Social cohesion, quality of life, and economic growth

1. Social cohesion, quality of life, and economic growth Vicente Navarro Professor of Public Policy Johns Hopkins University, USA - Pompeu Fabra University, Spain by Paper presented in the Panel Inequalities and Growth, Conference on Development, Trade, and Immigration, April 7, 2006, SAIS, Washington, D.C.

2. POVERTY IS NOT AN ABSOLUTE BUT A RELATIVE CONCEPT. • POVERTY CANNOT BE MEASURED BY LEVELS OF PRIVATE CONSUMPTION. • MEASURES SUCH AS LIVING ON 1 OR 2 DOLLARS A DAY ASSUME THAT POVERTY IS A QUESTION OF PRIVATE RESOURCE CONSUMPTION.

3. A POOR BLACK ADULT MALE IN HARLEM (IN THE LOWEST INCOME DECILE IN THE U.S.) HAS MORE RESOURCES (INCOME, TV, CAR, MOBILE PHONE, ETC.) THAN A MIDDLE-CLASS ADULT MALE (SKILLED SPECIALIZED WORKER) IN GHANA, AFRICA. • BUT THE FIRST PERSON HAS A MUCH LOWER LIFE EXPECTANCY (45 YEARS) THAN THE SECOND (58 YEARS).

4. IF THE WORLD WERE A NATIONAL STATE, THE POOR OF HARLEM WOULD BE MIDDLE CLASS, AND THE MIDDLE CLASS OF GHANA WOULD BE POOR. • AND YET. . . • THE MIDDLE-CLASS PERSON IN HARLEM IN THIS NATIONAL STATE WOULD HAVE A SHORTER LIFE EXPECTANCY THAN THE POOREST PERSON.

5. “I DON’T CARE HOW UNEQUAL A SOCIETY IS. I CARE ONLY ABOUT HOW MANY POOR PEOPLE ARE IN THAT SOCIETY.” • WRONG! • THE KEY ISSUE FOR EXPLAINING QUALITY OF LIFE IN EACH SOCIETY (AND IN THE WORLD) IS THE INEQUALITIES THAT GENERATE SOCIAL DISTANCE.

6. WHY? SOCIAL DISTANCE • IT IS MORE DIFFICULT TO BE A BLACK UNEMPLOYED WORKER IN HARLEM THAN A MIDDLE-CLASS PERSON IN GHANA. • THE SOCIAL DISTANCE BETWEEN THE BLACK UNEMPLOYED WORKER AND THE MEDIAN IN THE U.S. IS MUCH LARGER THAN THE SOCIAL DISTANCE BETWEEN THE SKILLED MIDDLE-CLASS PERSON AND THE MEDIAN IN GHANA. • THE FIRST PERSON IS FAR BELOW THE MEDIAN; THE SECOND IS ABOVE THE MEDIAN.

7. SOCIAL COHESION. SENSE OF TOGETHERNESS. BASED ON SOLIDARITY WITHIN THE SAME NATIONAL STATE. • EXAMPLE: WORLD WAR II IN GREAT BRITAIN • NEVER BEFORE OR AFTER DID LIFE EXPECTANCY INCREASE FASTER THAN IN THE PERIOD 1940-1951.

9. WHAT HAPPENED IN GREAT BRITAIN DURING THE THATCHER GOVERNMENT? • SOCIAL COHESION DIMINISHED, AND RATE OF DECLINE OF MORTALITY FOR ALL AGE GROUPS SLOWED DOWN.

10. Source: Wilkinson RG. Unhealthy Societies: The Affliction of Inequality. Routledge, 1996.

11. THERE IS VERY ROBUST SCIENTIFIC EVIDENCE THAT SOCIAL DISTANCE CREATES PATHOLOGY. • MARMOT’S STUDIES AMONG BRITISH CIVIL SERVANTS • DISTANCE IS A BETTER EXPLANATORY VARIABLE THAN DIET, PHYSICAL EXERCISE, BLOOD PRESSURE, OR OTHER FACTORS, FOR CORONARY HEART DISEASE MORTALITY.

13. THERE IS WELL-DOCUMENTED EVIDENCE THAT COUNTRIES WITH FEWER INEQUALITIES HAVE LONGER LIFE EXPECTANCIES.

18. SOCIAL DISTANCE IS PART OF THE PROBLEM BUT PERCEPTION OF THE REASONS FOR THAT DISTANCE IS IMPORTANT

19. Income differentials are too large • Australia 71% • Austria 86% • Canada 71% • France 88% • Germany 82% • Norway 73% • Japan 69% • U.K. 82% • U.S. 66% Source: International Social Survey Program (ISSP), 1999.

20. WHY IS THE DISTANCE TOO LARGE?BECAUSE PEOPLE BELIEVE IT IS UNFAIR WHY IS IT UNFAIR? BECAUSE INEQUALITY IS NOT BASED ON MERIT

21. INEQUALITY WHAT IS IT BASED ON? A GOOD QUESTION MAJOR EXPLANATIONS: • DOMINION, HIERARCHY, AUTHORITY, GRADIENT OF CONTROL • YES, BUT THESE EXPLANATIONS ARE NOT ENOUGH. THE REAL CAUSE MAY BE EXPLOITATION. • THE PERCEPTION OF THIS PROBABILITY MAY BE THE MOST IMPORTANT EVENT IN THE 21ST CENTURY.

22. The Barcelona Model

23. Infant Mortality Rate: Correlation with Power Relations, Labor Market, Welfare State, and Inequalities(OECD Countries) . Source: Navarro, V. (ed). The Social and Political Contexts of Health. Baywood. 2005.

24. COUNTRIES WITH FEWER INEQUALITIES(SUCH AS NORTHERN EUROPEAN COUNTRIES BASED IN A SOCIAL DEMOCRATIC TRADITION) • HAVE A MORE REDISTRIBUTIVE WELFARE STATE. • HAVE LARGER PUBLIC EXPENDITURES.

25. WHY HIGHER INEQUALITY MAY LEAD TO LOWER ECONOMIC GROWTH • BECAUSE IT REDUCES DOMESTIC CONSUMPTION. • BECAUSE IT REDUCES COOPERATION AND INCREASES TENSIONS (AT THE WORKPLACE, AMONG OTHER PLACES).

26. WHY ARE INEQUALITIES BAD? • LACK OF COHESION CREATES SOCIAL PATHOLOGY. • THEY DIMINISH REPRESENTATIVENESS OF DEMOCRATIC INSTITUTIONS. (ECONOMIC CONCENTRATION LEADS TO POLITICAL CONCENTRATION.) • THEY LEAD TO LOWER ECONOMIC GROWTH(?)

27. THERE IS NOT A CLEAR RELATIONSHIP BETWEEN: INCOME INEQUALITIES AND ECONOMIC GROWTH. • SWEDEN (HIGHLY EGALITARIAN) HAD POOR GROWTH PERFORMANCE IN 1980S AND 1990s. • BUT NORWAY AND FINLAND DID MUCH BETTER. • AND AUSTRIA AND BELGIUM DID BETTER THAN MOST.

28. BUT,WE HAVE TO ANALYZE DIFFERENT TIME PERIODS • THERE WAS A POSITIVE RELATIONSHIP BETWEEN: REDISTRIBUTION, PUBLIC EXPENDITURES, PUBLIC SOCIAL EXPENDITURES AND ECONOMIC GROWTH DURING THE PERIOD 1950-1970. • AMBIGUOUS AFTER THAT. BUT, ANALYZING  NATURE OF REDISTRIBUTION TAXES VERSUS TRANSFERS AND TYPE OF TAXES: CONSUMPTION TAXES ↑ PAYROLL TAXES ↑ INCOME TAXES ↓

29. AND TYPE OF TRANSFERS • PENSIONS ↑ •         INCOME UNEMPLOYMENT SUPPORT = •         OTHERS ↓ AND CHANGES IN • SUPPLY OF LABOR ↑ •         SUPPLY OF CAPITAL ↑ •         PRODUCTIVITY↑ WE MAY START SEEING A DIFFERENT PICTURE

30. Books to Read: Navarro, V. (ed.) The Political Economy of Social Inequalities. Consequences for Health and Quality of Life, Baywood, 2002 Navarro, V. (ed.) The Political and Social Contexts of Health, Baywood, 2004 Navarro, V., Muntaner, C. (eds.) Political and Economic Determinants of Population Health and Well-Being. Controversies and Developments, Baywood, 2005 Navarro, V. Neoliberalismo y Estado del Bienestar, Ariel Sociedad Economica, Ariel Sociedad Economica, 1997, 1st Ed., 1998, 2nd ed Navarro, V. Globalizacion ecnomica, poder politico y Estado del bienestar, Ariel Sociedad Economica, 2000