The Economic Costs of Inequality

Our Falling Walls Conference speakers are carefully curated each year. As experts in their fields, they have the insight to understand and analyse problems on a large scale and break them down into their essence in 15-minute talks suitable for an interdisciplinary audience.

The talks we are revisiting in this piece both tackle the relationship between equality, human rights and economic growth, and explain how systemic injustices lead to high costs for societies. These are issues that are currently also discussed in the context of this year’s German G20 presidency. The agenda focuses on fostering stable and resilient national economies and on strengthening the joint accountability and responsibility governments share in order to create lasting positive change across societies.

The G20 gathering thus continues a process that has been started in 2009, when the participants of the summit in Pittsburgh agreed upon a “Framework for Strong, Sustainable and Balanced Growth”. Since then, the G20 have pledged to keep GDP growth at 2% with varying successes, having come up with country specific investment strategies to give impulses for growth and employment. Their goal: to improve living standards, reduce poverty and inequality and create significant employment opportunities.

Naila Kabeer and Kevin Bales talks uncover why equality and human rights are such important factors in achieving these goals: they explain that gender equality is correlated with economic growth and that the inhumane practice of slavery creates much higher costs than we might be aware of. It is still a little known fact that slavery is one of the biggest contributors to climate change today.

Lets’ take a closer look at our two speaker’s presentations, starting with Naila Kabeer in 2015.

Naila Kabeer engages with gender and how it is connected to socio-economic inequalities. She opens her talk with a number: gender equality in the labour market could “add up to $28 trillion, or 26 percent to annual global GDP in 2025.” This is a quite impressive prediction, but it comes with a condition. In order to achieve this sort of growth in GDP the terms of women’s employment would have to be identical to those of men – a status that we are far from having achieved yet. Kabeer follows up on this with a somewhat surprising fact: while there is evidence that gender equality in education and labour force participation contributes to economic growth, the same does not hold true for the reverse case: economic growth does not, as one might suspect, contribute to gender equality.

The reasons for this are structural: many women work in the unpaid domestic sector, work that is not included in the calculation of the GDP, and when they do participate in the labour market their returns are often lower, meaning that there is not a level playing field across gender divides. Women do not join the labour force on the same terms as their male counterparts. They face disadvantages in the realms of education, but also in terms of the law, for example when it comes to their right to own property. But even if women are as educated as men, it does not lead to equal pay – women earn less even in the most gender equal countries around the globe.

An important factor that plays into this dynamic seems to be class. Class advantage can offset gender disadvantage to some degree at a higher socio-economic level. At the other end of the spectrum, class disadvantage reinforces gender disadvantages for poorer women and so do caste, race, ethnicity and religion.

Kabeer’s talk makes us understand that economic growth can only have a positive impact on gender inequality if societies will invest more effort into breaking down the walls that put women at a disadvantage in the first place. Only once we address and rewrite discriminatory regulations, involve women in lifelong learning opportunities, support women’s domestic work and simultaneously introduce family friendly policies for working women, can we expect a change in the ways our economies work. And maybe achieve the sort of growth margins the G20 have in mind.

Before long, we will have to acknowledge and break down the walls between paid productive and unpaid reproductive work – women contribute their labour to raising the future generations of workers and that itself is an invaluable contribution to our economies. Kabeer is right: the conceptual walls that divide our ideas of what it means to be a man or a woman need to be broken down – the last minutes of her talk give hope for a future in which each person contributes to our economies in the ways they choose – flexible, open to change, full of possibilities.

Bales also opens his 2016 talk with a number: there are about 45.8 million slaves in the world today. Contrary to the past, the acquisition costs for salves have collapsed and lead to the treatment of slaves as disposable inputs into economic processes. They are no longer seen as investments, but are entirely replaceable. But something else has changed: while slave masters used to own the land their slaves worked on, slavery now takes places even on protected national territories – it is not only illegal in terms of human rights violations, but it also destroys the environment and undermines regulations to protect nature. Bales seems to have discovered that the moral question of slavery is linked to climate change. He explains that if slavery were a country, it would have the population of Sudan/California and the GDP of Angola/Kansas yet it would be the third largest emitter of carbon emissions in the world. This fact becomes even more significant if we think about the solutions. Bales explains that it would take $23 billion to free slaves worldwide, a figure about the size of global expenditure on submarines.

Similar to Naila Kabeer’s talk Bales reminds us that to solve the issue of slavery and the many problems that result from it, we need global decision making on a large scale. And he offers solutions as well: former slaves could replant the forest they have cut and contribute to rebuilding the environment they were forced to destroy before. This could generate up to $48.5 billion in carbon credit ­– enough to set off the costs of freeing slaves easily.

Naila Kabeer and Kevin Bales not only make a case for recognising slavery and gender discrimination as the fundamental moral wrongs they are, but furthermore explain how inequality leads to negative costs for our economies and accelerates the destruction of our environment. Their talks show that equality is not only an issue connected to the implementation of human rights, but has effects beyond the individual. Where people are denied agency and personal freedom, we all carry the burden.



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