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SECTION 1 2 3 EXTREME INEQUALITY The same economic medicine worldwide In countries around the world, during the 1980s and 1990s, increases in government debt led creditors (principally the IMF and the World Bank) to impose a cold shower of deregulation, privatization, and financial and trade liberalization, alongside rapid reductions in public spending, an end to price stabilization and other public support measures to the rural sector. Generous tax cuts were provided for corporations and the wealthy, and a ‘race to the bottom’ to weaken labour rights began, while regulations to protect employees, such as maternity leave and the right to organize, as well as anti-competition laws to stop monopolies and financial rules to protected consumers, were abolished. In East Asia, the shift to liberalization started in the early 1990s and was accelerated following the 1997 financial crisis that paved the way for IMFimposed public sector reforms, known as ‘structural adjustment programmes’. These programmes were implemented in many countries, such as Thailand, South Korea and Indonesia, which subsequently experienced an increase in levels of economic inequality. In Indonesia, the number of people living on less than $2 a day rose from 100 million in 1996 to 135 million in 1999; 263 since 1999 inequality has risen by almost a quarter. 264 Across Africa, rapid market liberalization, under structural adjustment programmes, increased poverty, hunger and inequality in many countries. Between 1996 and 2001, the number of Zambians living below the poverty line rose from 69 to 86 percent; in Malawi, this number increased from 60 to 65 percent over the same period. 265 In Tanzania, inequality rose by 28 percent. 266 By 2013, across the continent an extra 50 million people were undernourished compared to 1990–92. 267 In the countries of the former Eastern bloc, market fundamentalism after the fall of communism in 1989–91 led to economic reforms which focused on liberalization and deregulation, and resulted in a significant increase in poverty and inequality. In Russia, the Gini coefficient almost doubled in the 20 years from 1991, and the incomes of the richest 10 percent of the population are now over 17 times that of the poorest 10 percent, an increase from four times in the 1980s. Meanwhile the wealthiest one percent of Russians – who greatly benefitted from the opaque process of privatization during the 1990s – now hold 71 percent of the national wealth. 268 Increases in poverty and inequality were lower in the countries of East Central Europe, such as Hungary and the Czech Republic, where the governments played a key role in regulating the market and responded to soaring levels of poverty. 269 56
SECTION 1 2 3 EXTREME INEQUALITY CASE STUDY INEQUALITY IN RUSSIA Vasily outside the derelict Vyshnevolotsky textile factory in Vyshny Volochek, where he and his wife once worked (2007). Photo: Geoff Sayer/Oxfam Vasily and his wife once both worked at the Vyshnevolotsky textile factory in the Russian town of Vyshny Volochek, but in 2002 it was shut down and the building now lies derelict. Vasily’s family lives within sight of the factory, which provided employment for thousands of workers from the surrounding community, until it failed to survive privatization. ‘About 3,000 people lost their jobs. My wife worked there, on the third floor. It was a miserable time. Everyone here lost their jobs. We were victims of these changes. We thought someone would care about our situation, but no one did, no-one helped us. In Moscow, they were getting rich, but the government didn’t care what was happening here. Everyone had to look to set up their own business. There were no jobs to find. ‘At the time the factory closed, my wife was eighth on the list for an apartment. She had waited for years. All that was swept away. There was not even a payment. In fact, they were given something, 100 Rubles each. It was an insult.’ In Latin America, historically a region where extreme wealth has sat alongside extreme poverty, inequality worsened considerably in the 1980s, when debt relief was made contingent on the adoption of wide-ranging structural adjustment programmes. These slashed public spending to what became the world’s lowest levels, at around 20 percent of GDP, 270 while also decimating labour rights, real wages and public services. By 2000, inequality in Latin America had reached an all-time high, with most countries registering an increase in income inequality over the previous two decades. 271 In every country in the region except Uruguay, the income share of the richest 10 percent increased while the share of the poorest 40 percent either decreased or stagnated. This had a considerable impact on living standards, causing a significant increase in the number of men and women living in poverty. 272 It is estimated that half of the increase in poverty during this period was due to redistribution in favour of the richest. 273 57
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JEFFREY SACHS Director of the Earth
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ACKNOWLEDGEMENTS The paper was writ
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The widening gap between rich and p
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