Inequality and Capabilities in an Era of Rising Instability

ABSTRACT

This paper reviews the trends in income inequality over the last 40 years, and proposes a new explanation for their evolution – that it is hoped will be tested empirically by many studies in the years ahead – to see whether the observed increases in inequality of the last four decades have been caused by an aggravation of its traditional causes (such as land an human capital concentration), or by a widespread increase in instability in five key areas affecting inequality, the Human Development Index and human capabilities. The five areas where a sharp increase in instability has been observed concern: (a) the financial sector; (b) industry 4.0, especially the development of robotics and artificial intelligence; (c) diseases such as ebola, aids and covid; (d) number of conflicts and (e) a growing environmental crisis. A key unanswered question in the above proposed overall explanation is whether these five crises are interconnected and whether there is a primum movens that explains this series of problematic events.

KEYWORDS:

• Old causes of inequality
• new causes of inequality
• capabilities
• HDI
• instability
• environmental crisis
• interaction between new causes of inequality

Acknowledgements

The author would like to thank Deepak Nayyar, Bruno Martorano and Miguel Nino-Zarazua for comments on a prior version of this paper. All remaining errors are only his.

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1 Such studies generally aim at identifying the characteristics and reactions of different types of households that prevent them to fall below a minimum normative standard of living when they are hit by a covariant shock. In some cases, such studies include also some public policy recommendations.

2 An asset index has been constructed and used to proxy household wealth and income: this index includes possession of household durables, quality of dwellings and access to water and sanitation facilities.

3 An exception is represented by the 2022 Global Report on Food Crises (https://www.wfp.org/publications/global-report-food-crises-2022) that highlights the high number of people in crisis or affected by an extreme lack of food in 2021. The report identifies the drivers of such problem in: economic shocks, conflicts, Covid-19, weather extremes and forced migration, that is the causal factors discussed in this paper.

4 It is plausible that the “maximum inequality threshold” in education rises with economic development, structural change and the adoption of skills-intensive technologies.

5 Such index is based on 60 questions concerning five areas: electoral process pluralism, civil liberties, functioning of governments, political participation and political culture. For each of these questions, some “experts” fill in evaluations. Also this index, like the Freedom House one, has been criticised for lacking transparency and accountability beyond the numbers. The EIU final report does not indicate in fact what kind of experts are consulted, nor their number, nor whether they are employees of the Economist Intelligence Unit or independent scholars, nor their nationalities. Similar and even stronger criticism has been addressed to the Freedom House Index.

Additional information

Notes on contributors

Giovanni Andrea Cornia

Giovanni Andrea Cornia is an Honorary Professor of Economics at the University of Florence where he taught for 17 years. He also taught at the Universities of Pavia, Clermont Ferrand and Buenos Aires, and was a visiting scholar at the University of Oxford. Between 1995 and 1999 he directed UNU-WIDER and, earlier on, was the main economic advisor in Unicef-HQ. He also held research positions at the ECE, UNCTAD and FIAT, and was the first President of the Italian Development Economist Association. He published 20 books and 80 journal articles or working papers on development and transition economics.