On December 9th, 2014, The Organization for Economic Cooperation and Development (OECD) released its report on inequality and Growth called “Does Income Inequality Hurt Economic Growth?” The conclusions are not very encouraging. The gap between the richest and the poorest is at its highest level in 30 years.
In other terms, “the richest 10% of the population in the OECD area earn 9.5 times more than the poorest 10%. By contrast, in the 1980s the ratio stood at 7:1”. But this conclusion is not something new.
Since the Washington Consensus was implemented, and its Neoliberal agenda established a market fundamentalism in Western economies, the value of labor in the society was displaced by the value of consumption and the rule of financial markets in the policy agenda. The Washington Consensus refers to all those economic measures applied during the decade of 1980, during the administration of Reagan in the U.S. and Thatcher in the United Kingdom. These measures are characterized by the deregulation of markets, moderate tax rates, privatization of public companies, private provision of public goods and free trade agreements. An example of a Washington Consensus driven policy is the North American Free Trade Agreement (NAFTA) between the U.S., Canada and Mexico. The NAFTA implies open borders for goods and investments, but of course not for people (that has been called the Neoliberal paradox).
The economic shift triggered spectacular rates of economic growth but also, and as an expected outcome, an increase in inequality. But what the fathers of Neoliberalism did not foresee is that in the long term this structural inequality will damage and jeopardize the long term growth of world economy. In addition, the outrageous level of inequality is destroying the very fabric of societies and threatening civic coexistence.
The biggest contribution of this report relies on its focus on education. Inequality affects economic growth because it “undermines education opportunities for disadvantaged individuals, lowering social mobility and hampering skills development.” In this regard, the report establishes a correlation between the increase of inequality and the deterioration of the human capital of those individuals whose parent have low levels of education (see OECD Adult Skills Survey – PIAAC). The effect of inequality has a smaller impact regarding those individuals whose parents have medium or high levels of education.
In other words, social mobility, which has been praised as an outstanding characteristic of the United States, is not achievable among the poorest populations. We have heard some cases of people from very vulnerable backgrounds who have reached incredible professional and educational achievements. But those cases are just exceptions that confirm the general rule: social mobility in the lowest deciles of US society does not exist at scale.
In this scenario Community Based Organizations (COB) play a crucial role. At some extension they reintegrate the social coexistence, giving back to this unequal society a little bit of cohesion through the provision of services, education, health and recreation. Many of the COB users receive services that could not afford by themselves or are simply not provided by the state. As a fellow working in a CBO I’m wondering, aren’t we subsidizing what the state and the society as a whole should assure to the members of the community? The provision of services for low income local communities is extremely helpful, as any other social relief measure, but unfortunately the inherent inequalities produced by the current system will ensure an inexhaustible source of clients for places like the Latin American Youth Center or Miriam’s Kitchen. Alberto Hurtado, a Chilean lawyer declared saint in 2005 by the Catholic Church, said once: “charity begins where justice ends”. In this regard, our mission and contribution is not charity and we are not meant to be a charitable organization. No. What we do relates more to justice and the access to services that every single member of this country should have. Although we are providing vital services for the community, are we doing enough to change the status quo? As organizations based in the community and inspired by an ideal of social justice we should pursue a more egalitarian society, not only through the provision of services but through an active advocacy agenda.
The OECD report concludes that “[A]nti-poverty programs will not be enough. Not only cash transfers but also increasing access to public services, such as high-quality education, training and healthcare, constitute long-term social investment to create greater equality of opportunities in the long run.” This means that structural changes are required. The access to public goods, universal access to health and labor rights must be addressed as matters of people’s fundamental rights. If we want to transit from charity to justice it is required to advocate for these changes. CBOs can be the key actors in this transformation, pushing the agenda towards progressive, inclusive and egalitarian policies.