Poverty and inequality are analytically different concepts. Poverty is a human condition where people are unable to achieve essential functions in life, related to survival needs, well-being needs and empowerment needs. Overall, people in poverty are those who are considerably worse-off than the majority of the population.
Inequality, by contrast, is a relative term. It refers to the difference between levels of living standards across the whole economic distribution. It is the unfair situation in society when some people have more resource, income, opportunity, power and privilege than other people. Economic inequality refers to inequality among individuals and groups within a society, but can also refer to inequality among countries.
Poverty and inequality are associated, however they do not change at the same pace. In many cases, people who have unequal opportunities in life often live in poverty, and people who live in poverty may be treated unequally. Countries that have greater inequality often have many people living in poverty is a reality.
The fact that inequality exists between nations is seen in the statistic that the world's wealthiest countries have just 13% of the world's population but 45% of its purchasing power; the poorest nations have 42% of the world's population and 9% of its purchasing power.
In a recent report by Oxfam, the world’s eight richest billionaires control the same wealth between them as the poorest half of the globe’s population, warning of an ever-increasing and dangerous concentration of wealth. Last year, Oxfam said the world’s 62 richest billionaires were as wealthy as half the world’s population. The vast majority of people in the bottom half of the world’s population were facing a daily struggle to survive, with 70% of them living in low-income countries.
In Nepal, poverty has been reduced but inequality has largely remained not addressed. The patterns of income and resource distribution reveal chronic inequalities within a population separated along the lines of the hierarchical caste system, gender and geographical location. Country’s 10% of the people take 50% of the wealth. The disparity in wealth in growing in Nepal, more wealth in urban areas and in the central region.
Similarly, more than 50 percent of landholdings in the Hill region are smaller than half a hectare. In terms of earning, 75 percent of the families earn less than 35 percent of the total national income. An estimated 400,000 young people enter the labour market each year and, in the absence of employment opportunities, particularly in rural areas, force them to migrate to urban centers and abroad to seek employment.
There are inequalities within and between the countries, and it has gotten worse in terms of education, health and finance. Inequality does not affect only the poor, but can be detrimental to growth, stability and well-being in general. Rising inequality and social polarization pose two of the greatest risks, in addition to climate change, to the global economy including the developing countries.
What should we do?
• The government should pursue inclusive growth strategy striking the macroeconomic, environmental and social policy balance focusing on ensuring equality of opportunity, improving upward mobility, and providing adequate support to mitigate shocks for the poorest.
• We need targeted investment and interventions, both from the government and private sector leading to an increase in income and employment of the poor, disadvantaged and vulnerable people.
• We need targeted investment in climate smart agriculture infrastructure and technology, as well as enhancing vocational skills and rural enterprises. Non-governmental organizations should promote cooperatives, private sector promote market linkages and the government make rural banking more attractive through incentives and securities.
• We need improvements in tax and customs. We need to widen the individual tax payers' base, as a large volume of the economy remains outside the tax net, as well as effective implementation of progressive taxation. We also need to critically assess the performance of VAT – who is actually benefiting?
Inclusive growth related discussions are new, and my suggestions are by no means a prescription. However, they are critical to address inequality, and hopefully, the forthcoming 14th National Plan will take these into consideration.
Dr. Prabin Manandhar is an expert of international development. Currently, he is working as Country Director of The Lutheran World Federation. He is the Chair of the Association of International NGOs in Nepal (AIN). He is also a visiting faculty at the Kathmandu University.
He can be reached at firstname.lastname@example.org