Inequality or Exclusion?

Last month I attended a meeting in Cape Town held by the MasterCard Center for Inclusive Growth.  Their board of Senior Advisors was gathered  to discuss the mission of inclusive growth. I was deeply honored to be invited, as the Senior Advisors are a very distinguished group who meet twice a year to think about ways to define, measure, and stimulate economic growth in an inclusive way.

Constraints aimed at excluding a group of people from social life–keeping them out of certain spaces, maintaining invisibility, forbidding them from communicating, and so on–must be addressed by an agenda looking to achieve “inclusive growth.”

The whole agenda of inclusive growth is a new one. Though the term is used increasingly in policy discussions, as well as in the press, the existing theoretical equipment in economics was not built with inclusion as a principle. Instead, the consensus on which our current practices and theories are founded assumes that the market is a more or less self-regulating mechanism. Some still hold that interventions taken with the intention to change the inequities in the world are doomed, because the market will simply correct for “heroic efforts” at basic change, bringing everything back to “equilibrium.”

From a more progressive perspective, of course, putting the name “equilibrium” on today’s very unbalanced and unequal economy seems inappropriate. And the notion that one should never intervene to correct for the vast disadvantages the market produces may seem shockingly retrograde. But we are talking about basic theory here and modern economics has come a long way by building on these principles. Many now believe in a more complex, nuanced approach, but the basic premises remain.

Still, the agenda for inclusive growth is important and it does seem to require some new concepts and theoretical work. For instance, one of the first questions this group posed for itself was whether, by trying to achieve “inclusion,” we really meant to be solving for “inequality.” The problem of inequality—of incomes and wealth—is one for which the field of economics already has a set of concepts and measures.

As we progressed through the next two days of discussion, however, the question of whether solving for “inequality” was an appropriate proxy for “inclusion” nagged at my mind. It seemed to me mere inequality of income does not stand in for the problem faced by women, or in fact for the constraints on many other disadvantaged groups around the world. When you include control of assets—that is, wealth— “inequality” comes closer to capturing these systemic disadvantages, but I had the sense that something more primary is at work.

This was the view from my hotel window in Cape Town. From here, no poverty is visible and the exclusion can be seen only as an absence–that is, only if you know that most of the population is poor and black. In most rich nations, the suffering of inequality is outside the view of the well-to-do.

All this rumination in my head went on as I moved about a place still reverberating with a history of exclusion—South Africa. I had never been to Cape Town, though the Avon project was done in South Africa. Cape Town is anomalous in that country because of the wealth there and the relative safety of the streets. In the places where the Avon team worked (greater Johannesberg, Polokwane, the rural areas of Limpopo), the damage done by one of world history’s most infamous attempts at exclusion is still very visible—in terms of both poverty and violence. The income and wealth inequalities are measurable and are tracked by the South African government. But are the income/wealth inequalities the main story or are they merely outcomes of a greater tale with beginnings long ago?

The current situation of blacks in South Africa seems to be the end result of apartheid–a complex set of practices that separated the races in a vicious and violent way, setting strict limits on where and when blacks could be in public places, as well as with whom they could associate, and even forcing whole tribes to return to their “homelands,” which were often undeveloped tracts with literally nothing that could support a viable economy. Blacks were refused education and access to economic institutions. The whole system was held in place by a brutal police force and the violent response of the black communities eventually corrupted them from within. Today, much of what exists on the ground in South Africa is traceable directly to these earlier practices of exclusion. The level of hatred that remains is pretty noticeable. When we were working on Avon, I found that you could hardly have lunch or coffee without somebody bringing up either race or violence.

So if—right now—we want to better include South African blacks (including the black women, who are by far the most disadvantaged group in the country), would we be able to accomplish it with inequality of income and wealth as our driving concept or would we need more?

I grew up in the American South during the Civil Rights movement, so the example of apartheid echoes a host of bad memories that still haunt my soul. Though poverty was undoubtedly a salient feature of life for blacks in the slums and rural areas of the southern states, the movement leadership, most notably Martin Luther King, focused first on the practices of social exclusion that kept blacks at a distance from the lives of whites. Seemingly “little” things like where blacks could sit on a bus or whether they would be admitted to a restaurant were long-standing features of a system of exclusion known as “Jim Crow.” The Jim Crow practices, which had their roots in the aftermath of the Civil War (1861 to 1865), were a collection of customs and laws that very effectively controlled the whereabouts of blacks, thus limiting their economic opportunities, their education, and denied them basic freedoms. Anyone who violated these expectations risked being “lynched”—that is, being murdered by a mad mob.

Blacks in America are still disproportionately the victims of police violence, an extension of a historical phenomenon that has also resulted in their poverty.

I studied Jim Crow as an adult academic and I really would have to say that the practices of exclusion produced the poverty, not vice versa. I would even suggest that the point of the practices was not particularly aimed at making blacks poor (indeed, I am not even sure people at the time understood those implications), but was all about keeping blacks separate from whites and maintaining their subordination in every way. A never-ending list of stupid beliefs justified these practices—that blacks were inherently incapable of higher level thinking, that they needed to be protected from their own incompetence, that blacks themselves actually preferred to live apart—thus giving people an excuse to do nothing to change matters. And, indeed, there were blacks who said they did not want change. But we would not now say that all blacks should have remained under such sanctions just because some of them were so blind to (or afraid to admit) the reality.

Exclusion would not necessarily bring about poverty. And perhaps poverty is not always the result of exclusion. The Jews, for instance, have been the victims of exclusion and persecution, but they have been the financial backbone of many communities that otherwise would have nothing to do with them. Societies can be reduced to poverty by war, famine, disease, and other disasters having little to do with social exclusion. Even slaves sometimes live comfortably and even prostitutes sometimes become rich. Nevertheless, if the mission is inclusive growth, then we should probably be thinking through the antonym for “inclusion,” which is “exclusion,” not “inequality.”

Which brings me to women. Some women have no sense of their own disadvantage—or are in denial about it—and people do use that as an excuse to do nothing. And some women are rich in their own right. But, as with blacks, it seems to me that a general pattern of exclusion is a moral demand for redress, regardless of how a few individuals may think they feel. Around the world and throughout time, women as a class have been excluded from economic life. We now know that this exclusion also drags on the growth of the world economy. So, the mission for “inclusive growth” surely must encompass women.

Economic inequality is normally measured at the household level. Thus, the measures of women’s inequality are a piecemeal affair, a patching together of wages, access to credit, and so on. Women’s exclusion is perhaps nowhere more evident than in the lack of data about them.

Women are not only disadvantaged at work, but are often barred from employment, and excluded from many very basic aspects of economic information and opportunities. In many places, women are still formally unable to have bank accounts, get credit, inherit wealth, or sign contracts. Even where the formal statutes have been changed, governments and civil society struggle to enforce new rules, constantly frustrated by religious councils, local clans, and tribal leadership who simply refuse to let their women go. In the so-called “advanced nations,” women have these rights now, but won them relatively recently. And, indeed, they still have difficulty claiming access and privileges that the law gives them. The jobs where they are paid unequally today would have been closed to them a few decades ago. So, much like the long-lasting effects of apartheid and Jim Crow, the continuing inequality in income and wealth among the women of the rich nations seems, at least to me, to be today’s reflection of a long history of exclusion—a set of constraints uncannily similar to those now holding back the women of the developing world. Make no mistake: these exclusions have been (and are) enforced by violence, whether it’s public stoning or private wife-beating. And, of course, the raft of stupid beliefs that carries these exclusionary practices could hold the entire company of Noah’s Ark—and be just about as old-fashioned.

Theoretically speaking, it may work all right for economists to use inequality as a imperfect proxy for the measurement of exclusion. However, in the case of women, the paucity of data would be a problem because inequality is usually measured by household unit. To disentangle women’s income/wealth inequality from that of the men in their homes would require confronting a set of very private and uncomfortable forms of exclusion. The very fact that we have had, until recently, so little measurement of women as economic beings speaks volumes for just how excluded they are.

In any case, if the agenda of “inclusive growth” is to be a practical one, then action will have to be taken with an eye to the exclusions, which seem to me are closer to being causal, rather than being limited only to addressing the income inequality, which seems more like a symptom. It’s a challenge for everyone, from the theorists to the community workers, but one that both justice and sustainable prosperity demand.

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