Rapidly rising inequality will be high on the agenda at the IMF and World Bank Spring Meetings in Washington this week. Oxfam has been warning of the scale of the problem, a paper published ahead of Davos this year revealed that 85 people own the same wealth as the bottom 3.5 billion people. Thomas Piketty has identified runaway economic inequality as threatening us all. The pope and president Obama agree.
The managing director of the IMF, Christine Lagarde, and president of the World Bank, Jim Kim, have also both expressed their deep concern in recent weeks. But just how serious are the World Bank and IMF about tackling the scourge of extreme inequality? The question is an important one. Through their financial power and their thought leadership, these two institutions still have major influence over the policies of governments across the world.
One area in which this is undoubtedly the case is public services. Lack of access to high quality health and education - often exacerbated by private provision - can drive up inequality. User fees in health are particularly bad, and the World Bank president agrees: "There's now just overwhelming evidence that those user fees actually worsened health outcomes. So did the bank get it wrong before? Yeah. I think the bank was ideological."
This is great to hear - especially given the Bank's previous championing of such fees. But actions speak louder than words. We would like to see the Bank implement a global programme to rid every country of these fees and make up for the damage done. Many still charge them, pushing 150 million people into poverty each year and causing many deaths. Also, when will the bank give up on costly experiments in private provision that threaten to bankrupt ministries of health, and exclude the poorest people? Oxfam just this week revealed that the World Bank's private sector arm, the IFC, engineered a public private partnership in Lesotho that is now using more than half that country's entire health budget on one hospital, depriving rural hospitals of the much needed funds.
The World Bank Group has in the past been a great champion of universal free primary education, but it has now started to get much more excited about private education instead, promoting this in Pakistan and elsewhere. Yet UNESCO research shows that for the poorest 20% of families in Pakistan, sending all children to a private school would cost approximately 127% of that household's income.
The IMF has started to dissent from its own doctrine in recent weeks, publishing some great work on inequality and pointing out the benefits of progressive taxation and redistribution in making societies more equal, and growth more effective. However, while it is now talking sense its actions remain rooted firmly in the failures of the past. Last week the European Network on Debt and Development pointed out that the IMF had been increasing economic conditions to its loans, insisting on a familiar set of austerity policies - cut public spending, make people work harder with less job security, cut red tape, remove subsidies, privatise and liberalise.The IMF insisted that Greece abolish the weekend and move to a six day week as a condition of its bailout. When will the new ideas start to change the way the IMF acts?
If both the Bank and the IMF are to truly change their practice, they need to recognise what their own research shows - namely the private sector is by no means always the best way of allocating scarce resources. As Michael Sandel pointed out so eloquently, the more that things are only valued by price, the more important wealth becomes. If this only applied to luxury goods - champagne or private yachts - then perhaps it would not matter that much. But when you can use your money to buy political influence, safety and security or superior education and healthcare - then the distribution of wealth becomes more and more important.
One step the World Bank and IMF leaders could take this week would be to come out in support of a global goal to reduce extreme inequality as proposed by Joseph Stiglitz and supported by the government of Brazil and many others. This would give a clear indication of their seriousness to break with the past.Suggest a correction