How to Deal With Inequality?

KHMER TIMES
CHHEANG VANNARITH

Cambodian workers make more money doing laboring jobs in Thailand than in their own country. Reuters

Inequality is a global problem. The gap between the rich and the poor is widening and deepening in different parts of the world, mainly due to unfair and unjust industrialization and unsustainable development.

The cost of inequality is high. A recent study by the International Monetary Fund showed that elevated levels of inequality were harmful for the pace and sustainability of economic development.

Inequality has a dampening effect on poverty reduction, leading to a less inclusive society, causes political instability and entails large social costs. It also leads to the loss of public trust in government institutions.

“The inequality is cause and consequence of the failure of the political system, and it contributes to the instability of our economic system, which in turn contributes to increased inequality,” wrote Joseph Stigitzs in his book “The Price of Inequality”, in 2012.

Both the economic and political structures are the root causes of inequality. Stigitzs argues: “While there may be underlying economic forces at play, politics have shaped the market, and shaped it in ways that advantage the top at the expense of the rest.”

Economic restructuring at the global, regional, national and local levels is needed to promote inclusive growth, which generates opportunities for all segments of the population and distributes the benefits fairly across society.

Political and institutional reforms are vital to strengthening the performance of public institutions in delivering quality public services and ensuring equal opportunities for all.

A tri-sector partnership or a government-business-civil society partnership needs to be built and strengthened to promote social inclusion – a process by which efforts are made to ensure equal opportunities for all, regardless of their background and economic conditions, so that they can achieve their full potential in life.

It needs a “whole-of-government” approach to focus on promoting an inclusive society such as uplifting lower-income families, helping children from poor families overcome early disadvantages and realize their potential, and supporting the elderly and people with disabilities to do their part for society.

In Cambodia, the gap between the rich and the poor has been widened over the years, with those at the top grasping a lion’s share of growth while the majority of the people are left behind.

There is no comprehensive study on the root causes and implications of inequality in Cambodia. The studies by the Asian Development Bank and the World Bank showed that there is a huge consumption gap between the households in urban areas and those in rural areas.

Although the poverty rate has been significantly reduced over the years from 47.8 percent in 2007 to 18.9 percent in 2012, the vulnerability to poverty remains high.

It means that a large population concentrates at the bottom of income distribution. The poverty rate will rise quickly if there are external shocks such as natural disasters or political instability or economic crisis.

Inequality, especially the development gap between urban and rural areas, in the Kingdom has led to a huge flow of internal and cross-border labor migration. The number of internal migrant workers is about one million and the number of cross-border migrant workers hit more than one million.

Thailand, South Korea and Malaysia are the main destinations of Cambodian migrant workers.

To reduce inequality, the government needs to urgently focus on pro-poor rural development. According to a study by the Asian Development Bank, the main rural development issues are insecurity in land tenure, low productivity in land and human capital, market failures and coordination issues, weak and underdeveloped rural infrastructure and financing for rural development.

Inclusive education and healthcare are the most important sectors in rural development. Increasing public investment in these two sectors is needed.

Social protection, including social safety nets and social insurance policies, need to be strengthened.

The government needs to effectively implement administrative and fiscal decentralization given it is an important governance strategy to empower and enable local governments and community in providing local solutions and collective leadership to local problems.