When G20 leaders meet in St Petersburg on September 5-6, they need to be sure not to forget that half the world’s poorest people live in G20 countries, and that income gaps are dangerously on the rise across most of them.
The G20 brings together the world’s major advanced and emerging economies, represents 90 per cent of global GDP, 80 per cent of global trade and two-thirds of the world’s population. It’s a powerful group, and its efforts to boost growth and fix the global financial architecture are important and needed.
Unfortunately, although G20 leaders have acknowledged that ‘for prosperity to be sustained it must be shared,’ too much of the time they have put economic growth first and the interests of poor people second, allowing their incomes to fall increasingly behind those at the top.
Economic growth alone won’t be enough to prevent poverty escalating across G20 countries and beyond. Leaders in St. Petersburg need to agree a way to tackle widening inequality gaps, and map out growth strategies that are balanced and inclusive.
Reducing inequality is not only the right thing to do; it also makes sound economic sense. Rising inequality has in the past been viewed as an inevitable result of economic progress, but a weight of evidence demonstrates that if policy makers focus exclusively on economic growth and ignore income gaps, the benefits of economic expansion are inaccessible to the poor. Inequality also undermines social cohesion, and weakens political stability.
Growth that is strong, sustainable, and inclusive requires the challenges of inequality to be met head-on.
As a first step, the G20 should assess the social impacts of their economic policies, weighing options that effectively address income gaps. Reducing inequality needs to be treated as a measure of progress, alongside GDP growth.
To support these efforts, the G20 must act to clamp down on corporate tax evasion which drains and billions from poor countries annually. The world’s poorest countries can ill afford losing resources that could be spent on tackling poverty and boosting their economies.
Current tax laws — some dating back to the 1920s — are simply no longer fit for purpose in a modern globalized world. Created to avoid the “double taxation” of companies working in more than one country, they’re now being abused to avoid taxation in any country.
Three years ago, the G20 agreed to take action against tax havens secrecy by negotiating new transparent tax cooperation agreements. So far, a tax haven crackdown has largely failed to materialize. More recently, at a meeting in July, G20 finance ministers approved a plan unveiled by the Organisation for Economic Co-operation and Development (OECD) to prevent corporations from paying little or no taxes. This is a welcome step. Now the G20 leaders must endorse the plan, finish the job, and do so without delay.
In addition, and just as importantly, G20 governments need to invest more in high quality health and education services. Health and education are crucial safety nets for poor people, and crucial investments in future productivity — and in turn, the future stability and strength of our global economy.
The G20, and Canada as part of the group, have an opportunity to establish themselves as an assembly that leads by example. They have committed themselves to pursuing a path of inclusivity and sustainability, and living up to their pledge is where they should start.
Steve Price-Thomas is Oxfam’s G20/BRICSAM Strategy Manager. Oxfam is an international confederation of 17 organizations networked together in more than 90 countries, as part of a global movement for change, to build a future free from the injustice of poverty.
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