Inequality Watch II 2015

Inequality Watch ll

This report is published with support from Norad, Norwegian Agency for Development Cooperation.

EdItorIal staffEditor Beate thoresen, senior advisor, International Program Department, NPA’s Head Office in Oslo. She has an MA in political science from the University of Oslo. She has long experience in practical solidarity and academic work on development, democracy, conflict and peace processes, civil society and political participation, particularly from Latin America.

Helle Berggrav Hanssen, advisor, International Programme Department at NPA’s Head Office in Oslo. Presently she works with NPA’s Latin America programme and communication. She has also worked with Eastern and Southern Africa, land rights and natural resource management, and youth participation. She has an MA in development education.

Inger sandberg, advisor, NPA’s Head Office in Oslo. Her background is from journalism, social work and the Norwegian solidarity movement for Palestine.

norwegian people´s aid

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Photo: W

erner Anderson, NPA

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dEsIgnOktan Oslo

front pagE From Beijing Photo: Peter Parks/AFP/NTB scanpix

pagE 2 From Ecuador Photo: Werner Anderson

prInt Merkur AS

oslo, february 2015

Contents

IntroductIon 4 Preface

5 Why do we let this happen?

6 How to close the gap

11 An agenda for reduction of inequality

an unequal world

12 Norway: High income – low inequality

22 Ecuador: Reduced inequality after the Citizens' Revolution

34 Spain: Popular resistance against the crisis

46 Egypt: Produced by the state – contested by the people

54 Tunisia: Regional inequality caused strong protests

66 Viet Nam: An economic tiger in South East Asia

76 South Africa: Inequality: The Achilles Heel of South Africa

references

80 Glossary

82 References and footnotes

InequalIty watch 2015

6

IntroduCtIon

Within the span of a few years, the world has changed dramatically. Power has moved south and east. china’s role in the world economy is undenia-

ble. likewise the reduced us influence. we have moved from a bipolar world dominated by the cold war to a multipolar world governed by a whole range of states and actors setting the international agenda.

the increasingly stark gap between the “haves” and the “have nots” formed an important background for the initial mobilisation in the Middle east-north africa region. the arab spring in 2011 promised major waves of democratisation internationally. four years later little has been achieved when we consider the strong calls that were there for increased justice and democracy. Instead, the growing discontent that broke into the arab spring is partially contributing to the civil wars that are now taking place in parts of the region.

un reports in 2014 documented historic achievements in poverty reduction internationally. at the same time, income levels for the middle class and the better off have increased much more. Inequality is increasing in many countries and is contributing to social unrest, instability and in turn security concerns for the whole international community.

Increasing inequality internationally goes hand in hand with a growing suppres-sion of democratic rights in many countries. rising global inequality undermines democracy at the same time as strong and vibrant democracy is needed to fight growing inequality. Many people lose confidence in democracy because they do not see their vote translated into services and social justice. at the same time, they see the rich getting richer, getting access to further privileges and seemingly having more influence over public policy than the “regular voter”. the oecd also documented in 2014 that since 1980 economic growth has been significantly reduced because of the growing inequalities (in oecd countries). as if this was not enough, the world economic forum continuously argues that inequality is the main threat to economic stability.

extreme inequality undermines social trust and cohesion. Increasing gaps in income and wealth are contributing to reduced contact between people and thereby the willingness of people to contribute to collective problem-solving. last but not least, increased inequality can reduce the willingness of the wealthy to contribute to public welfare systems and social protection schemes through paying taxes, even further. Increasing inequality often goes hand in hand with privatisation of health, education and other services for the wealthy, while the poor face services that are diminishing in quality, from a cash stripped public sector. In this there is a huge potential for conflict and discontent. It is a “lose lose-situation”. the combination of a lack of strong organisations that can mobilise people in a democratic, disciplined and peaceful manner with high and increasing inequality is a potent mix. social discontent arising from increasing inequality can take many forms. the challenge ahead will be to build strong and disciplined organisations that are able to mobilise people in democratic and peaceful ways to fight inequality.

Liv Tørres, Secretary General Norwegian People s Aid

preface


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IntroduCtIon

World wealth grew by 14% in 2014. Wealth is extremely concentrated, much more than income. the richest 10% controls 87% of the world’s wealth. The richest 1% controls 50% of the world’s wealth. The bottom half (50%) of the world’s population only controls 1% of the world’s wealth. This is also reflected within countries, for instance in Egypt, the richest 10% controls 73% of the country’s wealth. (Credit Suisse)

70% of the world’s absolute poor live in middle income countries. This shows that growth has not trickled down. Income inequality is growing within countries and within the world’s population. The rapid increase in high salaries, including in many developing countries, is a strong driver of inequality. (Sumner, IDS)

tax systems often favour the rich and do not contribute to redistribu-tion. The race to the bottom on corporate taxes to attract invest-ments and the emphasis on value added taxes on goods and services in development countries have made the poor pay relatively more. The rich also have more capacity to take advantage of tax loopholes, creative tax planning, and use of tax havens.

small landholders are being pushed aside and there is a ten-dency towards re-concentration of land. Land use, control and tenure are highly unequal and women control and have less land than men. Some places, large national land-owners are taking over land from smallholders, but small farmers also loose land due to the increase in for-eign direct investments, mainly from the rich countries.

labour has lost bargaining power and labour’s share of national income has decreased, while capital’s share has increased (functional income distribution). This has been a trend for years; Wages have not increased accord-ing to labour productivity. The loss in labour’s share of national income has a negative impact on house-hold income distribution. (ILO)

people lack access to decent jobs. 600 million jobs must be created to absorb the working age population, according to the World Development Report 2013. Econo-mists have considered labour only as a factor in productivity and not looked at jobs as a fundamental issue of people’s quality of life and wellbeing.

only 27% of the world’s population enjoys access to comprehensive social security (ILO). Social protection mechanisms are important to reduce inequality and poverty and enhance economic stability.

Influential politicians, elites and economists have decided not to care about inequality. They warn that any attempt to interfere with the marked will harm us and affect economic growth. They argue that we should give benefits to the rich so they can get richer and be able to supply us with cheaper goods and services, create jobs, and promote growth. In effect, the rich have hoarded more resources; there is growing wealth in the hands of few people, but this wealth does not trickle down. Substantial evidence shows that distribution of resources and small differences in income are favourable for the development of a healthy economy and for people’s wellbeing. nevertheless inequalities continue to increase. the present situation is harmful to society.

Why do we let this happen?


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IntroduCtIon

the extreme increase in inequality is not a law of nature, but a result of politics.

“One should be wary of any economic determinism in regard to inequalities of wealth and income. The history of the distribution of wealth has always been deeply political and it cannot be reduced to purely economic mechanisms… The history of inequality is shaped by the way economic, social, and political actors view what is just and what is not, as well as the relative power of those actors and the collective choices that result.”

thomas Piketty, capital in the twenty-first century, 2014.

who would have thought that a thick book with an economic analysis of inequa-lity could become a bestseller? the french economist thomas Piketty has starred the discussion on inequality this year, and we can only hope that the enormous interest will translate into political action to counteract increasing economic inequality.

Piketty’s finding is that increased concentration of wealth is the principal long-term trend. wealth increases faster the richer you are and inheritance contribu-tes to perpetuate concentration of wealth. Piketty’s book challenges mainstream economists who, over the last 30 years, have argued that inequality is of no concern and that any intervention to reduce inequality will damage the economy. People are concerned, however, with the extreme inequality observed, and the popularity of the book must be seen as an expression of this concern and of relief; finally someone is documenting what we are experiencing.

norwegian People’s aid has argued, as does Piketty, that distributional analysis must be at the heart of economic analysis. we have also argued that it must be at the core of development policies, and that neither free markets nor industrial development will automatically reduce inequality. the extreme increase in inequality is not a law of nature, but a result of politics or rather the political abandonment of equity policies. we can chose to take measures to reduce inequality. It is time to make that choice.

Inequality Watch IIInequality watch seeks to provide a better understanding of the politics of inequ-ality in different countries and has asked researcher and activists from selected countries to write for us. we want to mobilise to close the economic gap and this requires decisive political action at country level and solutions tailored to the country specific situation. It requires that there are organisations in each country that can push for a just distribution of resources. at the same time, it is urgent to change the economic policy recipes that for too long have been prescribed globally by mainstream economists, international finance institutions and many politicians. Measures such as structural adjustment, privatisation, weakening of labour institutions and withdrawal of the state have contributed to increasing inequality in most countries. for this we need coordinated mobilisation between organisations globally.

In this issue, Inequality watch includes an analysis of two countries that have maintained low levels of inequality over time. the article about norway

Beate Thoresen, Editor Inequality Watch

How to close the gap


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IntroduCtIon

attributes the relative equal income distribution to three elements; the high employment rate, the centralised wage bargaining systems and the universal redistributive welfare state. this is a model that came about after years of conflict, especially between unions and employers, at the beginning of the 20th century. the article about Vietnam suggests that the country will no longer be able to maintain the low levels of inequality combined with a high growth rate as its economic liberalisation continues.

In recent years we have seen many protests against market fundamentalism and rising inequalities, the so called austerity protests. these led several countries in latin america to break with neo-liberal policies and promote alternative development models. this is a hard job due to the continent’s historic record of extreme inequality and has only been possible by getting the state actively back into the equation. Inequality watch provides an analysis of ecuador, one of the countries in the region that has managed to reduce economic inequality.

widespread popular uprising has also taken place in north africa and europe. Inequality watch explores how economic inequality played into the protests, looking at the cases of egypt, tunisia and spain. the tunisia article points at regional inequalities, not income inequality, as the most important factor behind the protests. the article on egypt stresses that the state distribute resources unevenly and that this was an important contributor to the popular uprising.

today, the world’s richest 85 people own more wealth than the bottom half – some 3.5 billion people.

tHomas pIkEtty: Capital in the Twenty-First Century

Thomas Piketty analyzes a unique collection of data from twenty countries, ranging as far back as the eighteenth century, to uncover key economic and social patterns. His findings show that modern economic growth and the diffusion of knowledge have allowed us to avoid inequalities on the apocalyptic scale predicted by Karl Marx. In the 18th and 19th centuries western European society was highly unequal. Private wealth dwarfed national income and was concentrated in the hands of the rich families who sat atop a relatively rigid class structure. This system persisted even as industrialisation slowly contributed to rising wages for workers. Only the chaos of the first and second world wars and the Depression disrupted this pattern. High taxes, inflation, bankrupt-cies, and the growth of sprawling welfare states caused wealth to shrink dramatically, and ushered in a period in which both income and wealth were distributed in relatively egalitarian fashion. But we have not modified the deep structures of capital and inequal-ity as much as we thought in the optimistic decades following World War II. The main driver of inequality—the tendency of returns on capital to exceed the rate of economic growth (r > g) —today threatens to generate extreme inequalities that stir discontent and undermine democratic values. But economic trends are not acts of God. Political action has curbed dangerous inequalities in the past, Piketty says, and may do so again.


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IntroduCtIon

following the breakout of the international financial crisis, ecuador’s President correa commented that latin-americans are experts on crisis because they have experienced them all. the lesson learnt is that these crises were handled badly because the only goal was to defend the interests of capital. He warned that europe is going down that same erroneous road. the article about spain descri-bes a deep crisis and rapidly increasing economic inequalities. the established political system has failed to respond to ordinary peoples’ demands who have taken politics to the streets. finally, Inequality watch includes a comment on

One billionaire among the world’s poor?

(Photo: Svein Erik Dahl, Samfoto/NTB scanpix)


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IntroduCtIon

WEaltH lEvEls (usd)

below USD 5,000

USD 5,000 to 25,000

USD 25,000 to 100,000

Over USD 100,000 No data.

the development in south africa. this underlines that inequality has become the country’s achilles heel. social justice was postponed in the post-apartheid era, supposedly to stabilise democracy by getting the elites on board. this has, however, created an increasing discontent that threatens to undermine the very democracy it was supposed to favour.

Pay attention to wealthseveral of the articles report that peoples’ perceptions of inequality do not coin-cide with the statistics on income or consumption inequality. one explanation is that the statistics do not take wealth inequality into account and that the distri-bution of wealth is much more skewed than income. wealth is associated with economic power and most often also with political power. to get a better grip on inequality we have to pay more attention to wealth.

systematic information about wealth is less readily available, but the various media occasionally publish articles about the richest people in the world. accor-ding to forbes there are 1500 – 1600 usd billionaires in the world. the majority are from the united states, but the richest man in the world is from Mexico, a man whose fortune is built on the controversial privatisation of the Mexican national telephone company. the daughter of angola’s president is the highest ranking usd billionaire from african countries.

Wealth level is the avarage wealth per adult. World Wealth Report 2014, Credit Suisse


12

IntroduCtIon

the Global wealth report published by credit suisse tries to track all wealth globally. It shows that global wealth reached unprecedented levels in 2014. loo-king at regions, north america has 6% of the worlds’ population, but nearly 35% of the worlds’ wealth. switzerland has an average wealth per adult of usd 587 000, while some countries, particularly in central africa and southeast asia has less than usd 5000 per adult. In addition, wealth is also skewed within countries and globally 1% of the worlds’ population own 48% of the worlds’ wealth. this situation is damaging to a peaceful development and is profoundly unjust.

the inequality problem will not be solved by focusing on poverty reduction alone. reducing the number of people that live with less than 2 usd a day is good, but it does not secure people’s well-being or reduce inequality. the extreme concentra-tion of wealth in few hands is at the expense of the majority. a focus on inequality has great advantages because it takes the whole population into account, not just the poor, and evaluates the effects of political and economic measures on the whole population; the rich, the middle class, the poor, or on women and men. It is time to put reduction of inequality as a priority goal for development policies.

Pay attention to democratic processeswealth often counts more than votes when it comes to the definition of political priorities and political power often give access to increased wealth. when wealth inequality is high, this is a vicious circle that undermines democratic processes, social cohesion and justice.

elite capture of power and politics is one of the main drivers of economic inequa-lity. wealth gives the political and economic elites leverage to entrench and promote their privileges. It gives power to dominate and define the terms of the political debate. oxfam argues that elites often use the state to enrich themselves and their economic power to secure land concessions, contracts, subsidies, tax exemptions, as well as to block policies that may strengthen the hand of small-holders or labour. In addition, access to justice is often for sale, money buys the best lawyers, covers the court costs and thereby ensures impunity for powerful individuals or enterprises. companies use enormous sums of money to lobby congress representatives and governments.

democracy loses credibility when the system does not respond to people’s con-cerns and priorities. In many countries, people experience that their votes have little effect; there is no real choice because elites control the system. this is also reinforced because democratic institutions decide less while economic power in the market more. the elites are mostly men, and the political power gap between women and men is even larger than the gap in economic participation. a loss of faith in the democratic institutions is leading to more confrontation and street protest.


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IntroduCtIon

an agenda for reduction of inequality

1. strengthen organisations that challenge concentration of power and resources – formal democratic institutions and elections alone have not contained increasing inequality. organising is a priority to counterbal-ance elite power resulting from con-centration of wealth. organising is necessary for collective negotiations. International solidarity between organisations that represent people outside the elites is needed. the cur-rent tendency to restrict the right to organise must stop. Governments and international institutions must respect the right to assemble and associate, contribute to an enabling environment for organising and provide protection when the work or lives of organised people are threatened.

2. promote collectively negotiated solutions – negotiated solutions to challenges in society and distribution of resources are more democratic, more sustainable and secures broader representation of interests and opini-ons. we should promote collective bar-gaining of salaries, free prior informed consent for indigenous peoples and communities when investments are planned, hearings of policy proposals, opportunities to influence public budgets and social dialogue on state reform or tax systems. In these proces-ses, there are profound power imba-lances between elites and the rest, between different groups, for instance

ethnic minorities, and between men and women that must be recognised and dealt with.

3. make inequality reduction a priority – choose economic and social policies that contribute to inequality reduction and redistribution, evaluate the effect on inequality of present poli-cies, and document economic inequal-ity (between classes, groups, women and men).

4. promote openness and transparency – this is a prerequisite for holding governments and companies accountable, for democratic rule and debate, decision-making and develop-ment of effective policies. we need to document who owns what and abolish tax havens, and demand prior public information on trade agreements, openness about state income, budgets, expenditure, taxes, and information on concessions to companies.

5. share inequality information and analysis – Knowledge and information are powerful and necessary tools to fight inequality. we must share infor-mation on changes in inequality, analysis on why it happens and propose solutions. It is particularly important with independent media and channels of information accessible to the broad population that is not controlled by the elites.

a proposal to norwegian development policies

1. Take the five point agenda into account in all development cooperation.

2. Increase economic and political support to representative organisa-tions that promote the interests of the marginalised and the right to unionise and strike.

3. Strengthen organisations working to close the gender pay gap, promote equal inheritance and land rights for women, and women’s political participation.

4. Strengthen the Tax for Development programme offering support to the development of progres-sive tax systems, transparency, broad-based dialogue on tax systems, as well as continued support to countries negotiating contracts with multi-national companies on exploitation of natural resources.

5. Develop an action plan to fight tax havens and engage internationally to reform the global tax system, especi-ally on corporate taxation and financial transactions.

6. Strengthen support to develop-ment of social security systems and to the implementation of a universal social Protection floor.

7. Promote and support the Interna-tional Labour Organisation’s (ILO) Decent Work Agenda and the imple-mentation of the Ilo conventions

8. Support that the new United Nati-ons Sustainable Development Goals includes a specific goal to reduce economic inequality and promote a target to reduce inequality in income and wealth between the richest and poorest segments of the population.

xxxxxEquador

norway

IllustratIon: Iben Sandemose


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norWay

norWay

sWEEdEn

fInland

number of usd billionaires

gdp per capita

seats held by women and men in national parliament in 2013

populationin million

5

10% richest earn

6 times as much as the 10% poorest

youth unemployment rate

2%

8Gender Related Development Index (GDI) - UNDP; Estimated share of GNI per capita ($PPP 2011)

World Bank (2013, $PPP)World Bank, Gender Equality Data and Statistics

Credit Suisse, Global Wealth Databook 2014

Calculated based on Wold Bank Database

ILOstat

ILOstat

Forbes

sHarE of WorkforCE In

agrICulturE

Female income

80%of male income

Wealth share richest 10%

66%

66520 9%40% 60%


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High income – low inequality

Capitalism is making the rich richer and the poor poorer is a message coming out of recent studies of inequality (e.g. Piketty 2013, oecd 2011 and 2014a).

Many are, therefore, looking to the nordic countries that have achieved lower level of income inequality than most other countries. But have the nordic coun-tries and norway in particular succeeded in preventing inequality from growing and the wealthy from accumulating a greater share of the national income? our focus is on inequality in norway and the reasons for its low level compared with other countries. we will also explore whether inequality is on the rise in norway and what forces are pulling towards greater inequality. It should, how-ever, be emphasised that the quality of life is not only determined by the level of income. other factors are also important such as family and social relations, health, employment, education, the environment, culture, security and demo-cratic rights.

1. How unequal is Norway? In 2011, norway was among the three countries in the organisation for economic co-operation and development (oecd), with the lowest levels of inequality in household disposable income measured with the Gini coefficient (see figure 1).1 this coefficient is a standard measure of income inequality that ranges from 0 (everybody in a society has the same income) to 1 (one person has all the income). the value of the Gini coefficient was 0.25 in norway while it was 0.32 on average in the oecd countries. so far, norway has managed to uphold a low overall level of income inequality, along with a high level of Gross domestic product (GdP) per capita. this means that the norwegian people are not only relative equal, but that they also have a high income level. this contrasts with the us, where both the level of income inequality and GdP per capita is high. In 2011, GdP per capita2 was 46,800 usd in norway and 44,400 usd in the us (oecd database). Hence, norway has been more successful than the us in ensuring that the great majority of the population reaps the benefits of economic growth. there is, however, a considerable gap between the richest and the poorest ten percent in norway, although smaller than in most other countries (see figure 1). In 2011, the gap between the average disposable incomes of the richest and the poorest of the population (the so-called s90/s10 ratio) was 6:1 in norway and on average 10:1 in the oecd. In other words, the share of the total income earned by the richest is 10 times the share earned by the poorest in the oecd while it is 6 times in norway.

Lilja MósesdóttirSenior researcher at Fafo Institute for Applied International Studies

lIlja mósEsdóttIr Lilja Mósesdóttir received her university education in the United States, Germany and the United Kingdom where she obtained a master degree in development economics and a doctoral degree in com-parative labour market studies. Since the early 90s, Lilja has participated in various interdisciplinary research projects financed by the EU, the Nordic Council of Ministers and the European Trade Union Institute on the European social model, equal pay issues, the knowledge society and its social implications.

Many are looking to the nordic countries that have achieved lower level of income inequality than most other countries.


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2. What has contributed to the low level of inequality in Norway? the fact that norway is a wealthy country with access to large oil resources is sometimes suggested to be the reason for the high level of equality. Being rich in itself is, however, no guarantee of equal distribution and other factors are more essential to explain the low levels of income inequality. such factors, closely related to the so-called nordic model, are: high employment level, centrally coordinated wages and a welfare state characterised by universal access to public services, extensive redistribution through the tax system and generous social transfers (e.g. fløtten et al. 2014, Kvist & Greve 2011, oecd 2012). High level of employment is promoted through coordinated active labour market policy and social policy. those outside the labour market receive the assistance (services and benefits) to help them access the labour market and to remain in employment throughout their life-cycle. extensive public child care, paid paren-tal leave, and gender equality policies have contributed to women’s high employ-ment rate in the nordic countries (alestalo et al. 2009). In norway, mothers and fathers have the right to 10 months parental leave, with full wage compensation, to share between them, when having a child. furthermore, the child has, from one year of age, the right to have a place in a publicly funded kindergarten with a regulated rate for parents’ financial contribution. the nordic model is based on high union density. More than half of the norwe-gian workforce (52%) are unionised, while in the neighbouring countries sweden and denmark more than to thirds (70%) are (dølvik et al. 2014). the strength of the unions is important to sustain the centralised wage bargaining system. this system aims at moderate wage increases that do not endanger full employment. High union membership and centralised wage agreements that are extended to the unorganised part of the labour market have, so far, resulted in more com-pressed wage structure in the nordic countries than in most other oecd coun-tries. collective wage bargaining ensures that firms with different productivity

gInI CoEffICIEnt of HousEHold dIsposaBlE InComE and gap BEtWEEn rICHEst and poorEst (s90/s10 sHarE), 2011

fIgurE 1

Source: OECD.statExtracts, Income and distribution database, September 2014

Note: Data for belgium is from 2010 and Japan from 2009.

Gini S90/S10

the nordic model is based on high union density. More than half of the norwegian workforce (52%) are unionised.

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levels pay similar wages to workers with comparable skill levels. wages can, therefore, be too high for firms with low level of productivity while high produc-tivity firms are highly profitable. this gives incentives to expand the activities of profitable firms while unprofitable firms will be forced out of business. Hence, there is a constant need for highly competent and productive labour force in order to maintain high employment levels. a good, publicly funded educational system helps to ensure high skill levels (Ministry of finance 2013). civil society organisations play a rather limited role as welfare providers in the nordic countries. they have, however, been important in pioneering and devel-oping these services. today civil society organisations, not least organisations for disabled people and pensioners, play an important role in defending the level of income among those depending on welfare benefits and pensions.

the nordic welfare state is based on the principles of universalism and equality. universal access to high quality social services such as child care, education, employment services and health services ensures that everyone enjoys equal opportunities. In norway, a good, publicly funded educational system helps to reduce income disparities and the importance of parental income for the chil-dren's future (Ministry of finance 2013). only 3% of pupils in primary and lower secondary education attend private schools (statistics norway (ssB) 2014). social services are financed with tax revenues, but mainly provided by munici-palities. such services include for instance public education and public health services which are free of charge, as well as public long term care. an extensive social benefit system involving public pension, disability payments and transfers to families with children ensures that those unable to work have an acceptable level of income. Benefit schemes such as child allowance is for all families with children and not income-related and everyone has the right to public pension (alestalo et al. 2009, anttonen et al. 2012) the advantages of universal access to welfare programmes and schemes are less stigmatisation, better service quality, higher benefit levels, and greater support for the welfare state among taxpayers (anttonen et al. 2012). this is partly the result of trade unions’ and civil society organisations’ fight for the dignity of all and the equality of people. Hence, the nordic welfare state’s role is not only to reduce poverty, but to promote social cohesion by insuring against risk of income-losses (e.g. unemployment, lack of appropriate skills and ageing) and redistribute across social groups and over the life-cycle. the nordic countries have all achieved a high level of employment, income equality and gender equal-ity. the relative equal income distribution in the nordic countries and norway in particular can be attributed to three important elements. these are the high employment rate (also among women and the elderly), the centralised wage bargaining systems and the universal and redistributive welfare state.

the relative equal income distribution can be attributed to the high employment rate (also among women and the elderly), the central-ised wage bargaining systems and the universal and redistri-butive welfare state.


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In 2011, income inequality before taxes and transfers measured with the Gini coefficient was 0.42 in norway. after taxes and transfers, inequality fell to 0.25. this illustrates the effect of the equalising measures and that the equal income distribution in norway is both the result of relative equal distribution of earnings from work and capital and of redistributive taxes and transfers. 3. Has inequality increased in Norway? over the two decades prior to the onset of the global economic crisis, inequality in disposable income increased in the oecd countries (oecd 2011:228). the main driving force behind this trend was increased inequality in market incomes that includes gross wages, income from self-employment, capital income, and returns from savings (oecd 2011:23). also in norway, the Gini coefficient showed a strong trend towards increased inequality in disposable income until 2005. this was mainly because of a sharp increase in capital earnings, and the trend was reversed after a tax reform that came into effect from 2006 (oecd 2011: table a1.1, Ministry of finance 2013:93). Between 1975 and 2007, the richest 1% increased their share of the growth in pre-tax income in many oecd countries including norway (see figure 2). However, the wealthy in the us, canada, the uK and australia captured a much larger slice of the growth in income than in the nordic countries. the growth in wealth of the 1% richest has been associated more with a rise in incomes of the “working rich” (e.g. the remuneration of top executives) rather than a recovery of capital incomes (oecd 2011:348). Interestingly, the share of the richest 1% in the growth of pre-tax income increased more in norway than in other european countries (figure 2). as mentioned this trend was curbed by tax reforms in 2006.

In somE CountrIEs, onE fIftH or morE of total InComE groWtH Was CapturEd By tHE top 1%.

sHarE of InComE groWtH goIng to InComE groups from 1975–2007

fIgurE 2

Note: Incomes refer to pre-tax incomes, excluding capital gains OECD calculations based on the World Top Income Database.

Source: OECD 2014a, figure 3

bOTTOM 90% TOP 10-1% TOP 1%

the share of the richest 1% in the growth of pre-tax income increased more in norway than in other european countries. this trend was curbed by tax reforms in 2006.

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norWay

Growing income inequality is worrying as it may push more people into poverty and sparkle social unrest. countries with large income gaps (e.g. in south amer-ica) are to a much larger extent characterised by economic and social instability than countries with relative equal incomes (e.g. the nordic countries). oecd defines the poverty line as 50% of the median disposable income while eurostat sets the line at 60% of the median disposable income. the share of the population with low income measured with these indicators is small in norway compared with other countries. In 2011, the share of the population in norway with income below the 60% of the median income was 10.5%, while in eu27 16.9%. according to the oecd poverty line (50% of the median disposable income), only 7.7% of the population in norway have low income (oecd and eu databases), while in eu27 11.5% (figure3). Median income in norway in 2011 was approximately usd 50 000. the large increase in the share of those with low income in norway when we move from oecd threshold of 50% to eu threshold of 60% of the median dispos-able income is not only due to a higher income cut-off point. another important reason is that a substantial number of the elderly living alone receive minimum public pension that is between 50-60% of the median disposable income.

Persons with non-western immigrant background in norway are overrepre-sented among those with low income. their employment rate is lower and they tend to have larger families than other population groups. Households with many children and only one breadwinner in norway have a high risk of poverty/ low income (fløtten et al. 2014, Ministry of finance 2013). figure 3 shows the share of those who had income below 50% of the median disposable income in the oecd countries in 2011.

rElatIvE InComE povErty ratEs WHEn tHE povErty lInE Is sEt at 50% of mEdIan InComE. 2011 pErCEnt.

fIgurE 3

Source: oecd.statExtract, Income and Poverty database

* Numbers for 2010

Persons with non-western immigrant background in norway are overrepresented among those with low income.

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22

4. What is driving income inequality? according to oecd (2011:113), changes in labour market policies and techno-logical change were the main determinants of the increase in wage inequality between the early 1980s and the late 2000s. the labour market policies and institutions refer to product market regulation, employment protection legisla-tion and tax wedges that are all important parts of the nordic model. these policies have become more lenient due to de-regulation and de-centralisation of collective bargaining which has contributed to growing inequality in the oecd. stockhammer (2012) found in his study of 71 countries during 1970-2007 that income distribution is not primarily determined by technological progress, but rather depends on social institutions and on the structure of the financial system. financialisation or an increased role of financial activity has led to an upward concentration of income and thus to falling wage shares of those at the bottom. stockhammer (2012: viii) argues that strengthening the welfare state, in particular changing union legislation to foster collective bargaining and financial regulation could help increase the wage share with little if any costs in terms of economic efficiency. the nordic model including centralised wage bargaining systems and redistri-butive welfare states has contributed to the relative equal income distribution in norway. the ability of the nordic model to attain high level of income equality has, however, come under strain from technical progress, globalisation (of trade and production), immigration and market pressure. technological progress, such as the spread of the Information and communication technologies, increases demand for skilled workers and depresses demand for those without. Hence, there is a constant need to ensure that the nordic labour force is flexible and competitive in order to keep employment high and inequality low. this has, so far, been achieved through a good, publicly funded educational system or extensive social investment.

centralised wage setting that aims at attaining compressed wage structure and low level of unemployment has played an important role in ensuring a relative stable share of wages as opposed to capital in national income over time in the nordic countries, compared with many other oecd countries (see e.g. stock-hammer 2012). representative and well organised labour, as well as employers, makes this system powerful. Greater international competition puts a strain on the compressed wage structures in the nordic model, as skilled workers can increase their earnings by moving to international enterprises that do not partici-pate in the centralised wage setting system. continuous immigration increases the risk of social dumping and may prevent any further improvements in income inequality.

recently, the french economist thomas Piketty warned the nordic countries of the growing income inequality risk, especially at the top of the income distribu-tion. In his book capital in the twenty-first century, Piketty (2013) showed how

norWay

strengthening the welfare state, in par-ticular changing union legislation to foster collective bargaining and financial regula-tion, could help increase the wage share with little if any costs in terms of economic efficiency.


23

norWay

capital incomes are growing faster than other incomes and becoming more concentrated among the richest. this trend will accelerate the growth in inequal-ity if capital is not taxed in the same way as wages or progressively. norway has, as already mentioned, managed to curtail this trend by tax reforms that made the taxation of capital and wages more similar (see figure 1). the relatively low level of inequality in norway can, in other words, be traced back to several factors. firstly there is a high level of income, but this does not guaranty low level of inequality. Political factors are therefore important. strong trade unions and organised civil society makes space for centralised wage bargaining and redistributing welfare provision. this system is, however, under pressure. sustaining this system will demand political will to use measures that keep a high level of employment as well as a redistributing tax and welfare system.

this trend will accelerate the growth in inequality if capital is not taxed in the same way as wages or progressively.

Till now, Norway has been a country with relatively low inequality. However, today there are some disturbing signs of increasing inequality also here.

(Photo: Jens Sølvberg, Samfoto/NTB scanpix)


24

EquadorIndigenous peoples in Ecuador continue to demonstrate for fulfilment of their rights to land and resources.

(Photo: Werner Anderson) Ecuador


25

Equador


26


15

20%

Female income

54%of male income

ECuador

ECuador

BrazIl

ColomBIa

vEnEzuEla

pEru


10% richest earn

25 times as much as the 10% poorest

youth unemployment rate

0World Bank (2013, $PPP)World Bank, Gender Equality Data and Statistics

Calculated based on Wold Bank Database

ILOstat


agrICulturE

9900 11%39% 61%

gdp per capita


Gender Related Development Index (GDI) - UNDP; Estimated share of GNI per capita ($PPP 2011)


27

ECuador

reduced inequality after the Citizens' revolution

E cuador is a country in the andean region of south america, with a population of 14.5 million people.1 from the 1980s onwards ecuador, like all latin amer-

ican countries, applied the neoliberal policies of the washington consensus, promoted by the world Bank and the International Monetary fund. the neol-iberal period (1980–2006) led to increased poverty and inequalities2, and the worst economic crisis in the country's recent history (1999–2001), causing mil-lions of ecuadorians to migrate. the crisis echoed in the political sphere, creating a situation of marked instability. from 1996 to 2006, no President completed his term. In the midst of strong social protest they were ousted by the very people who had elected them. In a single decade, the country had eight presidents, and experienced an acute institutional and political crisis.3

In this context, the economist rafael correa was elected president of the republic in 2007. His government proposal, known as the 'citizens' revolution', aimed to end the 'long, sad neoliberal night' in ecuador, and change the power relations in the country by calling for a new constitution to rebuild the country. a constituent assembly was established in 2007 with the backing of a referendum, and ecuadori-ans overwhelmingly approved the new constitution at the polls in 2008. the consti-tution represented a new social contract that marked a break with the former neoliberal order. Based on the concept of sumak Kawsay or Buen Vivir (Good quality of life in harmony with nature), it questioned the old idea of 'development' as a unilinear progress and as economic growth alone. Buen Vivir puts human beings and nature above capital and is the key objective of public policy. this new constitutional framework accelerated a process of change in the country.

this article focuses on the progress achieved during the first seven years4 of government under the citizens' revolution policy, with regard to reducing poverty and inequality.

A lost decade: 1995–2005neoliberalism led to increased poverty and inequality in ecuador. consumption poverty increased from 39.6% in 1995 to 52.2% in 1999. In 2000, income poverty reached 64.4% (seteP, 2014: 47). whilst inequality, measured by income, increased from a Gini coefficient5 of 0.57 in 1999 to 0.62 in 2001, inequality measured by consumption increased from a Gini coefficient of 0.42 in 1995 to 0.46 in 2006 (senPlades, 2009: 80).

In 1999, the worst financial crisis in recent history began, leading the country to lose its currency and adopt the united states dollar as its official currency. with the dollarisation inflation reached 103.7% in June 2000,6 creating social problems and leading to mass emigration. In early 2006, ecuador achieved the same poverty levels as in 1995.7 It was a lost decade in terms of a reduction in poverty and inequality. the neoliberal model had failed.

Buen Vivir puts human beings and nature above capital and is the key objective of public policy. this new constitutional framework accelerated a process of change in the country.

Ana María Larrea MaldonadoTechnical Secretary for Poverty Eradication

ana maría larrEa maldonado Ana María Larrea Maldonado is an anthro-pologist, with a Master's Degree in Local Development, specialising in social move-ments. She is currently the Technical Secre-tary for Poverty Eradication in Ecuador and the Secretary of the National Planning Council, under the National Secretariat for Planning and Development. She was Under-Secretary-General for Planning for 'Buen Vivir' (Good Quality of Life), Director of the Institute of Ecuadorian Studies and member of the Steering Committee of the Latin American Council of Social Sciences (CLACSO), representing Ecuador, Colombia and Venezuela.


28

neoliberalism claimed that economic growth was the measure of development. the state should not intervene in the economy; its role was limited to guarantee-ing stability and growth. the idea of redistribution was dismissed and replaced by the 'trickle-down' concept: if the 'viable' economic sectors were promoted and favoured the well-being of these sectors would 'spill over' to those excluded from the benefits of the system. consequently, the objective of public policy was to sup-port the viable sectors of the economy. those groups considered to be 'non-viable' should either receive 'aid' from the state or be 'trained' to enter 'modernity ' and become part of the ‘viable’ sectors (larrea, 2012: 26).

In relation to economic policy, social policy was given a secondary, residual role (senPlades, 2009: 78). It was a welfare-based policy, directed at 'alleviating' poverty with the basic objective of neutralizing social unrest and generating govern-ability. this policy based on cash transfer to the poorest people was implemented throughout the continent, and ecuador was no exception. In 1998, during Jamil Mahuad’s term, the 'bono solidario' (family support voucher) was established with a cash transfer of one hundred thousand sucres a month8 to families with limited resources. the voucher was conceived as compensation to the most vulnerable sec-tors, due to a reduction in subsidies for gas, electricity and fuel. those who considered themselves poor had to fill in a form with their socio-economic details, which were processed through Banred, a private financial network. By the end of 1999 1,324,000 families were benefiting from the voucher scheme, but there were serious shortcomings in the way it was run, as around 20% of the families included in the scheme were not poor, whilst 24% of the poor families were excluded (león, 2000: 1–3).

the ecuadorian state invested approximately 200 million dollars annually in this voucher scheme. comparatively, the bailout of the banks because of the financial crisis in 1999 cost the country close to 8 billion dollars, benefitting owners and bank directors. these figures clearly show the priorities in the public policy. from 1980 to 2001, social investment progressively decreased, by 2001, in real terms per capita, social investment was half of what it was in 1981 (larrea, 2004: 44).

The Citizens' Revolution and the shift in power relationshipsthe citizens' revolution resulted in a profound change for ecuador, since it managed to set new priorities for public policy and regain state sovereignty. a change of this nature can only be made through structural modification of power relations. therefore, the aim was to deconstruct the bourgeois state and create a people's state; from a state with a history of defending the interests of a few, to one defending the interests of the vast majority.

In contrast to the neoliberal period, when the social policy was directed at offer-ing aid to victims of an economic policy, the citizens' revolution has managed to combine economic and social policies to allow for redistribution of wealth. In order to consolidate an effective redistribution policy, four aspects were particu-larly significant: tax policy; renegotiation of the foreign debt; renegotiation of oil contracts; and considerable public investment to benefit the poorest groups.

the citizens' revolution resulted in a profound change for ecuador, since it managed to set new priorities for public policy and regain state sovereignty.

ECuador


29

Redistribution and distributionIn 2007, the constituent assembly approved the amendment law for equitable taxation in ecuador. In the period 2007–2013, the total tax revenue almost tripled compared to revenues recorded in the period 2000–2006, increasing from 21,995 million dollars to 60,660 million dollars (senPlades, 2014: 4). the net tax con-tribution, that is taxes as a percentage of GdP, increased from 10% in 2000, to 15% in 2012 (senPlades, 2013: 55). In 2013, tax revenue accounted for 60% of the General state Budget9. the efficiency of tax collection was improved (tax evasion was halved) and the tax system was made more progressive so that those who have more also pay more tax.

In 2008, for the first time in history, the state started a public audit process on foreign debt. the government set up the audit commission for ecuador's foreign debt. following a detailed study, this commission concluded that a considerable part of the foreign debt incurred by ecuador was immoral and illegitimate, a conclusion that was denounced to the world at large. In this way, the ecuadorian state initiated one of the most successful processes to renegotiate its foreign debt, managing to safeguard 8 billion dollars, equivalent to 13% of the GdP in 2008. In 2006, foreign debt services accounted for 24% of the general state budget, whilst

Years of social uprising against neoliberal politics rendered results. It brought the redistributive state back and the new constitution put human beings above capital.

(Photo: Cristina Santacruz/NPA)

ECuador


30

in 2013 it scarcely accounted for 3.6%. this important recovery of national sover-eignty made possible a progressive increase in social expenditure from 2.4% in 2001 to 12% in 2012 of GdP. In 2006, 2,390 million dollars were allocated to service foreign debt and scarcely 1,976 million to social investment. In 2013, this relationship had been reversed with 1,284 million dollars spent on foreign debt whilst 8,959 million went to social policy (senPlades 2014: 18).

from 2007 onwards, ecuador implemented a sovereign policy for managing its natural resources. oil contracts were renegotiated, changing the contract provi-sions and the state's share in the earnings. whilst in 2005, the state barely received 13% from oil extraction; the ecuadorians now receive 85% of oil revenues. this means that the state now receives a billion dollars more per year, and this amount is used for public investment programs to benefit the poorest.

ecuador is the latin american country with the highest public investment in relation to its GdP. In 2013, ecuador recorded an investment equivalent to 15% of its Gross domestic Product, whilst in 2006 this investment scarcely accounted for 4% of GdP. In 2012 the average level of public investment in latin america was 4.5% of GdP. ecuador tripled this percentage.

In addition to the economic redistribution policy, distributive efforts were made, notably in terms of growth in income and measures to democratise the ownership of property.

from 1982 to 2006, income per capita experienced an average annual increase of 0.8%. In the period 2006–2011, income per capita increased almost six fold, at 4.6% per annum (senPlades, 2013a: 118).

By March 2013, the Plan tierras (land Plan) had allocated a total of 20,500.90 hectares to 4,020 peasant families. In addition, 6,440.14 hectares of land were redistributed to 1,288 beneficiaries through the acquisition of farm holdings, whilst the ancestral ownership of 122,626.49 hectares was acknowledged, with 4,198 beneficiaries (seteP, 2014: 142).

at the end of 2013, the handing over of 'la clementina' – the largest banana plan-tation in the country with 12,000 hectares - to 1,960 workers marked a historical milestone. this plantation was the property of the richest man in ecuador, the lawyer alvaro noboa, who owed the ecuadorian state more than 100 million dollars in taxes. after lengthy legal proceedings, the courts ruled in favour of ecuador's Internal revenue service on the lawsuit it had filed for tax evasion, and proceeded to seize this plantation. the plantation was valued at 90 million dol-lars. the ecuadorian state encouraged the workers to organise themselves into a production cooperative and put the plantation up for auction. the workers received a loan from the Banca Pública del ecuador, for close to 79 million dollars, which allowed them to participate in the auction, and they were awarded owner-ship of the property10.

ecuador is the latin american country with the highest public investment in relation to its GdP.

ECuador


31

one of the landmark hotels of Guayaquil, the Hotel ramada, also became the property of the workers, following the same procedure. the Hotel ramada belonged to the Isaías family, who owned one of the Banks which collapsed during the bank crisis in the late nineties and subsequently passed into state ownership. In 2008, the government decided to seize 200 assets belonging to the Isaías family to recover the resources the state had spent on the bailout of the filanbanco bank. Hotel ramada was included amongst these assets. In 2009, the hotel administration was handed over to the workers and, in 2012 the workers received a loan from Banca Pública on 4.4 million dollars to purchase the hotel.

Many more examples can be mentioned to illustrate the distributive policy in ecua-dor, but only one more milestone will be mentioned here. In 2012, the president of the republic decided to increase the monthly amount received by families benefiting from the Bono de desarrollo Humano (Human development Voucher)11 , from 35 to 50 dol-lars. the increase was financed by eliminating a tax exemption from the earnings of private banks, through a law approved by the national assembly. as a result almost 130 million dollars per year, which were previously part of Bank earnings, are now distributed amongst the poorest people in the country.

Universality of rightsthe progressive increase in social investment and expenditure is another of the pillars of the redistribution policy. whilst in 2001 public investment in the social sector accounted for 2.4% of the Gross domestic Product, in 2012 this had risen to 12% of GdP (seteP, 2014: 48).

since the citizens' revolution government came into office, social policy has been based on the universality and superiority of social rights. these rights were no longer considered commodities, as was the case in the neoliberal period, and the state guaranteed free universal public health and education for everyone.

one of the first measures was to remove the so-called 'voluntary contribution' in education. although the constitution of 1998 acknowledged the right to free pub-lic education, parents were charged a 'voluntary contribution' of usd 25 at the beginning of every school year. In 2007, this contribution was eliminated and the state guaranteed that primary and secondary level education in ecuador would be free. this was supplemented with the provision of free school uniforms and text books. the 'tejiendo el desarrollo' (weaving development) scheme was created where small production units, connected to the popular economy made school uniforms that were purchased by the state for public schools. this was a source of additional income for small associations of women dedicated to textile produc-tion. a number of studies in latin america and ecuador12 demonstrate that free education is an effective means to reduce inequality, even more effective than cash transfer (seteP – economics, 2014).

free education has effectively universalised primary education and closed gaps between groups. the net rate of attendance for primary education increased,

since the citizens' revolution govern-ment came into office, social policy has been based on the universa-lity and superiority of social rights.

ECuador


32

from 78% in 2001 to 91% in 2010 (senPlades, 2013a: 54 – 55) and by 2013 the net enrolment rate is 97% (Inec, eneMdur: 2013). the enrolment increase was far greater in rural areas, rising from 73% in 2001 to 90% in 2010. Importantly, access to education increased with 20% for indigenous peoples and 15%for afro-ecua-dorians (senPlades, 2013a: 53).

Progress with regard to secondary education has also been significant. the net enrolment rate increased from 41% in 2001 to 67% in 2013. the enrolment of indigenous peoples tripled, increasing from 17% to 57%, almost double the national average, whilst the net enrolment rate for afro-ecuadorians doubled from 28% in 2001 to 56% in 2013. the changes were also significant in rural areas with an increase from 26% in 2001 to 56% in 2013 (senPlades – seteP, 2014: 14–15).

In 2008, the new constitution of ecuador democratised higher education. the recogntion of the right to free higher education led to a major increase in enrol-ment, from 25% in 2001 to 40% in 2010 (senPlades, 2013a: 55). a historically ambitious scholarship scheme reinforced the democratisation of the system that has until now granted 7,166 scholarships (senPlades, 2014: 27). comparably, the ecuadorean state only granted 300 scholarships for higher education in the period 1996–2006.

access to public health services has also increased significantly. the number of health service consultations increased from 95 per 100 inhabitants in 2006, to 246 consultations in 2010 (senPlades, 2012: 48). the number of health person-nel per 10 thousand inhabitants increased from 37 to 50 doctors or equivalent and the access to these personnel has become more evenly distributed (Gini coeffi-cient reduced by 9 points). whilst in 1990, 6% of the population had no health personnel in their parish; in 2010, this figure had dropped to 0.6% of the popula-tion. the average life expectancy at birth has increased from 59 years in 1970 to 76 years in 2010, exceeding the latin american average (senPlades, 2013a: 7–75). Poverty-related illnesses and diseases have reduced considerably.

as far as housing is concerned, the most significant achievement is access to electrification, rising from 78% in 1990 to 97% in 2013, with rural electrification recording the greatest increases (Inec: cPV, 1990; eneMdur, 2013). the public drinking water supply network coverage increased from 69% in 2006 to 75% in 2012, whilst the sewerage network coverage increased from 56% to 66% over the same period. In spite of improvements, the universalisation of these services represents one of the major public policy challenges in ecuador, as in 2012, scarcely 36% of homes in rural areas had access to public drinking water and only 21% had access to the sewerage system.

senPlades estimates that achievement of a 95% coverage rate for drinking water and sewerage would reduce poverty due to unsatisfied basic needs (uBn) by 15% and eradicate extreme poverty, measured by uBn. furthermore, it would

the constitution of 2008 introduced the concept of a living wage, establishing that no company can take out profits until all its workers are paid at least a living wage.

ECuador


33

have significant effects in the field of child health and malnutrition. conse-quently, the poverty eradication strategy has prioritised access to drinking water and sewerage.

ecuador has managed to reduce unemployment considerably. In 2013, the unem-ployment rate was 5% (Inec, eneMdur, 2013), lower than the average for latin america, which was 6% in 2013.

the constitution of 2008 introduced the concept of a living wage, establishing that no company can take out profits until all its workers are paid at least a living wage. a living wage is calculated as the sum required to cover the basic food bas-ket, taking into account the average number of wage earners in a family . this was yet another important measure to redistribute income in ecuador. whilst in 2006, the average family income scarcely managed to cover 46% of the basic food basket, in 2014 the entire basket was covered.

the percentage of the working population affiliated to the social security system, one of the most important indicators of the quality of employment, has increased considerably over the last few years, from 23% in 2001 to 43% in 2013. In the refer-

Ecuador has been the country in Latin America with the fastest reduction in inequality.Rafael Correa, representing Alianza País, has been president since 2007.

(Photo: Rodrigo Buendia/AFP Photo)

ECuador


34

endum of 2011 non-affiliation to the social security system was penalised, as set out in the new Integral Penal code, approved by the national assembly in 2013. one of the most important decisions was to make domestic workers affiliation to the social security system compulsory and to match their wage to that of a worker. as unbeliev-able as it may seem, until 2006, domestic employees earned half the amount of other workers14 in ecuador. wage standardisation for all male and female workers put an end to this historical inequality and the value of to domestic female work was increased.

In 2011, for the first time, full urban employment was greater than underemploy-ment. However, underemployment continues to be an important structural problem and its reduction one of the greatest challenges in the coming years.

Poverty and inequalityas mentioned above, the right combination of distributive and redistributive poli-cies has reduced the problems of poverty and inequality considerably, positioning ecuador as one of the few countries in latin america that has managed to decrease poverty, reduce inequality and increase per capita consumption simul-taneously (senPlades, 2013a: 33). according to cePal, ecuador is the latin american country with the fastest inequality reduction rate. the Gini coefficient of income fell by 0,07 points between 2006 and 2012, from 0,54 to 0,47, whilst during this same period, latin american only managed to reduce this coefficient by 0,02 points, down to 0,50 (senPlades, 2014: 16).

these are the results of public policy priorities, based on the 'Buen Vivir' planning concept. consequently, over the last few years, ecuador has become a benchmark in latin america for overcoming poverty and inequality.

Peasant and indigenous peoples organisations were crucial in promoting the reform process in Ecuador. They have also been critical towards the present government.

(Photo: Werner Anderson)

ECuador


35

Peasant and indigenous organisations call for an agrarian reform in ecuador, but in spite of promises made by the correa government their expectations have not been met. the ongoing negotiation about a free trade agreement (fta) between ecuador and the european union has increased the level of conflict between social movements and the government. the article in this report, written by larrea, documents the last years’ substantial reduc-tion in inequality and improvements in social and economic indicators. still, inequality remains high in ecuador. as could be expected, there are conflicting views on the way forward between the economic elites and the government. at the same time, there are strong contradictions between the government and the social movements. the indigenous movement, represented by conaIe, spearheaded the mobili-sation against neo-liberal policies from 1990 and onwards. their mobilisation, in alliance with others, prepared the ground for a policy change and the wave of protests that eventually lead to the election of rafael correa in 2006. nevertheless, the relationship between the social movements, particularly conaIe, and the government of the citizens’ revolution is full of conflict. rural development, ownership and distribution of water, and concessions to mining companies are among the issues that have repeatedly led to protests against the government. former president of conaIe, Humberto cholango, commented in a recent interview with torunn aaslund, editor of the nPa maga-zine appell, that unjust distribution and privatisation of natural resources is a huge problem in ecuador. romelio Gualán, president in the peasant organisation cnc, says to nPa that the situation for peasants has not improved and that land redis-tribution is necessary to secure peasant production. they are both against a free trade agreement with the european union, while large export producing land-owners are among the strong interest groups promoting the fta. according to Gualán, ecuadorian peasants cannot compete with european providers and a free trade agreement will not be fair trade for them. the mayor of Kayambe and former president of conaIe, Guillermo churuchumbi, explains to nPa that they are developing new ways of working in the municipal government. Participation is crucial. People living in the neighbourhoods know the challenges they have and must take part in setting priorities. they must organise and present their proposals and needs to the municipality. the municipality is estab-lishing a fund to contribute to a more just distribution of water, initially funded by taxation of tele companies. churuchumbi considers corruption to be a major chal-lenge embedded in the top down colonial culture that is still present. therefore the municipality has developed a strategy where citizen participation is the key to fight corruption: participatory budgeting, public hearings and citizens’ observatories. Participation is also an issue at the national level, and the demand for a new state and a democratic and inclusive constitution, has been crucial in the mobilisations of the indigenous movement. However, the organisations claim there is a contradiction between the participatory democracy reflected in the approved constitution and the government’s lack of will to dialogue and negotiate with the social movements.

Broken dialogue with social movements

rural development, ownership and distri-bution of water, and concessions to mining companies are among the issues that have repeatedly led to protests against the government.

ECuador

BEatE tHorEsEn, npa


xxxxx

36

Equador

spain

norwegian people´s aid xxxxx

37

EquadorEnough austerity measures! People in Spain have taken to the streets to protest increasing inequalities and the government’s management of the financial crisis. Los Indignados express their outrage with the austerity measures.

(Photo: Pierre-Philippe Marcou/ AFP/NTB scanpix)


38

spaIn


47

spaIn

franCE

portugal

Female income

62%of male income

10% richest earn

18 times as much as the 10% poorestCalculated based on Wold Bank Database


22Forbes

4%ILOstat


agrICulturE



56%

World Bank (2013, $PPP)

31850 youth unemployment rateILOstat

56%World Bank, Gender Equality Data and Statistics

36% 64%


gdp per capita



39

spaIn

popular resistance against the crisis

Understanding the crisis in Spain

The marked increase in inequality and poverty in spain is not a product of the crisis. this scenario began to take shape in the early nineties and to under-

stand it we have to see it in a broader perspective.

after overcoming the crisis that hit spain in the early nineties, a golden age began for the spanish economy. these were the miracle years: 12 to 20 million jobs were created, primarily connected to the construction and hotel industries.

this period saw a rise in female and youth employment, which meant a significant improvement in household income, even though their salaries were lower, and their inclusion in the labour market tended to be more precarious – particularly in the case of women. nevertheless, GdP increased systematically in this period.

alongside this economic success, high levels of poverty (approximately 20%) persisted, and inequality began to increase for the first time since the democratic transition from 1975. the result was that poverty and vulnerability1 was concealed beneath an expansive tide. at the same time, the welfare state was progressively losing its capacity to integrate the disadvantaged members of society.

However, the citizens were not concerned about this. on the contrary, the feeling was that things were going well. Progress made in terms of social rights was negligible compared to that in the economic sphere, but this did not appear to cast a shadow on the sunny mood in spain. capitalising on this momentum certain anti-social measures were taken, which would later have an impact once the crisis was in full swing.

amongst these were the fiscal reforms of 1998 and 2007 that lowered taxes – to lure private investment – and reduced public revenue. once the financial crisis began, the state did not have sufficient resources to take countermeasures and support the most vulnerable. these were happy years, financially speaking, but sterile from a social point of view; neither social protection nor investments were consolidated. of course, an increase in social expenditure does not necessarily mean better redis-tribution, but it is an important element in evaluating a society's level of equity, and spain always remained far below the european average for social expenditure2 and below its own potential capacity to sustain social expenditure.

The social impact of austerity measures on the citizens’ well-being from 2009, there was an unprecedented rise in unemployment, close to 25%, par-ticularly amongst those under the age of 25 (53.4%). Inequality, poverty and social exclusion saw their highest increase in a very short period. the loss of household purchasing power has been emblematic of the crisis years. Inequality has grown

Gabriela Jorquera RojasCoordinator of the European Antipoverty Network in Madrid

gaBrIEla jorquEra rojas Since 2009, Gabriela Jorquera is coordinator at the European Antipoverty Network in Madrid, EAPN Madrid. She is a social worker with experience in social intervention in deprived context in Chile and Spain. She has a Certificate on research proficiency, under-took postgraduate studies in Sociology, public policies and social exclusion at Universidad Comillas de Madrid. She has written many articles concerning poverty, social exclusion, social action, minimal incomes and social rights. Researcher and activist against poverty.

once the financial crisis began, the state did not have sufficient resources to take countermeasures and support the most vulnerable.


40

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and the end result is difficult to predict. underlying factors unleashed the eco-nomic crisis, and their effects have been devastating. there is no before and after; it is all part of the same process.

as the diagram shows, the crisis first hit the low income sectors of the population that worked in sectors such as the construction and hotel business. the crisis also affected those already in severe or extreme poverty with few qualifications; temporary workers; part-time workers and those on very low incomes who lacked even basic social protection3. these were the first people to be dismissed and to fall victim to the economic crisis. General poverty increased, as did extreme poverty. this trend was accentuated in 2010 as unemployment rose.

In the second phase, from 2011, the crisis hit the middle classes, increasing the numbers at risk of poverty. this process was the result of job losses and, as unem-ployment continued to persist, the loss of social security for the unemployed4. the crisis had an impact on a spain that had a fragmented system of guaranteed income, with major territorial inequality and gaps in its coverage. the low levels of social expenditure were symptomatic of the fragile nature of the country’s mechanisms for social and economic integration. this consolidated the exclusion of those outside the labour market, who had limited access to social rights and basic goods and services.

the spanish state does not perform a particularly redistributive role. It is increas-ingly unequal and profoundly unjust. Inequality has thus risen to historic levels and has created a powerful breeding ground for citizen outrage.

the data does not demonstrate the impact this has had on people, and the huge feeling of injustice they are experiencing. Here are some stories from a neigh-bourhood movement in Madrid, Invisibles de tetuán, which reveal how abandoned the citizens feel5:

“I have 2 daughters, aged 12 and 13. My husband and I are unemployed. I have a temporary job for one month and earn EUR 3.40 an hour. I owe Canal de Isabel II (Madrid’s water company) EUR 435 which I'm paying in instalments. When I couldn't meet the payments, they sealed off the supply and charged me a fine for removing it. Any request for help to pay the bills was rejected." olvido

“I get EUR 600 a month from my deceased husband's pension, and I use this to help my daughters. I feed them and my three granddaughters every day. They cut my water supply because I hadn't paid the bills, and have charged me EUR 75 to recon-nect me. If I pay for electricity, water, gas and I help my daughters, I've nothing left for food. Things are very bad. I need help. We, the older people, need help with our electricity, telephone, gas bills etc.” Juana

“I have to make do with my EUR 365 pension. I can barely pay the bills. At the moment, I owe the landlord EUR 1200 for electricity. He's told me to pay him back

progrEssIon In tHE povErty and ExClusIon prEvalEnCE ratE In spaIn

fIgurE 1

Progression in the Poverty and Exclusion Prevalence Rate in Spain, with different thresholds (moderate 60%, severe 40% and extreme 20% of median household income) 2008 – 2012.

Source: Prepared by the author based on INE [Spanish Institute of Statistics] data, Living Conditions Survey.

60% 40% 20%

0

10

20

30

1211100908


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“With a pension worth 600 Euro, my daughter, granddaughter and I can hardly scape out a living.” The Invisibles from Tetuán campaign

the spanish state does not perform a particularly redistri-butive role. It is increasingly unequal and profoundly unjust.

when I can. I go to the food bank every couple of weeks. My main worry is paying the electricity bill.” carmen

The increase in inequalitythe crisis in spain meant a significant loss of wealth, which was not distributed equally across society. of all oecd countries, spain is the one where social ine-quality has increased the most. one of the inequality indicators, the s80/s20 ratio, which compares 20% of the richest people with the 20% poorest, shows that spain has gone from 5.4 in 2000, to 7.2 in 2012 (in other words, the richest 20% earn 7.2 times more than the poorest 20% in 2012 compared to 2000).


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the Gini index, where 0 means total equality and 1 is absolute inequality, has gone from 0.27 in 2004, to 0.35 in 2012.6 Globally, normal rates for developed countries are between 0.25 and 0.35. spain is close to the limit considered to be inadequate for a country with its level of development.

Inequality has not only increased because medium and low incomes have dropped. oxfam Intermón points out that there have been significant changes in the income of the super-rich (the top 0.01%). In 1980, they earned 74 times more than 90% of the population, but in 2008 they earned 173 times more, thanks to a 275% increase in annual income during this period. the richest 1% earned 105% more.7

the income of the richest 1% is rising, 370,000 people earn more than eur 153,000 a year. at the other extreme, the poorest 10% have lost one third of their income, and there are more than 740,000 households (1.4 million people) with no income at all, either in the form of salaries or welfare benefits. spain is now a dual society.

Inequality increases the impact of poverty, with negative implications for the well-being of individuals and, in particular, for social cohesion. the effect of the rise in inequality will increase the complexity of the economic and social conse-quences of the crisis8, affecting the social make-up and regional balance in ways still difficult to predict, but which will undoubtedly have a major impact.

The government response to the crisisthe first robust response came in 2010 – a 5 thousand million euro budget cut – which affected all the Ministries and cut jobs in the public sector. In the following months, various plans to rationalise expenditure were approved, and measures to reduce the public deficit9 were adopted, such as freezing salaries in the public sector and pensions. welfare payments for children were also cut.

In response, there were a number of citizen mobilizations. one of the most signif-icant was the General strike of september 2010, in which 5 million people took part, one third of the salaried population10. their demands (a rejection of labour reform) were supported by two thirds of the citizens. However, neither the broad support for the strike nor it's social legitimacy were able to force a change. this reinforced the perception that it was impossible to influence a government that did not respond to the views of its citizens.

In april 2011, the 2011–2014 stability Programme was adopted11. some of these measures involved freezing support and benefits, such as grants, subsidies, and minimum incomes, making it tougher for the unemployed to access social protec-tion, and increasing Vat from 16 to 21%.12 these measures were overwhelmingly rejected by the citizens and were particularly damaging to the poorest households.

the largest display of public outrage was the Movimiento de los indignados, which began with a mass demonstration on 15 May 2011 (15-M), expressing people's opposition to the government's measures. the 15-M marked the

the poorest 10% have lost one third of their income, and there are more than 740,000 households (1.4 million people) with no income at all.


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Participation has acquired a particular form: protest, which has become a form of participation in spain, in response to the fragile mechanisms for formal participation.

beginning of a new social upheaval. But once again, no substantial changes to the austerity policies were achieved.

the new government (elected in november 2011) subscribed heavily to cutting expenditure, particularly welfare expenditure, and reduced the health and edu-cation budget by 1% of GdP13. once again, it increased Vat and reduced unem-ployment benefits. In healthcare, the budget was systematically cut and began moving away from a universal guaranteed model to one that was conditional.

these decisions were adopted with a sole focus on reducing public deficit, with-out considering the effect that this would have on the population and how their rights were infringed14. the citizens resented this, the number of protests rose and the alienation of the political class became more acute.

The democratic crisisInequality is not only the economic gap between rich and poor. It is also the gap in well-being and power-sharing. Increased economic inequality was accompanied by a setback in political participation.

the historical background to political participation is of interest here. spain went from tight constraints on participation during the franco regime to greater open-ness in a Parliamentary monarchy. However, the right to participate in social organisation enshrined in the constitution, has not materialised in reality. the transition from dictatorship to democracy was achieved through pacts between the political leadership, "overriding the important participation of the people that had taken place during the process"15.

after the transition, inequality in political participation also increased. empirical evidence shows that those who feel excluded participate less during elections than the rest of the population16. extreme electoral abstention (more than 80%) is concentrated in the poor and marginalised neighbourhoods of the great cities. this does not mean there has been no participation, but that participation has acquired a particular form: protest, which has become a form of participation in spain, in response to the fragile mechanisms for formal participation.

the mechanisms for indirect participation, such as referenda, have only occa-sionally been used during democracy. Popular legislative initiatives, which the citizens submit to congress for discussion, have been widely used, but remain ineffective. of the 71 initiatives submitted in the last 30 years, only two have been considered, and only one has become law.

the pre-crisis period was not a very favourable period for citizen participation. Participation was delegated to politicians, who were increasingly less appreci-ated. they monopolised the management of public affairs, while ignoring the interests and needs of society. citizen participation in the decision-making was minimal17.


44

In the years preceding the crisis, the number of civic and politically-oriented associations increased, as did actions such as signing letters of protest and attending demonstrations18. these initiatives have grown, along with a distrust in politicians, currently at its highest level.

The citizens' response to the crisisas was to be expected, given the tradition for political participation in spain, the reactions in the streets have been overwhelming. In 2008 there were not more than 10,000 protests a year, but in the last three years of rodríguez Zapate-ro's socialist government they multiplied19 to 21,297 in 2011. rajoy's period in government (2011-) has broken all records. In the first year of his mandate, there were 44,233 demonstrations. In 2013, there were 43,170, but the number of banned demonstrations rose from 371 in 2011 to 1,682 in 2013. outrage against the government's austerity policy has taken to the streets.

the government's response has been to criminalise protests. there are currently 80 ongoing court cases against 265 individuals. Many of them are trade unionists who have taken part in protests, which according to the trade unions "is a gross violation of the right to organise"20. a draft law, known as the "Gag law"(ley Mordaza), has been proposed on citizen safety to control protests and has been strongly criticised. In recent months, the most damaging aspects of the law have been modified, and it remains to be seen how much of the original draft will be retained. even so, the level of control and repression of citizen protest has been on the rise, particularly since 2012.

the main reasons behind the demonstrations have been labour issues (38%) and a rejection of the measures the government is taking (23%)21. these figures are consistent with the main concerns of the spanish people22: unemployment (77%) followed by corruption and fraud (41.5%), and economic problems (28%), followed very closely by politicians in general, political parties and politics (26.4%). this data is significant; as far as the spanish people are concerned, politicians do not offer solutions; moreover, they are perceived to be a problem.

there is great diversity in the composition, subjects, objectives and forms of organisation. these groups and movements, that count thousands23 in numbers, have been established through social networks, and have multiplied their capac-ity to create an impact. they have transcended the barriers of mass media, aligned themselves with the interests of large pressure groups, and connected with the section of the population that does not participate in movements, but sympathises with them.

the large variety of issues and demands gives the protest movement a multi-faceted and fragmented character24. Its considerable diversity is positive and its greatest obstacle is the inability to generate change.

spaIn

the government's response has been to criminalise protests. there are currently 80 ongoing court cases against 265 individuals.


45

spaIn

as far as the spanish people are concerned, politicians do not offer solutions; moreover, they are perceived to be a problem.

one example is the Plataforma de Afectados por la hipoteca [Mortgage Victims’ Movement] (PaH), which has broad citizen support. the PaH has prevented a large number of evictions, but is a long way off solving the problem. according to the General council of the Judiciary in spain, there were 67,537 evictions by the third quarter of 2012, and according to information from the district courts, there were 76,724 during the first nine months of 2012.

therefore a Popular legislative Initiative was promoted, in conjunction with the trade unions and various nGos, for a mortgage law preventing future evictions and supporting families who have already been evicted. there were 1.5 million signatures collected endorsing the proposal, however, no demands were met.

“I am one of 23 000 people in Tetuán that have to choose whether to eat or to pay electricity and water”. The Invisibles from Tetuán campaign


46

this feeling of futility of citizen action, and the resistance and indifference of the institutions, is symptomatic of how weak spanish democracy is and a great threat to social movements.

one of the main criticisms of social movements is their lack of pluralism; they are essentially made up of the middle classes. If those who are most excluded are not present, their interests will not be included in the demands. during the crisis years the number of citizens taking part in protest movements increased across all income groups, but in lower income groups participation has remained substantially lower.

the protest movements have strength based on their legitimate social demands. However, their major challenge is to expand and strengthen representation, create greater channels for participation from the sectors of society that are least represented and have least power.

The progress made by citizen protest movementsProtest has not been the only response. some social movements have transformed themselves into new political forces being counted at the ballot boxes alongside traditional ones. there is a desire to break the hegemony of the powerful groups, and to restore balance to political inequality, which in turn both maintains and promotes economic and social inequality.

amongst these political groups is the Partido Podemos ["we can" Party], which has had unexpected success (winning 5 seats in the european Parliament in the first elections where they participated (2014)), and according to the latest polls it is the third largest political force. this is a substantial change to the way social movements have developed, and suggests a quantum leap to positions of power and spheres of representation.

the success of Podemos has encouraged others, and the political groups and alliances (such as Ganemos) standing for election (2015) and able to achieve institutional representation have multiplied. the success of these movements is destabilising the political establishment in spain.

wilkinson and Pickett25 point out that an unequal society has less solidarity and is more violent. But in spain, the social cohesion indicator is one of the few that has yielded positive results in the crisis years26. solidarity has worked as a powerful buffer to the fall in people's living standards. and although people do not trust politicians or the parties, they continue to believe in politics and in making policies27: they take to the streets, demonstrating and demanding change with increasing intensity. the population has remained cohesive and continues to take a stand.

spaIn

one of the main criticisms of social movements is their lack of pluralism; they are essentially made up of the middle classes. If those who are most excluded are not present, their interests will not be included in the demands.


47

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although people do not trust politicians or the parties, they continue to believe in politics and in making policies.

Conclusions• the systemic crisis in spain has had huge consequences in the social sphere and

its impact on peoples’ rights has been dramatic.

• spain had structural conditions that made it particularly vulnerable, and the crisis has made this weakness more acute.

• the austerity policies have created inequality and poverty. directly, by cutting benefits and basic services, and indirectly as a result of a fall in production and employment resulting from cuts in public expenditure.

• some of the most serious social consequences have been:- an increase in inequality and poverty gaps, becoming ever more severe,

extensive and intense;- salary reductions and an increase in the number of poor workers, who are

becoming increasingly poorer; - the loss of household purchasing power;- the increased heterogeneous nature of the poor and excluded; - increasingly more difficult and unequal access to basic social rights which

may, create a social structure of polarisation and inequality in the future.

• these are critical challenges for public policies. the needs of the population must be met urgently, but conditions must also be created for poverty and inequality to be reduced in the medium and long-term.

• the citizens’ response has been a categorical rejection. while confidence in political representatives has fallen to a historic low, protest movements are bubbling up, rejecting the austerity policies, and demanding a turnaround in the government's policies.

• the citizens' movements have not managed to have an impact on the govern-ment's actions, nor to reverse or block some of the measures, even though they have considerable social legitimacy.

• there are countless protest movements. the fact that some have managed to make the leap into the political arena may create a different landscape, in terms of rebalancing power and the decision-making capacity of the citizens.

• the action of social protest movements has kept alive the force of outrage felt by the citizens and has eroded the credibility of the discourse defending the need for austerity policies.

• this requires the political system to take a step forward in entrenching democ-racy and generating structural change in methods of governance. the future depends on the response of the current political system and its capacity to be open to the changes society is demanding.


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48

Egypt

xxxxxView of the Giza Pyramids from the Cairo Citadel, Egypt.

(Photo: Robin Wyatt)


50


88

Egypt

Egypt

sudanCHad

lIBya

10% richest earn



8Forbes

28%ILOstat


agrICulturE



73%



34%World Bank, Gender Equality Data and Statistics

2% 98%

Female income

26%of male income


gdp per capita



51

Egypt

produced by the state – contested by the people

Social Justice was the main theme of the protests erupting in egypt in January 2011. nationwide chants of “bread, freedom, social justice” echoed, not just in

the popular tahrir square, but also amongst striking workers in industrial cities1 and villagers in northern and southern governorates.

social Justice was core to the uprisings to the extent that it was utilized by political parties2 , presidential candidates, youth groups and local committees as a cam-paign motto. even the consecutive governments coming to power since 2011 started utilizing the theme in economic policy plans3, as a goal of budget proposals, and as a main axis of any official declaration.

But as the echoes of social justice continue, more inequality and deprivation are being constantly produced by the unchanging economic and political structures, directly affecting the livelihood of egyptians, and creating large inequalities.

while many egyptians would define social equality and social justice as access to dignified life or better life, equality remains a disputed term both on the local and global levels. It was argued that the Gini Index for income inequality was improving4 at the same time as egyptians increasingly experienced lack of equality. this was later articulated through the mass protests in 2011, and the following protests in egypt.

this being the case, this article will move away from fixed definitions of inequality (e.g. like income inequality), replacing them with a more comprehensive view on inequality, which considers inequality in two main ways: firstly, inequality as an act of the state, as a state policy; and secondly, inequality as deprivation, as social and economic injustice, contested by the protest movement.

Inequality as a state policyInequality is most evident as a systematic state practice, which can be observed in different stages of policy-making, in the allocation of state resources, and in the distribution of tax burdens.

the fact that inequality goes well beyond disparities in levels of income is undis-putable, for income is not the only determinant of well-being or of the standard of living. there are many factors that determine the cost of living, but also the quality thereof. In egypt, a lot of the inequality that exists is produced by the central state in its management of public funds and resources. there are three important examples to this: the state budget, the subsidy system, and the tax system.

first, the state budget presents the spending priorities for the egyptian state. It is determined at a central level, and the funds are distributed to governorates through central ministries based in cairo; which means that cairo, with its exploding population, remains the controller of resources.

Heba Khalil,Deputy Director, Egyptian Center for Economic and Social Rights

HEBa kHaalIl Heba Khalil is Deputy Director of the Egyp-tian Center for Economic and Social Rights. She holds a BA in Political Science from the American University in Cairo, and an LLM in International Human Rights Law from York University. Her research interests include social mobilization, rural resistance, margi-nalization and state-society relationships.

It was argued that the Gini Index for income inequality was improving at the same time as egyptians increasingly experien-ced lack of equality.


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for instance, the lowest per capita expenditures on health can be found in upper egypt, where governorates like qena, sohag, luxor, assiut, Menya and fayoum per capita expenditure on health is six times less than in other governorates.5 therefore, the southern region of egypt has the highest rate of private units nationwide. accordingly, the highest increase in out-of-pocket expenditures on health services can be found within the same region. 6

the same is the case in allocation of state funds for education, housing and infra-structure. while Greater cairo's residents make up 22% of the total population of egypt, the capital city receives 74% of investment in land for housing units.7 as a result, an average resident in cairo consumes 1708 kws of electricity per year, whereas a resident in Monofeya only consumes 467 kws.

similarly, average daily consumption of water varies from the center, with 140 liters in urban cairo, compared to rural areas like qena and Beheira, where it ranges from 35 to 44 liters. this reflects the centralization of the state budget in big cities, and the evident isolation of large groups, especially in rural areas and in the impoverished upper egypt.

second, the subsidy system presents a similar challenge. egypt’s subsidies origi-nally started post- world war II, and were picked up by former president nasser, who developed the subsidy scheme as part of his welfare system. egypt’s universal subsidy is far from egalitarian though. roughly 80% of the subsidy goes to subsi-dizing energy products, mostly petroleum, which is in turn used heavily by energy-intensive industries. food subsidies, on the other hand, amounted to less than 20% of the subsidy, and continue to shrink.8 In total, in 2011/ 2012 energy subsidies made up more than 20% of public spending, which is almost twice as much as public expenditures on education and four times the spending on health.9

the fact that the subsidies are misplaced is undisputed, and the question remains regarding the reform of the costly subsidies. while the state recognizes the injus-tice of the subsidy system, reform attempts so far have removed subsidies for the poor, and continued the subsidies for the rich.

even within food subsidies, 73% of those with access to ration cards are not classified as vulnerable.10 similarly, 41.3% of vulnerable households did not have access to subsidized bread in 2013.11 nevertheless, the world food Program estimates that a further 9% of the population would have fallen below the poverty line in 2010/11 had these subsidies not been in place.12 for despite their injustice, subsidies are key to many households.

third, the burden of paying tax is a major determinant of injustice in egypt’s case. while citizens are responsible for about 50% of the tax revenue in the form of General sales tax and Personal Income tax, corporations pay a mere 10% in corporate income tax. the rest is primarily funded by corporate income tax and property tax paid by the state itself. Because of the large-scale tax evasion and virtually uncontrolled illicit financial flows, egypt – according to Global financial

this reflects the centralisation of the state budget in big cities, and the evident isolation of large groups, especially in rural areas and in the impoverished upper egypt.


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Integrity – loses $6 billion annually. nevertheless, state tax policy always targets the citizens, leaving these untapped resources untouched. In this way, egypt is moving to implement a fully-fledged Value-added tax that will increase the aver-age tax on commodities, and introduce taxes on services, which largely remained untaxed so far.

Inequality as deprivationas a result of the above mentioned discriminatory state polices, which for instance facilitate a gender-pay gap, inequality continues to increase, and results in wide-spread deprivation.

egypt's national poverty rate increased from 19.6% in 2004/2005 to 21.6% in 2008/2009, to 25.2% in 2010/11 and 26.3% in 2012/13.13 But the picture is different for rural egypt. almost half of the population of upper egypt's rural areas (49.4%) lived in poverty in 2012/ 201314 with children living in rural upper egypt being the most vulnerable. In turn, more than half of egypt's youth (51.3%) suffered from poverty in 2012.15

Soldiers in front of the Giza pyramids in the outskirts of Cairo. The protests in Egypt in February 2011 demanded then president Hosni Mubarak to quit immediately.

(Photo: Mohamed Abd El-Ghany, Reuters/NTB scanpix)


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Egypt

living in poverty in egypt doesn’t just mean receiving a low income; it means that the low income is all that citizens have to support themselves. In this way, the poorest 20% of households spend 21% of their income on health, significantly more than the richest 20%, who spend only 13.5%.16 similarly, illiteracy is mark-edly higher among the rural population; 30.7% in 2012, compared to 17.7% among urban populations.

unemployment remains one of the most chronic problems, where even the con-servative official unemployment rate continues to increase. unemployment climbed to 13.4% in the first quarter of 2014; increasing from an average of 9% in 2010. one in three young people are unemployed; almost three times the national unemployment rate.17 women are hit harder by unemployment; 24.8% of women were unemployed in the first quarter of 2014, compared to 10% of men.18 In rural areas, 62.6% of women were involved in unpaid family work in 2012.19 a large gender pay gap persists, especially in the private sector, where women earned about 30% less than men in 2010.20

this being said, inequality is continuously contested by the people. the protest movement, which continued to flourish after the outbreak of the mass protests in January 2011, has increasingly focused on inequality and lack of justice in the distribution of resources.

Contesting inequalityIn 2013, most of the protests monitored in egypt for economic and social demands21 highlighted the pressing need for social equality and protested the widespread inequalities.

Most notably, “equality” and “social Justice” spearheaded the list of protestors’ demands. 17.55% of all economic and social protests observed in 2013 demanded social or economic justice, most notably in cases of forced eviction, unemploy-ment, or deprivation of basic services22. It is noteworthy that these protestors have mostly decided to protest instead of using legal means for compensation or reparations, which perhaps reflects the inadequacy of the judicial means of reparation in egypt. Protesting injustices in the streets has continued to be the sole avenue for many egyptians nationwide.

In addition, 15% of the social and economic protests monitored nationwide in 2013 demanded the right to quality education, mostly led by students. 14.5% of all protests demanded the right to drinking water, electricity and power, sanitation, roads, which reflects the deprivation of many egyptians from access to basic infrastructure.

remarkably, the main protesting group in 2013 was “residents” or “locals” out-numbering the “workers”, (the other main protesting group) many times with their protests demanding access to services and social/economic justice. In 2012, a small rural village in the delta region, deprived like many other villages, rose up

unemployment remains one of the most chronic problems, where even the conservative official unemployment rate continues to increase.


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Egypt

Thousands of Egyptions at a rally in Cairo in 2011 to press the country's military rulers to take faster steps towards democracy.

(Photo: Maya Alleruzzo/AP/NTB scanpix)

against the governorate and declared secession from their regional authority. al-tahsin, a village of the daqahliyya governorate, demanded a road for years. the isolated village, deprived from all services, demanded a road to connect its inhabitants to the rest of the governorate, to meet their basic health and education needs23. In 2014 al-tahsin rose up again, with the support of seven other neigh-boring villages. their demands are yet to be fulfilled.

Inequality continues to occupy the discourse locally, nationally and internationally. at the same time, inequalities continue to increase, between nations and within the same nation. In egypt, while inequalities are continuously produced by unjust state policies, they also continue to be challenged by the people, whose demands are yet to be addressed.


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56

Equador

tunisiaThe labour unions have been active promoting a just development. Here, women from Tunisian General Labour Union (UGTT) shout slogans as they attend a May Day rally in Tunis in 2012.

(Photo: Fethi Belaid/AFP/NTB scanpix)


57

Equador


58

tunIsIa

tunIsIa

lIByaalgErIa

moroCCo


11

10% richest earn



0Forbes

15%ILOstat


agrICulturE



38%

Female income

29%of male income

World Bank, Gender Equality Data and Statistics

27% 73%


gdp per capita



59

tunIsIa

regional inequality caused strong protests

The popular uprisings in tunisia in december 2010 set in motion one of the most profound upheavals in the region for several decades. the inequality

between the interior and coastal regions explains the uprisings in recent years that have broken out in the interior regions, such as in sidi Bouzid or Kasserine. nevertheless, the regional inequality should not overshadow the inequality within each region, and in particular between various tunisian households.

sudden shifts as seen with the upheavals are often the result of long processes that eventually trigger reaction when the parties involved consider the inequality unsustainable. the role of inequality, as the main cause of the arab uprisings, is currently being debated in the academic world between those who deny it and those who insist this is the case. as pointed out by Kanbur (Kanbur, 2013), before entering this debate, the first two questions one has to ask when tackling the issue of inequality are: inequality of what and between whom? this subject has already been the topic of several studies on tunisia and the rest of the region since the uprisings, notably inequality in regional development in tunisia (Boughzala, 2014), (Mahmoud, 2014), the Mena region (Bad, 2012) or even different forms of inequality in the region (Bad, 2011) and tunisia (Ins, 2012).

we would like to tackle the issue of inequality by focusing firstly on the economic inequality between interior and coastal regions using an historical and geograph-ical approach, and secondly on the inequality between households using a meth-odological approach. these two approaches will allow us to analyse territorial or social inequality in tunisia through the prism of major contemporary upheavals, be it the industrial or the financial revolution.

part 1: Historical perspectives on regional inequality in tunisia

The industrial revolution and the origins of regional inequality in Tunisiatunisia, wedged between the Mediterranean and the sahara, has in terms of eco-nomic activity historically been divided between the coast, with its towns and vil-lages, its fishermen, artisans and pastoralists and the interior, the main site for grazing and grain farming (camau, 1987). thus, by the end of the 18th century, a certain economic balance had slowly built up. Pastoralists in the steppes bartered with smallholders, trading their livestock for grain in the north or for oil in the sahel; the smallholders traded wool or grain with the artisans in exchange for clothes. this balance and local trade led to the development and creation of what is today the symbol of tunisian craftsmanship and independence: the chechia.

further afield, trade was also taking place, not only with europe but also, using caravan routes, with sub-saharan africa and the east, via libya. farming was the life force of the tunisian economy and was based on a diversified system of land

Chafik Ben RouinePresident and co-founder of the Tunisian Economic Observatory

CHafIk BEn rouInE Chafik Ben Rouine is President and co-founder of the Tunisian Economic Observa-tory (l’Observatoire Tunisien de l’Economie). He is a graduate from l’Ecole Marseille in 2009 and has a Master in Cuantiatative Economy from GRECAM (Groupement de Reserche en Economie Quantitative d’Aix-Marseille). His main work is focused on public economic policies related to development.

the role of inequ-ality, as the main cause of the arab uprisings, is currently being debated in the acade-mic world between those who deny it and those who insist this is the case.


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ownership: Arch land, owned collectively by pastoral tribes in the steppe and the south, where there was a right to use the land but not to dispose of it (collective use), allowing grazing to take place; Melk land, owned by the sedentary small-holders, large families or the Beys with the right to use and dispose of their land (private property), and Habous land, which was non-transferable and dedicated to pious and charitable works, playing a major social role in the redistribution of wealth. this whole economic system therefore allowed local production to meet local needs with a regional diversity that provided a certain economic balance.

tunisia then experienced a slow and painful transformation into a modern liberal economy. In 1820-1830, British and french gunboat diplomacy lead to the signing of trade treaties that favoured the european colonies to the detriment of tunisian artisans. the power of businesses, bankers and european usurers plunged the tunisian Beys, artisans and smallholders into debt and led to the setting up of the tripartite commission, placing tunisia under the financial control of france, Great Britain and Italy. this was a merciless example of colonisation through debt, brought about by a trade imbalance and an elite that had become a major consumer of new european products.

the establishment of the french protectorate of tunisia in 1881 led to unequal treatment between the regions of the north and the south. In the north, the colonis-ers had grabbed the Melk lands and transformed the smallholders into agricultural workers, on the path to economic modernisation. In the south, pastoralists were cut off from their seasonal migration routes, and smallholders reduced to a nomadic existence of hunger or forced to work in the mines. as for the artisans, they were subjected to stiff competition from manufactured products imported from europe. the fragile pre-colonial balance was transformed into a state of regional inequality reinforcing dependence on the capital. this was the first clear division of tunisia's regions (north-south) in the modern period and was not to be the last.

Marginalisation of the interior regions following independencethe unions developed a strong and structured resistance towards the end of the colonial period, fuelled by high unemployment following the crisis in the 1930s up until independence in 1956. the colonial state massively withdrew investment in the tunisian economy in this period: the Gross fixed capital formation (Gfcf) went from 42 billion francs in 1950 to 23.1 billion francs in 1957. thus, independ-ent tunisia emerged with a shortage of local capital that forced a process of eco-nomic extroversion. the extroversion of the tunisian economy is defined as the ratio of total exports, tourist revenue and transfers from emigrants as part of the country's GdP. It is a way of measuring the tunisian economy’s dependence on external factors. the extroversion rate went from 20% in 1957-61 in the early years of tunisia's independence to 43% at the beginning of the 90s, peaking at 53% in 2008 before falling back to 47% since the latest global crisis.

why does this extroversion rate matter? It is important , because it is this process that transformed the north-south division, inherited from the colonial period,

the coastal regi-ons have attracted high-performing sec-tors, becoming part of globalisation, while the interior regions have become margina-lised and part of the informal economy.


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into the division between the interior and the coastal region. the tunisian authorities’ economic option, has led to concentration of economic activities on the coast with the development of an industry that is mainly export-based and with a strong focus on beach tourism. the result is that the coastal regions have attracted high-performing sectors, becoming part of globalisation, while the interior regions have become marginalised and part of the informal economy. of course, this coastal development has not been homogeneous and the coastal fringes (Bizerte in the north and Medenine-Ben Guerdane in the south) are not as integrated and developed as the central-eastern and north-eastern regions.

the figures for this coastal concentration, although a little out of date, are highly revealing (Belhedi, 1996). the coast accounts for: • 85% of the urban population; • 34% of the rural population; • 45% of the farming population; • 63% of agricultural added value; • 60% of agricultural exports; • 85% of manufacturing employment; • 90% of industrial added value; • 99% of the mechanical, electrical and chemical industry; • 95% of hotel capacity and overnight stays; • 82% of land traffic; • 88% of exporters; etc.

Female voters in the elections of November 2014, where millions took part in electing a new parliament. Tunisians are still somewhat split on what political road to take after The Arab Spring in 2011.

(Photo: Hamideddine Bouali/Demotix/NTB scanpix)


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this concentration of economic activity often leads to social inequality - migra-tion, inadequate infrastructure, unemployment – which in turns increases the requirement for welfare from the communities in question and reinforces the dependent relationship (some would call it domination) between the coastal regions and those in the interior. Improvement of the infrastructure accompanies the economic concentration on the coast and this further increases the margin-alisation of the interior. In terms of access to drinking water in 2010, the figures for households connected to clean water is on average 98% in the coastal regions of the centre-east and north-east, and on average 63% in the interior region of the centre-west and north-west. If we only look at rural areas in the interior, the rate of households connected to clean water around Kasserine (centre-west) is 28%. likewise, in the health sector, the number of hospital beds per 1000 inhabitants is 2.3 in Greater tunis, while it is only 1.2 in the centre-west.

therefore, the current state of regional inequality is the product of a long, unplanned and uncontrolled process that has had profound repercussions, particularly for traditionally agricultural regions populated by smallholders and pastoralists. economic modernity, with its industrial revolution and materialist colonisation, has made its mark on tunisia's history by destroying the traditional smallholder, pastoralist, artisan and tribal society. new forms of land occupation illustrate this transition to modernity: firstly, the sedentarisation of pastoralists, followed by coastal development and the virtual abandonment of rural regions in the interior. finally, we see a phenomenon of uncontrolled peri-urbanisation brought about by migration towards the large urban centres, creating informal settlements on the outskirts of coastal towns, particularly the capital.

this process is, we believe, the structural cause behind the outbreak of uprisings in tunisia. a feeling of marginalisation and frustration fuelled the uprisings, caused by the central authority's unilateral decision to follow a development model that had excluded and left so many people behind.

part II. Economic inequality in tunisia

The lack of debate on the assessment of inequality in householdsevaluating inequality between tunisian households first requires good tools for its measurement. How should one measure inequality between households? this question is of crucial importance and is currently the subject of intense debate in the united states. In fact, thomas Piketty's latest book, "capital in the twenty-first century", has restarted the debate on inequality with a long historical analysis of developed countries. this book underlines the scale of income and asset inequality in the world, particularly in developed countries such as the united states, which has underscored movements such as occupy wall street with its famous slogan "we are the 99%".

this study has allowed the debate to be opened on the various ways of measuring economic inequality: should one analyse the economic equality of households according to their level of consumption, income or assets? levels of consumption allow one to compare the standard of living of households regardless of their

ConsumptIon sHarE By dECIlE tunIsIa (2010)

Consumption by the lowest 10%

Consumption by the ninth 10%

Consumption by the eighth 10%

Consumption by the seventh 10%

Consumption by the sixth 10%

Consumption by the fifth 10%

Consumption by the fourth 10%

Consumption by the third 10%

Consumption by the second 10%

Consumption by the highest 10%

Source: National INS survey, 2010

fIgurE 1

3%4%

5%

6%

7%

8%

10%

12%

16%

29%


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source of income, without questioning whether or not they are living beyond their means, while income conversely allows one to compare household incomes to meet their needs. an analysis that uses consumption allows inequality to be downplayed, as the average propensity to consume (aPc) is greater in low-income households.

In tunisia, the national Institute of statistics (Ins) decided, in partnership with the african development Bank (afdB), to update its tools for measuring poverty and inequality through a study of the decade from 2000 to 2010 (Ins and afdB, 2012). It is striking to note that there is no discussion at all on the various meas-ures of poverty and inequality. whether measuring poverty or inequality, the only approach used is household consumption, without ever mentioning income. this can clearly be seen in an afdB study on inequality in tunisia, Morocco and Mauritania (afdB, 2011), which justifies the use of the consumption approach based on the permanent income hypothesis developed by Milton friedman which downplays income inequality. thus, according to the consumption approach, the poverty level went from 32.4% in 2000 to 15.5% in 2010 and the Gini index for consumption went from 34.4 in 2000 to 32.7 in 2010. In terms of the household consumption share by decile, the following are the results for 2010:

according to a recent afdB survey (afdB, 2010), using the income approach, tunisia is one of the most unequal countries in the Mena region.

Debt as a temporary solution to inequality between householdsthis places household debt at the heart of economic policies to combat inequality by encouraging households to resort to consumer credit, measuring this inequal-ity through the prism of consumption alone without ever attacking income inequality. this is the choice that tunisia has made. nevertheless, studies are beginning to make the link between inequality, household debt and major crises.

Indeed, Kumhof and rancière (Kumhof and rancière, 2010) demonstrate that the two major crises, the Great depression of 1929 and the Great recession of 2007, were preceded by sharp increases in income and asset inequality, as well as a sharp rise in debt in low and medium-income households. when the debt in these

Country dIffErEnCEs In InComE InEqualIty In mIddlE East and nortH afrICa (mEna) (most rECEnt data)

fIgurE 2

We note that Tunisia is the third most unequal country in the MENA region after South Sudan and Iran, with a Gini income index of approximately 42: in other words, 10 points more than for the Gini consumption index. This significant difference is explained by the fact that households compensate for the stagnation in their income by resorting to debt to maintain a socially acceptable level of consumption.

Source: Authors, using World Bank Data (2012)

0 5 10 15 20 25 30 35 40 45 50

IraqEgypt, Arab Rep.

Yemen, Rep.Syrian Arab Rep.

West Bank and GazaJordanAlgeria

IsraelMoroccoDjibouti

QatarTunisia

Iran, Islamic Rep.South Sudan


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households was perceived to be unsustainable, the crises unfolded. the mecha-nism is simple and formidable: investors use their surplus revenue, the product of an unfair redistribution of wealth, and invest it in financial products backed by loans to workers. they therefore limit the workers' drop in consumption brought about by the drop in their net income, but this increase in the workers' debt eventually weakens the financial sector leading to crises.

In tunisia, consumer credit for the middle class almost became part of the culture: car loans, computer loans, and wedding loans, loans for a smartphone or even for daily purchases. the tunisian authorities were late in being alerted to this phenomenon. It was not until 2002 that the central Bank of tunisia (cBt) separated its private loan accounts from its business loans, 2007 when it sepa-rated its consumer credit from mortgage lending and 2012 when it finally included home improvement loans as part of consumer credit. worse still, house-hold debt has not officially been recorded and monitored by the cBt and a former Ins Managing director even told us that he was unable to obtain this information from the cBt.

part III Inequality in postrevolutionary tunisia

the uprisings in tunisia originated in the regions where inequality is most persistent, thereby demonstrating that regional inequality is at the core of the —tunisian development model. the slogan chanted by the people was very telling: "work, freedom, national dignity" which, when analysed, reveals the profound causes behind the uprising and the aspirations of the people.

the first demand echoes one of the main frustrations of young tunisians: unem-ployment. the second, an inherently political demand, but closely linked to the socio-economic situation, underlines the desire for expression and freedom to act, particularly the right to demonstrate, strike or express one's dissatisfaction in public. the last demand, expressed by the term "dignity", illustrates the wish to live in a dignified manner, with access to basic services (infrastructure, health, education, etc.) and the wish to be treated with dignity by the authorities repre-sented by the police, the government and local authorities.

the collapse of the dictatorship gave way to major social movements: 2011 was marked by an explosion in the number of strikes (wildcat or legal) and sit-ins, and more than 500 social movements. a report on the social climate by the Minister of social affairs reveals 743 strike notices between January and september 2013, compared to 640 over the same period in 2012. the movements affected all regions and all sectors, and demands centred primarily on better working condi-tions (in particular, salary increases) or the payment of unpaid wages. workers' solidarity movements were also formed. Income inequality is therefore at the core of the demands of tunisian workers and demonstrates the importance of redefining inequality indicators by using an income-based approach rather than one based on consumption.

tunIsIa

prIvatE loans In tunIsIa 2002–2012

fIgurE 3

Private loans increased fivefold in 10 years (2002-2012) and consumer credit increased threefold in five years (2007-2012). The oversupply of consumer credit, coupled with the desire of an urban middle class to imitate Western consumer trends, is produc-ing the same mechanism of rising household debt that will weaken Tunisian growth still further. This has reached such a point that the CbT recently sent out a circular to the banks (No. 2012-17) with the aim of reducing consumer credit. This credit frenzy shows that Tunisian growth in the last decade was under-pinned by consumer credit, the consequence of a growth that leads to income inequality, as shown in the following diagram from the AfDb study (AfDb, 2012).

0

2000

4000

6000

8000

10000

12000

14000

16000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


65

to appease the people, Prime Minister Béji caid essebssi1 decreed several meas-ures, such as the launch of the amal (Hope) programme which allocated 100 for unemployed graduates over a one-year period, a doubling of public service recruitment and a series of salary increases in various public sectors (health, higher education, etc.). an agreement between the workers' union (uGtt), the employers' union (utIca) and the Ministry of social affairs was reached in June 2014 to increase salaries by 6% (including inflation) in the private sector, which will affect more than 1 million workers.2

furthermore, disregarding the strikes and sit-ins related to specific causes, post-revolutionary tunisia has seen several waves of disputes that have put structural problems on the agenda, such as the management of natural resources or the role of the state. the most striking of these are without doubt the Gafsa mining basin (a phosphate producer) and those of the town of Ben Guerdane (with a wealth of oil and gas, a hub for the informal economy and a border crossing with libya). It should be noted that during the Ben ali period, these two regions witnessed waves of protests that were brutally repressed. In fact, the Gafsa mining basin, and in particular the town of redeyef has, since 2008, been the symbol of the fight for regional equality and the equitable distribution of wealth. Ben Guerdane, in turn, symbolises recourse to the informal economy as a way of compensating for the absence of the state.

a new slogan, which appeared in 2014 during popular uprisings in the Kebili and tataouine Governorates, revealed a rise in awareness of the importance of the equitable distribution of natural resources. Voices were heard chanting "the republic of the south", claiming their right to enjoy what they consider to be their resources. the more moderate aspire to a decentralised and fair state, while the more assertive protesters demand regional autonomy.

Issues that link the exploitation of natural resources and regional development continue to be downplayed in political discourse and in the actions of successive governments. the extraction industry's lack of transparency, despite being one of the main complaints of civil society, continues to persist and governments have a tendency to downplay corruption in this sector. the inclusion of the people's sov-ereignty over natural resources in article 13 of the new constitution is one of civil society's major victories on economic issues even if civil societies’ push for the proposal to publish public contracts was rejected, not without some controversy.

In addition, since 2011, the trend in tunisia has been to propose reforms that reduce the state to a bare minimum, to allow the market to drive the country's development. examples of this are mass deregulation, privatisation through public-private partnerships, the withdrawal of food and energy subsidies, a major comprehensive free-trade agreement with the eu as well as financial liberalisa-tion. these are reforms promoted by the world Bank, the IMf, the afdB and the eu. civil society has responded by rallying to strengthen the state for it to be able to face up to the countless challenges ahead. civil society organisations have won

tunIsIa

pEr CapIta gdp groWtH & InComW InEqualIty In mEna

fIgurE 4

This diagram shows that Tunisian growth, despite being the highest in the MENA region, is also the one with the highest income inequality. Although it has equivalent growth, Egypt has 10 points less in its Gini index. Therefore, the combination of a consumption based approach to the analysis of inequality and an ever more sophisticated supply of credit to house-holds, shows that the political choice of the Tunisian authorities was to rush headlong into the situation when faced with income inequality. better wealth distribution would not only allow reduction in house-hold income inequality, but also avoid compensating for the poor redistribution of wealth by resorting to household debt, a cause of instability and systemic crises. It is all a question of political choice; on the one hand, a redistribution of wealth based on stable, permanent and inclusive growth, on the other, a stockpiling of wealth offset by the debt of other households and based on unstable, unsustainable growth leading to crises.

Source: Authors, using World Bank Data (2012)

-2

0

2

4

6

30 35 40 45

Egypt

IraqSyria Jordan

Yemen Algeria

IsraelMorocco

Tunisia

IranQatar

DjiboutiWest Bank and Gaza

Per c

apita

gdp

gro

wth

rate

(mean) gdppcga Fitted values


66

important victories halting IMf/world Bank structural reforms. the govern-ment abandoned a new investment code proposal3, deemed to be too lax and permissive for foreign investors, and the assembly blocked the law on public- private partnerships4.

the solutions to tunisia's inequality challenges will depend on the state's ability to shift economic activity towards the interior regions. the state attempted to do this through the free trade agreement with algeria that came into force in March 2014. However, so far, the infrastructure has not followed suit. Infrastructure projects underway, such as the trans-Maghreb motorway5 backed by the union for the Mediterranean, in fact has the opposite effect as it increase coastal development in tunisia and its north african neighbours.

two movements are developing in tunisia: one that wishes to strengthen the role of the state to face up to the challenges created by the uneven economic develop-ment in recent decades, and another that wishes to reduce the role of the state and rely on private initiatives. the side that manages to impose its standards and measurement tools will have the edge.

tunIsIa

two movements are developing in tunisia: one that wishes to strengthen the role of the state to face up to the challenges, and another that wishes to reduce the role of the state and rely on private initiatives.


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tunIsIa

Most pictures from The Arab Spring have shown urban people and various city protests. However, 15 per cent of the Tunisian work force is still working in the agricultural field.

(Photo: CM Dixon/Heritage/NTB scanpix)


xxxxx

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Equador

viet nam

There is a big gap between rural and urban areas in Viet Nam, but it is considered small compared to other countries. There is also a persistent large gap between the majority population Kinh and the ethnic minorities over represented among the poor.

(Photo: Hoang Dinh Nam/AFP/NTB scanpix)


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Equador


70

vIEt nam

CamBodIa

tHaIland

laos

malaysIa

vIEt nampopulationin million

91

10% richest earn



1Forbes

47%ILOstat


agrICulturE



6%

Female income

73%of male income

World Bank, Gender Equality Data and Statistics

24% 76%


gdp per capita



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vIEt nam

an economic tiger in south East asia

From the Changing Perception of Inequality …

During the last two decades of reform and development, Viet nam has under-gone a period of rapid growth, substantial poverty reduction, and impres-

sive economic transformation. figure 1 shows the growth of GnI per capita of Viet nam in the catching up process of lower middle income and developing east asia countries. a characteristics that may distinguish Viet nam from other grow-ing economies, such as china and Indonesia, is that Viet nam’s economic trans-formation has not run parallel with a rapid rise in inequality (Benjamin, Brandt and Mccaig, 2009; world Bank, 2012). Many studies using traditional measures of inequality (such as Gini coefficient) show that inequality rose modestly during the 1990s and stabilized during the 2000s (Hoang et al., 2010).

according to an analysis by the world Bank (wB, 2014a), Gini coefficient, where 0 indicates total equality and 100 is absolute inequality, for Viet nam in 2012 was almost 40. In thailand the index is slightly higher than 50. approximately half of the developing asian countries have Gini coefficients lower than those found in Viet nam, including cambodia and India. Many of the countries with higher Gini coefficients, like russia and china, are transition economies that have undergone high growth along with high inequality. another characteristics of Gini coeffi-cient for Viet nam is that the index has been quite stable over time (figure 2). this has been used by many observers as evidence showing the success of Viet nam in maintaining high economic growth without a surge in inequality.

However, the empirical measures of inequality seem to contrast with rising per-ceptions among Vietnamese people that inequality in income and expenditures is increasing rapidly (Vass, 2010). the concern of rising inequality is observed and reflected in the media, policy debates, and among academics (world Bank, 2012).

researchers note that using the Viet nam Household living standard surveys (VHlss) to calculate the Gini coefficient may underestimate the income of the richest, as they are hardly included in the sample of the surveys. for example, in 2012, the highest value of annual income recorded in is 853 million Vnd, while the average income at management level is more than 1,000 million Vnd, and at executive level it may be higher than 2,500 million Vnd (world Bank, 2014a). as a result, inequality tends to be highly underestimated.

… To the Persistent Ethnicity Gap as found in world Bank (2014a), Viet nam is characterized by low inequality with regards to primary school attendance, and access to electricity and safe water, but suffers substantial inequality in malnutrition, secondary school attendance, hos-pital usage, and access to sanitation.

Nguyen Duc Thanh, Director Viet Nam Institute for Economic and Policy ResearchNghiem Kim Hoa, Independent researcher and development consultant

nguyEn duC tHanH earned his PhD. in Development Economics from National Graduate Institute for Policy Studies (GRIPS), Tokyo, Japan in 2008. He is a founder and currently Director of the Viet Nam Institute for Economic and Policy Research (VEPR), and has been a member of the Economic Advisory Group to the Prime Minister of Viet Nam since 2011. ngHIEm kIm Hoa is an independent researcher and development consultant based in Viet Nam. She works with various international development agencies and local NGOs on action research and advocacy for rights-based development.

Is Viet nam moving towards the end of an era with high economic growth combined with low inequality!


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Besides the disparities among regions in the country, originated from the differ-ent infrastructure and natural allocation of resources, the disparities are clearly depicted in ethnic aspects and rural/urban areas. ethnic minorities make up 15% of the population of 90 million in Viet nam, and almost 50% of the poor. ethnic minorities are historically concentrated in upland regions, with poor connectiv-ity both in terms of physical and soft infrastructure. However, statistics show that location is not the only factor explaining the large gap in living conditions between ethnic minorities and Kinh – the majority in Viet nam, because most Kinh living in the same place with ethnic minorities are not poor. therefore one can claim there is a persistent gap between Kinh and ethnic minorities regardless of physical or geographic conditions.

one example is the share of Vietnamese children below the age of 5 with low height for their age (figure 3). the figure shows that urban areas have signifi-cantly lower share of stunted children than rural areas. However, the situation becomes even worse when looking at ethnic minorities and the poorest group (q1). In fact, these two groups are almost the same, reflecting the fact that most ethnic minorities live in poor conditions.

the same source (wB 2013) also shows that there are substantial disparities between Kinh and ethnic minorities in access to sanitation (81% vs. 26%) and piped water (93% vs. 73%). the difference in access to the national electricity grid may be less severe (99%, vs. 86%), but the real level of electric consumption per household may reflect how different they are.

a study by Viet nam academy of social sciences (Vass, 2012) reveals that the level of well-being as measured by household’s per capita expenditure, the wealth index, education of household head, and its regional location, are the most impor-tant determinants for dissimilarity. ethnic circumstances is the most important factor determining access to maternal care and also relatively important for access to improved sanitation facilities and safe water. furthermore, a comparison made between 2002 and 2008 indicates that the dissimilarity is stable over time.

Disparity in Education Opportunities as the Main Driving Force of Future InequalityIn terms of access to education, there are real inequalities in enrolment at post-primary level. Primary enrolment is compulsory in Viet nam, and 90% of the children from the poorest households are enrolled in primary education. lower and upper secondary enrolments were above 80% and close to 60% respectively in 2010, after considerable increase over the last 15 years (wB, 2013).

secondary education is not compulsory and schools are allowed to charge tuition fees, which are exempt for children from registered poor households. However, net enrolment rates at secondary level drops significantly among households with low income. the higher the degree, the larger gap of children’s enrolment rates

gnI pEr CapIta: vIEt nam and otHErs (atlas mEtHod, CurrEnt usd)

fIgurE 1

Source: Wb World Databank

VIET NAM

DEVELOPMENT EAST ASIA AND PACIFIC

LOWER MIDDLE INCOME

0

1000

2000

3000

4000

5000

6000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013


73

vIEt nam

between the better off and poor families. as a result, most human capital can only be accumulated in richer families. this, in turns, will widen the inequality in the next generation.

Measuring inequality in urbanisation: the hidden urban poor the urban population has increased from 19.5% in 1990 to 32.2% in 2013 (Gso, 2014). It has been suggested that about 20% of the urban population are migrants – both temporary and long-term ones (undP, 2010). statistically, the urban poverty does not appear to be a significant problem. statistics have rather showed very positive trends. the General statistics office and the wB indicated a dra-matic decrease of urban poverty rate from 25.1% (headcount) in 1990 to 5.4% in 2012.

the major focus on inequality analysis would then be the urban- rural disparity, a gap considered to be relatively narrow compared to other countries (wB, 2014). However, researchers (e.g. Hoang X.t. et al, 2013) have commented that neither the design of the Vietnamese Households living standards survey (the key data for poverty analysis by Gso and the wB) nor the measuring of poverty lead by the Ministry of labour, Invalids and social affairs were conducive for collecting information from migrants and informal groups. Migrants, especially temporary ones, were often missed as a target group in the local survey or intervention. an oxfam and action aid study on participatory monitoring of urban poverty (2012) found only a few long-term migrants included in these living standard monitoring efforts. relying on the formal system of registration, the collection of data was likely to miss unmarried people (who would likely be registered through a residential family) and temporary or seasonal workers. to reflect on this, an urban poverty assessment was conducted by undP (2010).

It suggested only around 10% of migrants participated in different activities organ-ised by local government, ranging from formal meetings with their representatives in the local People’s council or national assembly to more informal community events.

vIEt nam’s gInI CoEffICEnt of InEqualIty ovEr tImE

InEqualIty In nutrItIon: pErCEntagE of CHIldrEn undEr 5 WItH loW HEIgHt-for-agE

fIgurE 2

fIgurE 3

Source: Wb (2014a)

Source: Wb (2013)

0 5 10 15 20 25 30 35 40 45

20%Kinh/Hoa

Ethnic minorities

Urban

Rural

Q5 (richest)

Q4

Q3

Q2

Q1 (poorest)

41%

12%

27%

6%

16%

24%

24%

41%

0

5

10

15

20

25

30

35

40

45

Gin

i Coe

ffici

ent

1990

1995

2000

2005

2010

2015


74

vIEt nam

the exception was to make cash contribution to local funds managed by local authorities. several studies also indicated less access to public services such as health care and education for members of migrants’ families, or access with significantly higher costs (Gso, 2012, 2013).

Increased inequality is recognised by the publica recent survey on inequality perception showed that 76% of the urban dwellers expressed their concern on living standards disparities, compared to 53% of the rural residents (wB, 2013). In this survey, the dominant public opinion is that inequality is as a natural result of competition, talents, capacity, capital and luck. further interviews exposed more understanding of inequality factors, such as unequal opportunities or corruption. Perceiving inequality as an indispensable side-effect of development is common even among policy makers. this approach resulted in policy measures, which tend to fix consequences of inequality through providing substances than empowering disadvantaged groups.

the government has made several efforts to provide social welfare and protection schemes to the most vulnerable groups, such as the poor, the elderly, and the disa-bled. the devil, however, might be in the detail. for instance, as out-of-pocket remained a major share of health care costs, the poor are still vulnerable despite being provided with health insurance through the government program (wB, 2014b). from 2003, along with different poverty studies and policy briefs, research by donors, government agencies, and civil society attempted to provide different insights on the many dimensions of poverty and inequality, to make policy measures more responsive and comprehensive. economic factors remained central in the public debate of inequality, while few discussions successfully lead to practical intervention towards social inclusion.

Civil society engagement: from service delivery to advocating for inclusionVietnamese civil society organizations and groups operate in a fairly narrow legal framework, which is not in favour of civil society acting independently from the state. national nGos, and other forms of civil society organisations in Viet nam, have a short history of operation since the 1986 reformation, but the first 25 years were mostly spent on overcoming social and legal barriers for their establishment. their work during this period has focused on service delivery in agriculture and rural development.

dealing with fast economic growth and its disadvantages, was a new experience for young, domestic nGos, as much as facing macroeconomic development and social-political reform. the know-how and resources for their operations were primarily transferred from international nGos and development donors with more experi-ence in monitoring growth and inequality, and in conducting dialogues with policy makers or mobilising public participation. the lack of transparency and public accountability, together with constraints of association and expression in general, posed a great challenge for civil society in their monitoring role.

local nGos and groups started exploring new forms of organising people through social networks or new structures, such as social enterprises or cooperatives, through which they could con-nect directly to their constituencies and mobilise communities.


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In this context, local nGos and groups started exploring new forms of organising people through social networks or new structures, such as social enterprises or cooperatives, through which they could connect directly to their constituencies and mobilise communities. exploring different aspects of inequality and exclu-sion through working with disadvantaged groups, such as ethnic minorities, people with disabilities, lGBt (lesbian, Gay, Bisexual and transgender), poor people, and migrants, have been an effective entry point for civil society engage-ment. these new forms of organising people could also potentially resolve the challenge of financial scarcity as donors start leaving Viet nam as it has reached a middle-income country status.

Challenges ahead and policy implicationsalthough Viet nam has successfully eradicated extreme poverty and hunger, except for in a few isolated areas, there are widespread concerns about rising inequality in opportunities and outcomes. new work is needed to better under-stand these various sources of inequality and, more importantly, to understand the appropriate role of public policy in addressing these challenges (wB, 2012).

There is a strong perception among slum dwellers and rural population in Viet Nam that economic inequality is increasing. However, conventional inequality measures have not captured this development. A women carries empty plastic bottles purchased from Hanoi residents for reselling.

(Photo: Hoang Dinh Nam/AFP/NTB scanpix)


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Many perceive inequality as an indispensable side-effect of development. Local organisations and groups are now exploring new forms of organising to tackle inequality and exclusion. They seek ways to engage in making social policies more responsive to peoples’ needs and realities.

(Photo: Kham/Reuters/NTB scanpix)

for the government, policies to promote growth should go along with building an effective social insurance and social assistance system. the policy makers should consider social welfare as an integral part of any economic reform or restructur-ing package. at the same time, as the macroeconomic instability is continuously present, the official measurements of social benefits or poverty conditions should be updated regularly to capture the inflation. with the rapid urbanization pro-cess, appropriate polices should be designed to protect migrant workers from the rising cost of living and other sources of risks in urban areas. they should have equal access to basic services, portable benefits (including health insurance), and better access to social protection programs in their new residence. their children should have equal rights to access public schools in the area. More infrastructure and basic services should be provided in remote areas where most ethnic minori-ties reside.

for civil society groups, the question is not really about the role of local nGos participating in the debate, but how they can support their constituencies to engage directly in making social policy more responsive to their own needs and realities. advocating for the principle of non-discrimination in public services and social welfare is another strategy several local civil society groups are striving for, as people are more open and ready to make their voices heard. civil society groups will have to find their way to fuel policy dialogues and build trust, while working to enlarge their space through improving conditions to exercise freedom of assembly, association and expression.

with the rapid urbanization process, appropriate polices should be designed to protect migrant workers from the rising cost of living and other sources of risks in urban areas.


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south africaSouth Africa has the second biggest economy on the African continent, but is also a country with an enormous gap between rich and poor. Here, inequality still runs primarily – but not only – along racial lines. Johannesburg in the background.

(Photo: Peter Dejong/AP/NTB scanpix)


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Inequality:the achilles Heel of south africa

South africa in 2014 is a far better place than it was in 1994. It is truly nonsensi-cal to even debate this. the democratisation of our political system, the dera-

cialisation of our public sphere, the enormous access in education and health provided to so many, the social support grants disbursed to the poorest third of our citizenry, overwhelms even the gross corruption of nkandla, the service delivery failures of our municipalities, and the tragedies of Marikane. no sane person who lived through apartheid, at least one who is committed to humanist values, can truly argue that apartheid was a better political system. But having bettered apartheid’s outcomes must not make the political leadership of contemporary south africa complacent. after all exceeding the performance of the leadership of a political system described as a ‘crime against humanity’ cannot in itself be viewed as a great feat. Moreover, the political polarisation of our society in recent years, the violent service delivery protests and labour strikes, and the police reactions that it has provoked, threaten the political inclusion and democracy bequeathed by the grand compromise of 1994. the source of the cycle of violence and polarisation is of course the levels of ine-quality in our society. south africa achieved economic growth in 19 of the last 20 years, even if it was at a level far lower than we would have preferred. we have also brought down poverty levels in this period. But we simultaneously increased inequality every single year for the last 20 years. and in the midst of this democ-ratisation, we increased our Gini coefficient and overtook Brazil to become the most unequal society in the world. this is the badge of shame that some of our political leadership need to bear. and it is this scourge of inequality that is the source of the political polarisation in our society, and the cycle of violence that it has begun to breed. Ironically, our political leadership followed the advice of mainstream democratic theorists who counselled in the 1990s that we should focus on elections and polit-ical inclusion and indefinitely postpone any pursuit of social justice, lest the democratisation itself be derailed. this political decision legitimised the tragic pursuance of conservative economic policies that led to the increase in economic inequalities. and it is precisely these very economic inequalities that are perpe-tuating the polarisation and cycle of violence that is now compromising the very political inclusion its postponement was meant to enable. the lesson to be learnt from this tragic case is that postponing social justice only temporarily facilitates the democratisation of a society. If this political inclusion and democratisation is to be made sustainable, social justice itself has to be pur-sued as an independent goal in its own right. this means that if we are to avoid the possibility of an african spring, it is absolutely essential that we address the gross

The first issue of Inequality Watch presented an in-depth analysis of inequality in South Africa; “South Africa’s growing gap”, written by Neva Makgetla. This issue follows up with input to the debate on the challenges of inequality in South Africa.

Adam HabibVice-Chancellor and Principal of the University of Witwatersrand

adam HaBIB Adam Habib is a political scientist and has held academic appointments over the last decade at the Universities of Durban-West-ville and Kwazulu-Natal and the Human Science Research Council. He was also founding director of the Center for Civil Society. He is presently Vice-Chancellor and Principal of the University of Witwa-tersrand. His recently published book is entitled South Africa’s Suspended Revolu-tion: Hopes and Prospects.


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inequalities within our society. But is this necessity sufficiently recognised among our political and economic elites? I believe not. two powerful sets of stakeholders – corporate leaders and some in the political elite - are not sufficiently appreciative of the challenge in this regard. the executives in the corporate sector, and in particular the private sector econo-mists that tend to serve them, assume that with economic growth, inequality with automatically stabilize and subsequently erode. But these stakeholders would do well to reflect on thomas Piketty’s newly published study entitled Capital in the Twenty-First Century which explicitly demonstrates that inequality will grow across the world unless there is an explicit political attempt to counter this economic trend. Piketty himself in a commentary in the Financial Times (29/30 March 2014) recommends “a global progressive tax on individual net worth … so as to put global wealth dynamics under public scrutiny”. the political elite, on the other hand, recognises the threat that inequality poses, but cannot muster the political will to do anything about it. Perhaps this is best demonstrated by the national development Plan which has rallied support across the political divide, other than of course from nuMsa (national union of Metal-workers of south africa) and some in cosatu (confederation of south african trade unions). there is much that is of merit in the national development Plan, especially with regards to the recommendations on addressing the challenges in education and Health. But the Plan’s economic chapter has essentially ducked the fundamental question of our time. It assumes that by addressing poverty, we will automatically reduce inequality. It therefore proposes to expand livelihood opportunities at the lower end of society through a series of reforms: a new indus-trialisation plan targeting employment, expanding educational opportunities, and financing new entrepreneurs. these are important recommendations that will grow the economy, expand employment opportunities and address poverty. But they will not address inequality. the essential problem is that even if we get livelihoods growing at the bottom end of society through unemployment, financial support for new entrepreneurs and the like, the incomes of those at the upper end of society is likely to grow even faster. this is because the rich have assets – property, stocks, bonds – and it is these assets, which the poorer do not have, which will ensure that the incomes of the rich will grow faster. the net effect is that even if poverty erodes, inequality will grow faster. this is essentially what happened in south africa, russia, India and china in the last 20 years. and it is the fundamental challenge of our time. the only way economic inequalities can be addressed is if the expansion of liveli-hood opportunities at the base of society is coupled with either containing the enrichment at the top of society, or ensuring that the bottom grows faster than the top. the former can be done through caps on remuneration at the top end of the corporate sector and tax transfers as was done in western europe after the second world war, or in the united states prior to the first world war. the latter

the lesson to be learnt from this tragic case is that postponing social justice only temporarily facilitates the democratisation of a society.


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– growing the bottom faster than the top - was done in Brazil most recently through using the development finance institutions to finance small companies in the informal economy and to thereby shift them and their operations into the formal sector. none of these strategies have been tried in south africa. neither are they being proposed in the national development Plan. Instead we continue with a narrow Black economic empowerment program – even though we attach the suffix ‘broad‘ to it. our Black economic empowerment Program is essentially about enriching political elites and a narrow band of politically connected black entre-preneurs. Its net effect is thus to increase economic inequalities in our society, the very outcome that the national development Plan claims it wants to prevent. the plan’s failure in this regard is perhaps the best demonstration of the lack of political will to address the inequalities within our midst. I recognise the difficulty of convincing the powerful stakeholders within the corporate sector and in the party about making sacrifices in the struggle against inequality. But if this is not done, then we truly risk a perpetuation of the political polarization, the cycle of violence, and ultimately the emergence of an african spring.

Commuters hang on to a moving passenger train in Soweto, south of Johannesburg. April 27, 2014, South Africa marked the 20th anniversary of multi racial democracy. The achievements and soaring expectations of "The Rainbow Nation" have been tempered by the yawning gulf between rich and poor.

(Photo: Themba Hadebe/AP/NTB scanpix)


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glossary

Human dEvElopmEnt IndEx (HdI) is a way of measuring human development. It includes three dimensions which are equally important to the index score:• Life expectancy: How long it is expected when born for an

average person to live• Knowledge and education, measured by 2/3 weight on the

adult literacy rate, 1/3 on the gross enrolment ratio. This is the ratio of people who have started primary, secondary and tertiary schooling.

• Standard of living: Measured by GDP (see below) per capita at purchasing power parity (PPP, see below)

HDI will give a value between 0 and 1, where 1 is the best. UNDP uses the index value to classify the countries into four levels of human development: Very high (1,0 – 0,9), High (0,9 – 0,8), Medium (0,8 – 0,5) and Low (0,5 – 0,0).

gEndEr InEqualItyIndEx (gII) reflects women’s disadvantage in three dimensions: Reproductive health, empowerment and the labour market, for as many countries as data of reasonable quality allows.

The index shows the loss in human development due to inequality between female and male achievements in these dimensions. It ranges from 0, indicating that women and men fare equally, to 1, indicating that women fare as poorly as possible in all measured dimensions.

The health dimension is measured by two indicators: maternal mortality ratio and the adolescent fertility rate. The empowerment dimension is also measured by two indicators: the share of parliamentary seats held by each sex and by secondary and higher education attainment levels. The labour dimension is measured by women’s participation in the work force.

InEqualIty-adjustEd Human dEvElopmEnt IndEx (IHdI) adjusts the Human Development Index (HDI) for inequality in distribution of each dimension across the population. The IHDI accounts for inequalities in HDI dimensions by “discount-ing” each dimension’s average value according to its level of inequality.

The IHDI equals the HDI when there is no inequality across people but is less than the HDI as inequality rises. In this sense, the IHDI is the actual level of human development (accounting

for this inequality), while the HDI can be viewed as an index of potential human development (or the maximum level of HDI) that could be achieved if there was no inequality.

The “loss” in potential human development due to inequality is given by the difference between the HDI and the IHDI and can be expressed as a percentage.

gross domEstIC produCt (gdp) is an aggregated measure of production equal to the sum of the gross values added of all resident institutional units engaged in production – plus any taxes, and minus any subsidies, on products not included in the value of their outputs.

The sum of the final uses of goods and services (all uses except intermediate consumption) measured in purchasers' prices, less the value of imports of goods and services, or the sum of primary incomes distributed by resident producer units.

gross natIonal InComE (gnI) is GDP less net taxes on production and imports, less compensation of employees and property income payable to the rest of the world plus the corre-sponding items receivable from the rest of the world (in other words, GDP less primary incomes payable to non- resident units plus primary incomes receivable from non-resident units).

tHE atlas mEtHod is used when converting the GNI (see above) of some currency into U.S. dollars. The purpose of the Atlas conversion factor is to reduce the impact of exchange rate fluctuations in the cross-country comparison of national incomes.

gnI pEr CapIta, atlas mEtHod (CurrEnt usd) is the GNI of the country(see above) divided by its population to get it in per capita terms, using the Atlas method to convert it from the countries’ national currency to the current U.S. dollars.

tHE tHEory of purCHasIng poWEr parIty (ppp) is a method for comparing the value of different currencies in their home countries by equalising the purchasing power for a given basket of goods. A basket of goods is a collection of products (and services) that is supposed to be representative to what the average person buys.

gnI pEr CapIta, ppp (CurrEnCy mEasurEd In us dollars) is the GNI (see above) of the country divided

glossary


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by its population to get it in per capita terms and using the PPP method (see above) to equalise the purchasing power. This is a measure of the standard of living in the respective countries.

sHarE of populatIon lIvIng BEloW 1,25 usd a day (ppp) is the percentage share of the population that has less than 1,25 PPP-adjusted international dollars to live for. An international dollar has the same purchasing power in the respective country as a US dollar has in the United States. This makes the international dollar less than a US dollar in Norway (because of higher prices) and more in a country like Bolivia. People with income below 1,25 USD are considered extremely poor in international statistics on absolute poverty.

sHarE of populatIon lIvIng BEloW 2 usd a day (ppp) is the percentage share of the population that has less than 2 PPP-adjusted (international) dollars to live for. People with income below 2 USD are considered poor in international statistics on absolute poverty.

tHE gInI IndEx is used measuring the distribution of income, expenditure, consumption, wealth and land ownership in a popu-lation. A way of understanding the popular indicator is by looking at the graphical illustration. The horizontal axis measures the cumula-

tive percentage of the population, starting from the poorest and ending with the richest, while the vertical axis shows the percent-age of the income (or expenditure, wealth, land etc) associated with the different shares of the population.

This means that in the special case of the country “Egalitaria”, where 50% of the population has exactly a 50% share of the income, the Lorenz Curve would be the same as the 45 degree line. In general the Gini (G) for a country is: G=A/ (A+B). In the case of “Egalitaria” A would be 0, B would be 0,5 ( B=(1*1)/2 = 0,5) ) which makes its Gini: G=0/(0+0,5) =0.

The other extreme case is in “Unhappyania” where one person gets all the income of the country. This would make the Lorenz Curve shift all the way down to the right, which would make A – 0,5 , B - 0, making the Gini: G = 0,5/(0,5 + 0) = 1. The Gini Coefficients globally range from Denmark’s approximately 24,7% to Namibia’s 70,7.

This index is calculated for income, food consumption and land.

tHE mIsEr IndEx gives a measure on the economic polarisation between the rich and the poor in a country. The focus is on the extreme poor with less than 2USD PPP per day. It relates poverty to the absolute amount of resources available. The index therefore highlights absolute rather than relative inequalities.

tHE InComE sHarEs are what part of the country’s total income that is held by a specified subgroup of the population. This is a good supplement to the per capita income numbers because it shows how the income is distributed between the different groups.

natIonal WEaltH (or national capital) is the total market value of everything owned by the residents and government of a given country at a given point of time, provided that it can be traded on some market. It consist of the total sum of nonfinancial assets (land, dwellings, commercial inventory, other buildings, machinery, infrastructure, patents, and other directly owned professional assets) and financial assets (bank accounts, mutual funds, bonds, stocks, financial investments of all kinds, insurance policies, pen-sion funds, etc.), less the total sum of financial liabilities (debt). National wealth = private wealth + public wealth. National wealth = domestic capital + net foreign capital (Piketty).

Cumulative share of people from lower income 100%

Loren

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references and footnotes

01) Disposable income is calculated by subtracting transfers, income taxes and social security contributions paid by households from their earnings involving income from employment, self-employment and bonds and public cash.

02) Constant prices, constant PPPs03) http://www.bloomberg.com/news/2014-06-12/piketty-warns-scandinavia-of-growing-

threat-of-income-inequality.html Anttonen, A., Häikiö, L. and Stefánsson, K. (red.) (2012). Welfare State, Universalism and

Diversity. London: Edward Elgar. Alestalo, M., Hort, S. E.O and Kuhnle (2009) The Nordic Model: Conditions, Origins, Out-

comes, Lessons. Working paper no. 41. http://www.hertie-school.org/fileadmin/images/ Downloads/working_papers/41.pdf

Dølvik, J.E., T. Fløtten, J.M. Hippe & B. Jordfald (2014), Den nordiske modellen mot 2030. Et nytt kapittel? Faforapport 2014:46. Oslo: Fafo.

Eurostat (2012). Eurostat news release http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/3-03122012-AP/EN/3-03122012-AP-EN.PDF

Fløtten, T., Kvist, J., Mósesdóttir, L. & Pedersen, L. (2014). Velferdsstatsutfordringer. Ulikhet, ar-beidsintegrering, tjenesteproduksjon og likestilling. NordMod-rapport 10. Fafo-rapport 2014:42. Oslo: Fafo.

Kvist, J. og Greve, B. (2011). Has the Nordic model been transformed? Social Policy and Ad-ministration, 45(2): 146-160.

Ministry of Finance (2013) Perspektivmeldingen 2013. Chapter 5. St. Meld. no. 12 (2012–2013) Oslo: Finansdepartementet.

OECD (2014a). Better policies for better lives. Focus on Top Incomes taxation in OECD countries: Was the crisis a game changer? Figures and Data (April 2014). www.oecd.org/social/inequality.htm

OECD (2014b). Income inequality update. Rising inequality: youth and poor fall further behind.

Insights from the OECD Income Distribution Database, June 2014 http://www.oecd.org/ social/OECD2014-Income-Inequality-Update.pdf

OECD (2013). Crisis squeezes income and puts pressure on inequality and poverty. OECD: Paris. OECD (2012) Going for growth. OECD: Paris. OECD (2011). Divided We Stand. OECD: Paris. Piketty, T. (2013) Capital in the twenty-first century. Harvard: Harvard University Press. Stockhammer, E. (2012). Why Have Wage Shares Fallen? An analysis of the determinants of

functional income distribution, ILO Conditions of Work and Employment. Research Paper No 37. Geneva: ILO.

pages 12–21: norwayHigh income – low inequalitylilja mósesdóttir

pages 22–33: EcuadorReduced inequality after the Citizens' Revolutionana maría larrea maldonado

01) According to the population and housing census for 2010, the country had a population of 14,483,499 inhabitants, of which 63% lived in urban areas and 37% in rural areas.02) The CEPAL Social Panorama report for 2006 highlighted the fact that, for the period from 1990–2005, inequality increased in Ecuador and Paraguay by 10% (Gini coefficient of income), in contrast to other countries in the region, which achieved a reduction in inequality measured by income (CEPAL 2007: 27).03) The President elected for the period from 1996–2000, Lawyer Abdalá Bucaram, was ousted from office in 1997, without having completed one year of his mandate. His Vice- president, Dr Rosalía Arteaga assumed the Presidency for just a few days before being removed from office by the National Congress, who appointed Lawyer Fabián Alarcón as Interim


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President, in order to call a general election. As a result, Lawyer Jamil Mahuad became Pre- sident of the Republic for the period from 1998–2002, only to be removed from office in the year 2000 due to indigenous and popular protests. He was replaced by a triumvirate formed by the armed forces and indigenous peoples, which lasted just one day in power, since the National Congress appointed the Vice-president, Lawyer Gustavo Noboa, as the President of the Republic until the end of the term of office for which ex-president Mahuad had been elected. In 2003, following the elections, Colonel Lucio Gutiérrez became President of the Republic for the period from 2003–2007. As in the cases above, he was ousted by popular protests in 2005 and replaced by his Vice-president, Doctor Alfredo Palacios, to conclude the term of office.04) Following a long period of political instability (1996–2006), the Government of the Citizens' Revolution managed to stabilise the country. In contrast to former governments, President Correa has tremendous support from the people, which has been maintained at close to 80%, he has been re-elected twice in a row (2009, 2012), and he has won 9 elections.05) The Gini coefficient is the most-used indicator to measure inequality. The coefficient ranges from 0, reflecting complete social equality, to 1, showing complete inequality.06) http://www.explored.com.ec/noticias-ecuador/la-inflacion-rompe-record-101277.html,

consulted on 26/01/14.07) Poverty measured by consumption in 1995 was 39.6% whilst, in 2006, it was at 38.3%.08) Equivalent to around 19 dollars per month, based on the dollar exchange rate in September 1998.09) http://www.hoy.com.ec/noticias-ecuador/record-de-recaudacion-tributaria-en-2013- 598445.html, consulted on 20/20/2014. 10) http://www.telegrafo.com.ec/politica/item/1-960-agricultores-compran-hacienda-la- clementina.html; http://www.telegrafo.com.ec/economia/item/hacienda-la-clementina-fue-adjudicada-a-sus-empleados.html; http://www.elcomercio.com/negocios/Cle- mentina-credito-buen-vivir-Noboa-bananera-SRI_0_1087691454.html, site consulted on 20/02/14.11) In Ecuador, the Bono de Desarrollo Humano is the monthly cash transfer given to the poorest families in the country. The cash transfer is given to mothers, on the condition that their children are enrolled at a school and receive regular health check-ups.12) For Argentina, Brazil, Bolivia, Mexico and Peru, refer to Commitment to Equity, 2012. For the case of Ecuador, Economics – SENPLADES, 2014.13) Currently the average number of wage earners per family in Ecuador is 1.6.14) The minimum wage in 2006 was USD 160 for workers and USD 80 for domestic employees.

CEPAL, 2007. Panorama Social de América Latina 2006. Santiago de Chile. Commitment to Equity, 2012. The impact of taxes and social spending on inequality and po-

verty in Argentina, Bolivia, Brazil, Mexico and Peru: A synthesis of results. Working Paper N° 3. Comitment to Equity, Inter American Dialogue, Center for Inter American Policy and Rese- arch, Tulane University.

INEC, 1990. Censo de Población y Vivienda (CPV). INEC, 2013. Encuesta nacional de empleo y desempleo urbano y rural (ENEMDUR). Larrea, Ana María, 2012. Modo de desarrollo, organización territorial y cambio constituyente

en el Ecuador, Quito: SENPLADES. Larrea, Carlos, 2004. Dolarización, crisis y pobreza en el Ecuador, Quito: Abya – Yala, ILDES

– FES, IEE, FLACSO.

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01) Ayala, L, 121 Nuevas Propuestas para nuevos tiempos [New Proposals for new times], EAPN ES, Madrid. 2012, pp. 26. As selected by the author of this article.02) CESR, et al. Joint Submission to the Committee for Economic, Social and Cultural Rights. 5th Periodic Review of Spain, 48th Session of the CESCR. May 2012.03) CEET, EAPN Madrid (20012) La inclusión social frente a la crisis. La evolución del riesgo de la pobreza y la exclusión en la Comunidad de Madrid [Social inclusion during the crisis: the progression in the prevalence of poverty and exclusion in the Community of Madrid]. Madrid. EAPN Madrid.04) Ibid.05) Available at http://invisiblesdetetuan.org/06) INE, 2014.07) Oxfam Intermón, Crisis, Desigualdad y Pobreza. Aprendizajes desde el mundo en desarrollo ante los recortes sociales en España [Inequality and Poverty. Lessons from the developing world in the face of cuts in social spending in Spain]. Oxfam Intermón Report No. 32, Decem- ber 2012. Spain. Available at www.intermonoxfam.org

León, Mauricio, 2000. Los beneficiarios del bono solidario ante la crisis, Documentos de tra- bajo del SIISE N° 10, Quito: SIISE.

SENPLADES, 2009. Recuperación del Estado Nacional para alcanzar el Buen Vivir, Memoria Bianual 2007–2009, Quito.

SENPLADES, 2012. Evaluación del Plan Nacional para el Buen Vivir presentada en el I Gabi- nete Público, Quito.

SENPLADES, 2013. Evaluamos para profundizar el cambio, Quito, mimeo. SENPLADES, 2013 a. Atlas de las desigualdades socioeconómicas del Ecuador, Quito: Trama. SENPLADES, 2014. 7 años. Revolución Ciudadana. La Patria Brilla, Quito. SENPLADES – SETEP, 2014. Presentación sobre las desigualdades socioeconómicas en el

Ecuador, para el Consejo de Derechos Humanos de Naciones Unidas, Quito, mimeo. SETEP. Secretaría Técnica para la Erradicación de la Pobreza, 2014. Estrategia nacional para

la igualdad y la erradicación de la pobreza, Quito, mimeo. SETEP, Económica Centro de Investigaciones Cuantitativas, 2014. Evaluación de los efectos

demográficos, de crecimiento económico y de gasto público sobre la pobreza y la desigualdad en el Ecuador, Quito, mimeo.

Websites: Diario El Comercio: http://www.elcomercio.com/negocios/Clementina-credito-buen-vivir- Noboa-bananera-SRI_0_1087691454.html Diario El Telégrafo: http://www.telegrafo.com.ec/politica/item/1-960-agricultores-compran- hacienda-la-clementina.html http://www.telegrafo.com.ec/economia/item/hacienda-la-clementina-fue-adjudicada-a- sus-empleados.html Diario Hoy: hoy.com.ec, en explored.com.ec: http://www.explored.com.ec/noticias-ecuador/ la-inflacion-rompe-record-101277.html Diario Hoy: http://www.hoy.com.ec/noticias-ecuador/record-de-recaudacion-tributaria- en-2013-598445.html

pages 34–45: spainPopular resistance against the crisis gabriela jorquera rojas

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08) There is an ever-increasing consensus on the importance of fighting against inequality. The United Nations Commission of Experts on the reforms of the international monetary and financial system, which has investigated the causes of the Great Recession has, like the IMF, warned that inequality leads to greater economic instability. 09) Royal Decree-Law 8/2010, of 20 May, according to which extraordinary measures were adopted to reduce the public deficit. Boletín Oficial del Estado [Official State Gazette] No. 126 of 24 May 2010.10) Antón, A. Resistencias frente a la crisis. De la huelga general del 29 S al movimiento 15M. [Resistance to the crisis. From the General Strike of 29-S to the 15-M movement]. 11) Spanish Government. 2011-2014 Stability Programme. Available at: http://ec.europa.eu/europe2020/pdf/nrp/sp_spain_es.pdf12) See the assessment at http://www.lavanguardia.com/opinion/ editorial/20120901/54345433421/la-subida-del-iva.html13) The impact of the European Crisis. Caritas Europa. 2013.14) Joint Report to the CESCR for the examination of the 5th periodic report on Spain, in the 48th sessions. May 2012. Available at: http://www.cesr.org/downloads/Joint%20Submission%20 CESCR%2015%20March%202012.pdf15) Actis W. et al, La participación ciudadana. Algunos apuntes a partir del Barómetro Social de España [Citizen participation. Some notes from the Spanish Social Barometer]. Colectivo Ioé. Spain, 2012. Available at http://www.colectivoioe.org/uploads/520e6494fe049fe304f30f7 4005041488a074d04.pdf16) Gómez Fortes, B. y Trujillo Carmona M., Los excluidos también pueden votar: abstención y exclusión social en España [The excluded can also vote: abstention and social exclusion in Spain], Working document 169/2011. Fundación Alternativas. Spain, 2011.17) Actis W. et al, La participación ciudadana. Algunos apuntes a partir del Barómetro Social de España. Colectivo Ioé. Spain, 2012. Available at http://www.colectivoioe.org/uploads/520e6 494fe049fe304f30f74005041488a074d04.pdf18) Ibid.19) We have data on the number of demonstrations; the numbers of those attending is much less reliable, and is subject to great debate. While it would be interesting to have both to provide a clearer impression of the scale of protest in Spain, the number of demonstrations gives us a clue to an understanding of the social turmoil caused by the people's condemnation of the austerity policies.20) News from eldiario.es on 07/08/2014. Available at http://www.eldiario.es/economia/sindi catos-internacionales-Rajoy-persecucion-derecho_0_286972002.html21) Ministry of the Interior of the Government of Spain, Statistical Yearbook of the Ministry of the Interior, 2008, 2009, 2010, 2011, 2012 and 2013. Available at http://www.interior.gob.es/ web/archivos-y-documentacion/documentacion-y-publicaciones/anuarios-y-estadisticas22) Survey of the Centre for sociological research, results of the question " three main problems currently existing in Spain (Multiple choice %)" Available at http://www.cis.es/cis/export/ sites/default/-Archivos/Indicadores/documentos_html/TresProblemas.html23) Nevertheless it is impossible to know exactly how many we are talking about.24) Subirats, J., Otra Sociedad ¿Otra Política? De «no nos representan» a la democracia de lo común [A Different Society, Different Politics? From "they do not represent us" to a common democracy]. Icaria editorial. Barcelona. First edition, November 2011.

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01) A. Leber. “The Struggle Continues: Social Justice in Post-Morsi Egypt”. Muftah. 23 Octo- ber 2013. http://muftah.org/the-struggle-continues-social-justice-in-post-morsi-egypt/#. U7PyNxCSww8 02) See for instance the website of “Al-Dostour Party”. http://aldostourparty.ca/about/ 03) D. Farid. “Government Launches ‘Egypt 2022’ Development Plan”. Daily News Egypt. 2 November 2013. http://www.dailynewsegypt.com/2013/11/02/government-launches- egypt-2022-economic-development-plan/ 04) World Bank. World Development Indicators. http://databank.worldbank.org/data/views/ reports/tableview.aspx 05) N. Mokhtar. “The Justice of the State Budget Expenditures on Public Health”. The Egyptian Center for Economic and Social Rights. 2014. Working Paper [Arabic Only] 06) N. Mokhtar. “The Justice of the State Budget Expenditures in Health”. The Egyptian Center for Economic and Social Rights. 2014. Working Paper [Arabic Only]07) CAPMAS. Annual Statistical Book 2012: Governorate Census. Central Agency for Public Mobilization and Statistics.08) A. S. Al-Naggar. “The Equity of the State General Budget”. The Egyptian Center for Econo- mic and Social Rights. August 2010. Electronic book [Arabic Only] available at: http://ecesr. com/contents/uploads/2010/08/%D8%B9%D8%AF%D8%A7%D9%84%D8%A9-%D8 %A7%D9%84%D9%85%D9%88%D8%A7%D8%B2%D9%86%D8%A9-%D8%A7%D9 %84%D8%B9%D8%A7%D9%85%D8%A9-%D9%84%D9%84%D8%AF%D9%88%D9 %84%D8%A9.pdf 09) EIPR. Energy Subsidy in the State Budget: A Model of Inequality. Egyptian Initiative for Per- sonal Rights. [Arabic only] 10) IFPRI, WPF and CAPMAS. “Tackling Egypt’s Rising Food Insecurity in a Time of Transition”. Policy Note. May 2013). Pg.2.11) IDSC and WFP. “Egyptian Food Observatory: Issue 13, July—September 2013”. 12) World Bank. Inclusion and resilience: the way forward for social safety nets in MENA. 2012.13) CAPMAS. Main Indicators for Household Income, Expenditure and Consumption Survey Year 2012-2013. Central Agency for Public Mobilization and Statistics. November 2013. P.74 14) CAPMAS. Main Indicators for Household Income, Expenditure and Consumption Survey Year 2012-2013. Central Agency for Public Mobilization and Statistics. November 2013. P.7315) CAPMAS. Press Release on the International Day for Youth. Press Statement. August 12, 2013.16) USAID. "Egypt Household Health Expenditure and Utilization Survey 2009/2010”. Pg 43.

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25) R. Wilkison & K. Pickett: Desigualdad: un análisis de la (in)felicidad colectiva [Inequality: an analysis of collective (un) happiness], Madrid, Turner Publicaciones.26) Fundación FOESSA, Precariedad y Cohesión social, Análisis y perspectivas [Insecurity and Social Cohesion, Analysis and perspectives]. Madrid, 2014.27) Gimeno, B. ¡Es la democracia, “estúpidos”! [It's democracy, "stupid"!] Article in the digital newspaper eldiario.es, on 24 Mar 2014. Available at: http://blogs.publico.es/econonues- tra/2014/03/24/es-la-democracia-estupidos/



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01) Head of government appointed by consensus in February 2011 to set up a government of technocrats until the Constituent Assembly elections were held in October 2011.

02) http://www.tunisienumerique.com/tunisie-signature-dune-convention-cadre-pour-les-aug mentations-de-salaires-du-secteur-prive/222312

03) http://www.webmanagercenter.com/actualite/economie/2014/07/10/152385/tunisie- devel oppement-le-gouvernement-retire-de-l-anc-le-projet-du-code-d-investissement

04) http://www.brettonwoodsproject.org/2013/07/art-572840/05) http://ufmsecretariat.org/wp-content/uploads/2014/01/COMPLETION-OF-THE-CENTRAL-

SECTION-OF-THE-TRANS-MAGHREB-MOTORWAY-AXIS.pdf (AfDB, 2011) "Economic Brief - Poverty and Inequality in Tunisia, Morocco and Mauritania".

AfDB. 2011. (AfDB, 2012) "Economic Brief - Inequality and Arab Spring Revolutions in North Africa and

The Middle East". AfDB. 2012. (CBT) Annual Reports from 2000 to 2012. (Belhedi, 1996) "Littoralisation et mondialisation: l’état des lieux et les enjeux". RTG, 1996, 30,

9-52. (Boughzala, 2014) "Promoting Inclusive Growth in Arab Countries. Rural and Regional

Development and Inequality in Tunisia". Global Working Paper n°71. Global Economy and Development at Brooking.

(Camau, 1987) Camau, M. (Ed.) 1987. Tunisie au présent: Une modernité au-dessus de tout soupçon? Institut de recherches et d'études sur le monde arabe et musulman. Taken from http://books.openedition.org/iremam/2539

(INS, 2012) Rapport annuel sur les indicateurs d’infrastructures. 2012. (INS and AfDB, 2012) Mesure de la pauvreté, des inégalités et de la polarisation en Tunisie.

2000-2010.

17) CAPMAS. “Unemployment Rate, Egypt, Index Mundi and Bulletin of Labor Force”. Central Agency for Public Mobilization and Statistics. October – December 2013.18) CAPMAS. “Labour Force and Unemployment”. Central Agency for Public Mobilization and Statistics. January- March 2014. http://capmas.gov.eg/Pepo/sdds_lb1.pdf 19) CAPMAS. Annual Growth Rate Of The Labor Force: 2012. Central Agency for Public Mobilization and Statistics. April 2013.20) UNECE. “Gender Pay Gap in Egypt.” 10 February 2012. http://www.unece.org/ fileadmin/DAM/stats/documents/ece/ces/ge.30/2012/14_EGY_E.pdf 21) ECESR’s Information Portal monitors protests on a daily basis since 2011. Protests demanding Economic and Social rights are the target of the Protest Database, which includes up-to-date information on protests for economic and social demands. Quarterly and Annual Reports are published to explain the methodology of data collection and data entry, as well as to analyze the most striking trends in the protest movement. Data used is from the 2013 Annual Report.22) ECESR. “Annual protesting Report”. Information Portal. Egyptian Center for Economic and Social Rights. July 2014. P.18 [Arabic Only]23) ECESR. “We were Cut off, so we seceded”. The Egyptian Center for Economic and Social Rights. September 2012. [Arabic Only] http://ecesr.org/?p=5937



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Action Aid and Oxfam (2012), Participatory monitoring of urban poverty in Vietnam: Five years synthesis report 2008 – 2012.

Benjamin, Dwayne, Loren Brandt, and Brian McCaig. 2009. “The Evolution of Income Inequality in Vietnam between 1993 and 2006.” University of Toronto, Toronto.

GSO (1998), Results of Vietnam Households Living Standards Survey, General Statistics Office, Statistics Publishing House, Hanoi.

GSO (2006), Results of Vietnam Households Living Standards Survey, General Statistics Office, Statistics Publishing House, Hanoi.

GSO (2013a), Results of Vietnam Households Living Standards Survey, General Statistics Office, Statistics Publishing House, Hanoi.

GSO (2013b), Results of Vietnam Households Living Standards Survey, General Statistics Office, Statistics Publishing House, Hanoi/ Poverty and Migration Profile.

Hoang, Thanh Huong, Le Dang Trung, Pham Thi Anh Tuyet, Pham Thai Hung, and To Trung Thanh, (2010), “Preserving Equitable Growth in Vietnam.”Background paper for the 2008– 2010 Vietnam Poverty Assessment, Vietnamese Academy of Social Sciences, Hanoi.

Hoang Xuan Thanh et. al. 2013.“Perception of Inequality in Vietnam: A Qualitative Study,” IIED Working Paper series, Human Settlements Group.

UNDP (2010), “Urban Poverty Assessment in Hanoi and Ho Chi Minh City,” UNDP Vietnam, Hanoi.

UN Department of Economics and Social Affairs (2013), Equality Matters: Report of the World Social Situation. http://www.un.org/esa/socdev/documents/reports/InequalityMatters.pdf

VASS (Vietnamese Academy of Social Sciences) (2012), “Opportunities for Children in Vietnam,” Background paper for the 2012 Programmatic Poverty Assessment, World Bank, Washington, DC.

WB (2012), Well Begun, Not Yet Done: Vietnam’s Remarkable Progress on Poverty Reduction and the Emerging Challenges, East Asia and Pacific Region, the World Bank, Report No. 70798-VN, June 2012. http://www.worldbank.org/en/news/feature/2013/01/24/poverty- reduction-in-vietnam-remarkable-progress-emerging-challenges

WB (2013), Vietnam Development Report 2014: Skilling up Vietnam: Preparing the workforce for a modern market economy, World Bank Viet Nam, Ha Noi.

WB (2014a), Taking Stock: An Update on Vietnam’s Recent Economic Developments, World Bank Viet Nam, Ha Noi.

WB (2014b), Integrating the Poor into Universal Health Coverage in Vietnam, World Bank Viet Nam, Hanoi.

(Kanbur, 2013) "Economic Inequality and Economic Development: Lessons and Implications of Global Experiences for the Arab World", Paper, January, 2013.

(Kumhof et Rancière, 2010). "Inequality, Leverage and Crises" IMF Working Papers 10/268, International Monetary Fund.

(Mahmoud, 2014) TERRITORIAL AND SOCIAL INEQUALITIES IN TUNISIA: Which Sustainable Urban Governance?. figshare. http://dx.doi.org/10.6084/m9.figshare.1037429

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