Inclusive Economic Sustainability: SDGs and Global Inequality
2. Conceptual Framework
2.1. Inclusive Economics
2.2. Economic Sustainability
- Normative: Reducing indignities and empowering the poor, justified by moral values;
- Legal: Institutionalizing social norms and advancing minimum acceptable conditions for all human beings grounded in their human rights;
- Economic: Raising participation in production and consumption processes to enhance people’s material, relational and human wellbeing, including that of future generations;
- Security: Reducing social conflict over resources (and promoting innovative distribution) and enabling the poor to have access to legal means of survival and live in safety;
- Political/democratic: Taking account of the needs of the poorest as part of the electorate and engaging all in decision making (procedural justice) and in sharing resources and prosperity (distributive justice);
- Relational: Limiting poverty resulting from the actions of others and/or the exploitation of the resource base by strong economic role players (e.g., monopolies).
2.3. Global Inequality
3. Drivers and Outcomes of Global Inequality and Exclusion
- Legacy of unequal historical patterns: The consequences, and in some cases the continuation, of historical inequalities or injustices of the past within and between countries (e.g., colonization) make this a very underestimated driver of exclusion. Unequal distribution of assets (e.g., land, water or economic capital), wars that led to the unfair redistribution of land ownership, concentration of power resources in the hands of village landlords, and systems of ethnic segregation (e.g., apartheid) all have such marginalizing impacts that it takes generations to rebalance conditions .
- “Perverse growth”: This is growth that undermines rather than enhances the potentialities of the economy for long-term growth and development. It leads to the exclusion of some people, the concentration of wealth, and very often the maldistribution of resources . It also leads to a consumption-based development model—dependent on increased consumption and standardization—as opposed to a wellbeing-based model, which includes and empowers people to make objective decisions linked to their values and motives. Such a growth-driven economy follows a vertical structure, assuming a trickle-down effect through a separation of production and consumption. Increased inequality is most often a result . Perverse growth is also linked to the unequal ownership of capital, which can be either privately or publicly owned. In terms of global wealth inequality, the 2018 World Inequality Report  found that “the combination of large privatizations and increasing income inequality within countries has fueled the rise of wealth inequality among individuals” (p. 16).
- Market fundamentalism: Piketty  demonstrated that, without government intervention, the market economy tends to concentrate wealth in the hands of a small minority, causing a rise in inequality. Fukuyama  expresses concern that neoliberalism helped generate some of the problems of “failed states” (p. 163) that emerged in the 1990s. The growing problems of governance, lawlessness and the breakdown of administrative competence can hardly be separated from state-neglected uneven development . By reducing government intervention (e.g., tax and regulation to keep inequality in check), market fundamentalism is seen as a contributor to the inequality problem . Ironically, the liberalization of markets has the capacity to obliterate the social capital essential for the long-term sustainability of capitalism itself.
- Globalization: All meanings of globalization suggest some relationship to inequality—at least in terms of heightening it. The United Nations  stresses that “the costs and benefits of globalization are not equally shared among countries and peoples” (p. 5). Concerned about how globalization exacerbates inequality, Robinson  emphasizes: “Expanding poverty; inequality, marginality; and deprivation are the dark underside of the global capitalist cornucopia so celebrated by the transnational elite” (p. 168). In The Globalization of Inequality, Bourguignon  more moderately recognizes the significant role globalization plays in the development of inequality, increasing it in most countries over recent decades. The globalization of trade, for instance, has had a substantial impact on the distribution of income, lowering the wages of unskilled labor in developed countries in the face of direct competition from cheap labor costs in emerging economies, and increasing the profits and remuneration of highly skilled labor across the world. It is furthermore undeniable, as the ILO  points out, that wealthier countries exploited the benefits of globalization as they possessed a “strong initial economic base, abundance of capital and skill, and technological leadership” (p. 37).
- Imbalanced global economic governance: Perpetuating global inequalities associated with globalization, the International Monetary Fund (IMF), the World Bank and the World Trade Organization (WTO) remain plagued with criticism: the structural underrepresentation of the global South; undermining of democratic ownership; biased and inconsistent decision making; effective impunity regarding harms caused; and a largely unfair international trading system . It is well recognized that the neoliberal structural adjustment policies that were required by the World Bank and the IMF in the 1980s and 1990s from developing countries did much damage to their economies . The ensuing social costs, slowdown in economic growth, and rising inequality eventually put them at a grave disadvantage. In the same vein, the WTO is criticized for enabling exploitation by multinational companies (MNCs) of local industries and firms, thus reducing cultural diversity and economic inclusivity.
- Unequal access to education: The impact of education disparities starts even as early as early childhood education. Since this is largely determined by parents’ socioeconomic status and a child’s health, only 20% of children in the developing world receive it . Starting from this disadvantaged position, inequality is then often perpetuated by inadequate schooling facilities, insufficient teaching capacity, and many other factors limiting access to education. In many cases, it even increases the risk of parents transmitting poverty to their children by withdrawing them from school and permitting child labor for survival. It is clear that education outcomes severely affect people’s productivity and ability to earn a decent income. Since inequality tends to accumulate through life, it affects the human capital development of a nation and eventually its economic ability to compete globally. Being poorly staffed and underfunded, poor quality public services in general drive inequality in many countries .
- Social instability: Severe economic disparity is considered to be one of the major global risks in the 21st century, particularly for its link to social problems and instability, such as violent crime, civil unrest and even mental illness . This is especially the case in countries with social structures that overtly foster unequal power relations. Even in the developed world, the increased social dislocation experienced by many, together with growing threats to people’s security (e.g., terrorism), adds to the sources of social instability. According to Dietz and O’Neill , “inequality produces the conditions for social ills, but it also contributes to environmental problems” (p. 90). They demonstrate in their study that nations with greater income inequality have more health problems and more social breakdowns, confirming that less equal societies have a strong tendency to become dysfunctional, thus worsening inequality. Unequal redistribution of income creates further social tensions between different segments of the population. For instance, it is estimated that in Latin America half of the increase in poverty between 1980 and 2000 was due to redistribution of wealth in favor of the richest .
- Segmented labor markets: The impacts of minimum wages, layoffs, discrimination against certain groups, and migration have severely deepened inequality. Women are arguably worst affected when labor regulations are mitigated—such as when paid maternity leave and holiday entitlements are removed, or when unpaid care by the government is held back . Add to this the impact of industrial restructuring (downsizing, outsourcing, dismissals) and job security drastically decreases. Furthermore, in conjunction with globalization, the “iron law” of labor cost reduction inherent in capitalist production has contributed significantly to worldwide depressed wages and worsening work conditions . Unemployment itself—not just the loss of income but also its additional effects on society—is a significant driver of inequality. “Employment precariousness” or the lack of a “decent job” are forms of non-monetary inequality . Discrimination in the labor market, including discrimination against migrants, is a form of inequality that is not fully taken into consideration in standard income inequality measurement.
- Uneven policymaking: Concerns range from inequality being explicitly exacerbated by reducing taxes on the rich (weakening the progressiveness of taxation) and curtailing welfare provision for the poorest to subtler forms. Entrenching unfair advantages and the role of political and economic elites in the capture of political power and policy are known to be reinforcing inequality . Policymaking, where many are excluded from participation, limits the legitimacy, accountability and very often the efficacy of such policies. Public policy choices that create and sustain inequality are particularly worrisome . Over recent decades, a number of reforms have been undertaken—in the name of economic efficiency—that were meant to improve national economies’ competitiveness but have often contributed to a rise in inequality .
- Climate change: The 2019 Human Development Report demonstrated how climate change and inequalities in human development are intertwined—where climate change is both a driver and an outcome of inequality . It found that global carbon dioxide emissions are highly concentrated: the bottom 50% of emitters account for 13% of global emissions, while the top 10% account for 45%. The disequalizing impacts of climate change are further evidenced in how unmitigated climate change drives inequalities in human development . The impact is shown in two ways: differential exposure and vulnerability. In the context of the former, differences in the environment add another dimension to inequality of opportunity (e.g., healthy versus unhealthy living and working spaces).
- Technological transformation: Ever since the Industrial Revolution, which caused the “Great Divergence” between industrialized countries (producing and exporting manufacturing goods) and others that depended on primary commodities, technology has played a significant role in global inequality. Today, in the age of artificial intelligence and nanotechnology, another major shift is taking place as the rate of innovation exponentially increases in advanced economies while most others are left behind. As part of a “New Great Divergence” in the 21st century, technological convergence is having a profound impact, reshaping income distribution, inequalities in access to technology, employability, and how technology is replacing workers. This digital divide, which is expected to be entrenched by the Fourth Industrial Revolution, is also reshaping economic power (e.g., the dominance of tech monopolies). It is estimated that, by 2030, 70% of the global economic benefits tied to artificial intelligence will accrue to North America and East Asia . In this way, the technological transformation is both a driver and an outcome of inequality.
4. Inclusive Economic Criteria
4.1. Inclusive Growth
4.2. Moving Towards a Circular Economy
4.3. Genuine Economic Progress
4.4. Building a Collaborative Economy
4.5. Inclusive Economic Policies
5. Economic Sustainability and the SDGs
- Community: Sustainability gives recognition to the fact that there is an interdependence at all levels of community—from the local to the global. Sustainable strategies at the local level involve housing, jobs, transportation, healthcare, education and arts. At the regional level, they deal with the impact of neighboring communities and sharing resources and interregional infrastructure. At the national and international levels, sustainable strategies are promoted or hindered by policies on taxes, energy, healthcare, food, etc. Due to their relatedness to the three Es of sustainability (ecology, economy and equity), their interdependence is systemic, as they contend with difficult and interrelated problems at all three levels . Of particular significance is how this creates a platform for integrating common interests and finding cross-sectoral solutions. It is furthermore beneficial that indicators of a sustainable community (or community of communities) can specifically strengthen the areas where the links between the economy, society and the environment are weak. Essentially, all the SDGs adhere to the principle of “community” to a greater or lesser extent . The lack of progress on, especially, Goal 17 (strengthen the means of implementation and revitalize the Global Partnership for Sustainable Development), is significant here. Continuing a downward trend, during 2018, aid to Africa fell by 4% and total Official Development Assistance fell by 2.7% . In addition, private investment flows globally are unsynchronized with sustainable development, while trade tensions, especially between the US and China, are causing a retreat from multilateral cooperation.
- Commerce: Similar to the “precaution principle” instituted by Germany in the 1970s, this sensitizes businesses to rethink their responsibility to society, requiring them to use foresight as regards the community and environmental costs of their business ventures . A new business ethic is taking shape where the responsibility moves from the customer and government regulators to the corporation. Being accountable not only to shareholders but to all stakeholders (partners, employees, customers, supplies and the larger community), it is setting sustainable businesses apart in a “Conscious Capitalism” movement. Significantly, the move to a willingness by companies to achieve development objectives by integrating them into their core business models, and not just add-on corporate social responsibility, is what is truly setting a new standard . Increasing evidence, also, of inclusive businesses outperforming traditional competitors are incrementally changing “business as usual” for good. Plus, as a driver of innovation, they have started exploring how the power of business can solve social and environmental problems. The SDGs that can be directly linked to this principle are goals 5 (gender equality), 8 (decent work and economic growth), 9 (industry, innovation and infrastructure), 12 (responsible consumption and production), and 17. Of particular significance are goals 8 and 12. The annual growth rate in real GDP in the least-developing countries is continuing a downward trajectory (from over 8% in 2007 to just over 4% in 2017), with the global unemployment rate at 5% in 2018 . The global material footprint—the total amount of raw materials extracted to meet final consumption needs—continues to grow rapidly (92 billion in 2017), outpacing population and economic growth.
- Natural resources: Valuing the integrity of the land and its resources is crucial. While principles in this area reflect the challenges faced by resource extraction industries (e.g., minerals, fish, oil and gas, and land for agriculture) to implement sustainable strategies, the need for them to retool and search for alternative ways to manage their operations has become immutable . Two key variables stand out regarding this principle: (1) assessing whether a resource is renewable or not (if not, it requires recycling of existing materials and moving to renewable alternatives) and (2) short-term versus long-term perspectives (short-term profits often bring resource destruction while long-term sustainable practices require a more comprehensive strategy) . These being global issues, it is often the local dimension that is most affected. For instance, the positive impact of agribusiness on family farms and communities highlights the value of sustainable farming practices. In terms of the SDGs, goals 7 (affordable and clean energy), 9, 12, 13 (climate action), 14 (life below water), and 15 (life on land) are relevant here. In 2016, 17.5% of total final energy consumption came from renewable energy (up from 16.6% in 2010). Furthermore, the proportion of fish stocks at biologically sustainable levels declined from 90% in 1974 to 67% in 2015 . Between 2000 and 2015, land degradation affected one fifth of the Earth’s land and the lives of one billion people, resulting in a considerable loss of services essential to human wellbeing.
- Ecological design: This principle relates to the interdependence between human environments and ecosystems. More specifically, finding alternative building strategies that are in harmony with communities and ecosystems is essential. Few are aware that, globally, buildings use 40% (three billion tons annually) of all raw materials . Only in the US, buildings are responsible for over 30% of total greenhouse emissions, almost 150 million tons per year of demolition and construction waste, and 15% of potable water use . “Green” building strategies have the added benefits of reducing operating costs, improving people’s health and safety, and enhancing the quality of life in communities. Conveying an innovative fusion of biology and engineering, the principle of ecological design focuses on the interaction of architecture, people and nature. While more SDGs may be indirectly affected by this principle, it is primarily goals 9 and 11 (sustainable cities and communities) to which it contributes directly—both positive and negative. According to the United Nations , “total official flows for economic infrastructure in developing countries reached $59 billion in 2017, an increase of 32.5% in real terms since 2010” (p. 40). Yet, in 2018, due to urbanization, one out of four urban residents around the world lived in slum-like conditions. This is outpacing the construction of adequate and affordable housing.
- The biosphere: The relationship between humans and nature is at the heart of sustainability. This principle concerns itself with the following central question, as pointed out by Edwards : “How can we live in harmony with the natural world and create a healthy and vibrant economy that supports all life on the planet?” The role of nature as model and teacher to guide human actions also underlies this emerging environmental ethic. It calls for heightened sensitivity of our human impact and responsibility since we and all other species depend on the ecosystems in the biosphere for survival. Following “biomimicry” principles, an increasing number of businesses are giving serious consideration to nature as a beneficial model for business and industry . There is general consensus that all the SDGs are focused towards addressing the central question above. The ones that can be directly linked to the biosphere principle are goals 6 (Clean water and sanitation), 7, 13, 14 and 15. It is especially disturbing that two out of five people worldwide do not have a basic handwashing facility with soap and water . Moreover, biodiversity loss is still accelerating as the risk of species extinction has worsened by almost 10% since 2000. This raises the important connection that Costanza and Kubiszewski  express: we are “fighting poverty by healing the environment” (p. 293).
6. Integrated Sustainability Priorities for Better SDG Adoption by Countries
- Full integration into business: a shift from corporate social responsibility to inclusive business;
- Enabling society to take initiative: a shift from reactive to proactive community development;
- Steering a new development path: a shift to inclusive growth through interactive governance.
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van Niekerk, A.J. Inclusive Economic Sustainability: SDGs and Global Inequality. Sustainability 2020, 12, 5427. https://doi.org/10.3390/su12135427
van Niekerk AJ. Inclusive Economic Sustainability: SDGs and Global Inequality. Sustainability. 2020; 12(13):5427. https://doi.org/10.3390/su12135427Chicago/Turabian Style
van Niekerk, Arno J. 2020. "Inclusive Economic Sustainability: SDGs and Global Inequality" Sustainability 12, no. 13: 5427. https://doi.org/10.3390/su12135427