CAPITALISM'S ACHILLES HEEL Dirty Money and How to

274 CAPITALISM’S ACHILLES HEEL
Let me repeat: The World Bank has never put the whole of the development
equation or the whole of the poverty alleviation equation on the table
for analysis and discussion and eventual incorporation into its programs. To
do so, it must get into the question of severe inequality and what generates
and maintains severe inequality. Dirty money is a large part of this question,
and the World Bank has a hard time looking rich countries in the eye and
saying, This has to stop. Better to have a weak program of poverty relief than
an honest program that speaks for the poor in the full range of their needs.
Nancy Birdsall, a development economist across the street from me
in Washington, wrote a fine piece on “Why Inequality Matters.” 9 What is
distressing is that when it was published in a small journal in 2001, it
made arguments that many people had never considered. Inequality can
inhibit growth and prolong poverty reduction. It can undermine the political
process, as wealthy groups hold the levers of power. And in culturally
divided societies it can lead to a self-justifying tolerance for economic
imbalance.
Poverty is treated by looking only at the poor. Inequality requires us to
look at both rich and poor, in other words, to take a comprehensive view of
the whole of our global society and the relations among all its parts.
I do not believe that global poverty can be sharply curtailed while at the
same time ignoring global inequality. Or, to put it differently, by downgrading
inequality, we delay poverty reduction by generations.
The fact that the gap does matter is part of the reason why all rich countries
have much lower income disparities than the global average of 31 to 1.
Reducing poverty means reducing inequality to levels that do not threaten
social cohesion. These levels may differ from country to country, but for the
rich they seem to be in a band roughly between 4 to 1 and 10 to 1. Certainly
not 31 to 1.
When the aid community says the gap doesn’t matter, as I’ve heard
many times, it forestalls the alleviation of poverty. When the business and
banking communities say the gap doesn’t matter, it justifies illegalities. Both
groups have become accustomed to thinking that the gap doesn’t matter,
and that’s a major reason why it does matter—because thinking that it doesn’t
matter produces behaviors and consequences in rich and poor countries
that work against global progress and stability.
Looking at the 70 to 90 percent concentration of income among the