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Inequality rises across the G20 as economic growth fails to trickle down to poorest

By Ben Grossman-Cohen

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Washington, D.C. – Inequality has increased in at least 14 G20 countries since 1990 as economic growth has too often failed to benefit poor people, according to a new report published by Oxfam. US inequality has grown since 1990 and remains the most unequal wealthy G20 country followed by Japan and the UK.

Left behind by the G20? was released today as Treasury Secretary Timothy Geithner joined G20 finance ministers at a meeting in Mexico.  The report adds to a growing body of evidence showing that inequality, often viewed as an inevitable result of economic progress, in fact acts as a brake on growth. Among the best ways to assure inclusive, sustainable growth and fight poverty, finds the study, are policies that reduce inequality.

“The evidence is exploding the myth that governments can wait for economic growth to trickle–down to the poorest,” said Paul O’Brien, vice-president for campaigns and advocacy for Oxfam America. “Too many policy makers have their blinders on to the interests of poor people.   It is having devastating impacts, not just on the lives of the poor, but on our natural resources and economic prosperity overall.”

The report presents a new analysis of inequality in G20 countries showing that inequality increased fastest in Russia, China, Japan and South Africa over the period 1990-2010.  Inequality has also increased in wealthy countries such as the US, Canada, the UK and Germany.  South Korea is the only wealthy country that has succeeded in reducing inequality during the last two decades. Of the emerging economies only Brazil, Argentina and Mexico have done so, though inequality remains high.

The report predicts that more than a million more people will be pushed into poverty in South Africa during the next decade unless rapidly growing inequality is addressed.   In Brazil and Mexico, bringing inequality down to the level in Indonesia (close to the G20 median) could reduce the number of people in poverty by 90 percent in the space of a decade.

Oxfam will present the report to the Mexican President, chair of this year’s G20, at the World Economic Forum in Davos next week.

“If the US and other G20 nations are serious about tackling poverty, we need to move away from thinking that ‘any and all growth is good’ to promoting truly ‘good growth’ that boosts the incomes of the poor and protects the resources they rely on.” said O’Brien. “Poor people were denied their fair share of the prosperity during the boom years and have been hit hardest by the crisis that followed.   It is time to set things right for everyone.”

Half the world’s poorest people live within the G20, making it a key battleground in the fight against global poverty. The G20 is formally committed to promoting inclusive and sustainable growth.

The report finds that reducing inequality is not only the right thing to do; it also makes sound economic sense.   In Brazil between 1999 and 2009, nearly 12 million people escaped absolute poverty (income less than $1.25-a-day) bringing the proportion of people living in poverty from about one in nine to fewer than one in 25 thanks to economic growth and reductions in income inequality. Reducing inequality at a similar rate over the next decade would reduce poverty by a further 80 percent.

“The contrasting fortunes of poor people in South Africa and Brazil – two countries with similar growth rates - show the crucial role governments play in reducing poverty and inequality,” said O’Brien.  “Governments cannot sit idly by and wait as poor people suffer the consequences.  We need to take real steps right now to reduce inequality.”

The report lists five key policies governments can adopt to reduce inequality and recommends that the mix of policies should be tailored to the national context. The five are: universal health and education; progressive taxation; removal of barriers to equal rights and opportunities for women; land reform and income support programs.

The report can be found at: http://www.oxfamamerica.org/publications/left-behind-by-the-g20

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