Sherine Abdel-Razek listened in on experts discussing equality and economic development Inequality is old as the earth itself, an epidemic that throughout history has infected countries governed by socialist and capitalist regimes alike. Beliefs that economic growth is directly proportional to equality have been proven wrong. The poor have persistently reaped the lowest profits from higher growth rates, with fruits falling into the laps of the affluent. The annual conference of the Economic Research Forum (ERF), held recently in Cairo, discussed the reasons and repercussions of inequality, and its effect on different aspects of life in the Middle East and North Africa region. According to World Bank figures for individuals aged 15 to 19 still in the educational system, learning outcomes are worse for the poor than they are for the rich. In Egypt, for example, the percentage of children reaching grade nine in the richest category is almost 80 per cent, compared to 30 to 35 per cent in those of the low income categories. Ritva Reinikka, economist with the World Bank specialised in the region, said the classic approach of directing public spending to entities like ministries and municipalities, does not work in most cases, and yields different results in others. She explains that while the level of public spending on education between Malawi and Ethiopia was initially similar, primary school completion patterns between the two countries were totally different. Sixty per cent of students going to school in Malawi finished their primary education versus only 23 per cent in Ethiopia. The same applies in Egypt, where mismanagement of public money and corruption strip the poor of much-needed benefits. Expenditure on social services, mainly health and education, are equivalent to 6.5 per cent of GDP, and subsidies are equivalent to eight per cent of GDP. However, the percentage of people belonging to the poorest category and benefiting from food subsidies does not exceed 19 per cent compared to 25 per cent making use of social guarantees. Galal Amin, economics professor at the American University in Cairo (AUC), presented his views about the main reasons for inequality, analysing how different political and economic regimes governing Egypt have succeeded in diminishing or exacerbated social inequality. He pointed out that the degree of integration with the world -- being it through colonisation or economic integration -- as well as rapid unequally shared technological development, can be considered to be among the reasons of inequality. Amin highlighted the fact that in the period from the mid-1980s until 2004 there was a deterioration in GDP growth, equity and state of the poor. As migration rates to the Gulf countries declined because of a retreat in oil prices, the structural adjustment programmes imposed by the International Monetary Fund had a severe impact on the life of the poor. The monopoly of power by a few at the top allowed for a rapid growth in the gap between income levels. Analysing the scene over the past four years, Amin points that while the growth rate has increased alongside Egypt's integration with the outside world -- as seen in increased exports, foreign direct investments and tourism -- there was no improvement in equity. In fact quite the opposite is true: "There is no improvement in power structure, no decline in corruption and no significant reduction in unemployment," said Amin. An advocate of capitalism and markets deregulation, Jeffrey Sachs of Columbia University sees inequality as a normal phase in the development process. "There will be inequality as development occurs, in extreme poverty which is the starting point of development. When it is successful, opportunities for development and human capital and skills mean certain sectors of the economy will be better than other sectors. However, inequality will decline afterwards," he said in a video recording shown to the ERF's audience during the opening session. However, Sachs did not take public resentment to inequality lightly. Citing the words of economist Albert Hirschman, he compared public tolerance to inequality in the development process to a traffic jam in a tunnel. "When one lane moves forward it gives hope to those in stalled lanes, as it provides a signal where they might be going in the future but if only one lane continues to move those in the stalled lanes become frustrated and tempted to resort to radical behaviour as jumping the median strip," he said. To hedge against this "radical behaviour", Reinikka presents a new approach to regulate public spending through empowering the poor to monitor and discipline service providers and to raise their voice in policy-making. "In 1995, only 13 per cent of non-wage recurrent spending on primary education in Uganda reached primary schools. From 1997, amounts of per capita grants sent to local governments have been published in local and national newspapers to promote client power. Schools in Uganda received more of what they were due, post- intervention," Reinikka added.
