spending on health and education.

India would do well to heed Piketty's advice if it wants to meet Goal 10 of the SDGs and start delivering a more equal and inclusive society by 2030. More importantly, it needs to do that so that it can start to tear apart its "inherently unequal environment" and create an equal opportunity nation that we can all take pride in, along with Mr Tata (Mint, Feb 3, 2016).

This article is part of a series on the SDGs for BW Sustainability