A Global Shared Societies Agenda

Sponsored by Club de Madrid, Center of Concern, Friedrich Ebert Stiftung

23 April 2012 | Minutes

22 April 2012

Chair: Clem McCartney, Club de Madrid


Maria Aguero, Club de Madrid: We want democracies that deliver; need social inclusion and social cohesion as part of sustainable development agenda

Hugh Bredenkamp, IMF

  • Global events have changed views, including in the IMF
  • Historically IMF had no role in the social dimension of macro policy; financial programmes adapted first (1970s through the 1990s), then surveillance work (recently)
  • Worries about overreach and conditionality led to macro-criticality test
  • Following Arab spring – need not just growth or growth + safety nets; need fairness, and economic opportunities; need a more joined up policy perspective – equity and inclusion need to meet with growth and economic focus
  • IMF is now doing three things:
    • Building a conceptual understanding of inclusive growth; now have a working group on this in the Fund (supervised by Min Zhu, with an advisory board with external people)
    • We are incorporating into financial programmes – comprehensive review of the Funds programme in the last decade; will highlight IMF push for social protection, consideration of distributional effect of tax policy; will make recommendations for how to go further; but must tread carefully because of conditionality concerns
    • Collaboration with other institutions – we should not replicate others; ILO collaboration for social protection floors in 6 pilot countries; G20 study with ILO & WB; dialogue with ILO/unions; collaboration with WFP/UNICEF on food security
  • Fund is convinced of need to promote social inclusion and cohesion

Petre Roman, former prime minister of Romania

  • If economic system collapsed in Romania, it was b/c economics weren’t there; we were uncompetitive
  • Three keys things that I think are necessary for social cohesion
    • Minimum wages
    • Development of small and medium enterprises
    • Good management of natural resources
  • Sometimes have to do things that are correct and right but unpopular

John Bruton, former prime minster of Ireland

  • The IMF’s work on inequality is very important; because of risk of extremism like the 1930s
  • Increase in inequality can be explained in Ireland from: rapid development, people and money can move – so can’t put too many restrictions; nature of celebrity promotes inequality; technology
  • Ideas: move from tax allowances to tax credits; take account of regional differences; a good tax collection system; need better explanation from politicians to citizens
  • Need to change the policy that we can burn sovereign bond holders of Greece, but not burn the bond holders of a private bank (Anglo Irish Bank) – ECB does not explain this to anyone, this is why they can pursue it
  • Stability & Growth pact – enforcement was too political (and too focussed on deficit but not debt); need to cover balance of payments issues not just deficit and debt
  • Also need more mobility of people in EU, including recognition of qualitifications

Jack Borman, formerly IMF

  • Reservations about language of “shared society” – need to be more specific
  • Four things we need:
    • Proper governance and institutional structures – including to prevent crises, and deal with them when they come; need orderly bankruptcy procedures so that we don’t socialise losses
    • Reasonable political and economic stability
    • Shared opportunity, esp around education
    • Positive and widely available incentive structures (ie not perverse as in finance)
  • National states are not in control of destiny, only national policies – but international and other countries policies are important – this is why international monetary system matters
    • Governance of IMF is ineffective and unfair – need to go faster and further
    • Surveillance – how to get teeth into it; see Palais Royale Initiative ideas on quantitative limits that trigger tougher surveillance
    • IMFC should be preeminent body, not the G20 finance ministers – Argentina is not a model to follow – merge the G20 and IMFC to make it constituency based
  • On inequality – are there thresholds for triggering greater redistribution?
  • Fund has done great on transparency; but need more on financial sector, incl supervision
  • Military spending should be listed specifically in the fiscal documents – it is immoral
  • The IMF is a political institution because of membership; staff must be non-political; but political decisions happen (eg Vietnam, Zaire) so maybe we should be more political in the decision making

Francois Bourguignon, Paris School of Economics

  • Definitions are important
    • WDR 2006 on development and equity was key – first accepting of the word “inequality”
    • Equity is about opportunities, equality is about income or outcomes
    • Two levels – national and international (annex-anted then between countries or people globally)
  • Alternatives on global inequality
    • Global inequality (between people) was going up for 2 centuries but for 2 decades it has been going down
    • International inequality (between countries) is driving change in global inequality
    • Within country it is flat overall; in many countries inequality is increasing (esp OECD, China), but in some it is decreasing (Brazil and Mexico for example)
  • Inequality/efficiency relationship is very complex
    • Ex-ante (opportunities and assets) should include things like access to health, education etc
    • Ex-post inequality determined by ex-ante inequality and the structures of the market and economy; but then feedback to the opportunities
  • There is no global blueprint for delivery to national authorities
  • Could make the case for a globalization of policies
    • National social cohesion as a global public good – an institution to monitor and advise on these – because they impact on other countries

Hugh Bredenkamp

  • A lot of complexity and questions, the IMF mandate for surveillance comes from acceptance of global public good in economic policy
  • On SDRM need – this will come back after the crisis, people do not want to talk about the general issue in the midst of a crisis because of sensitivity, understand catch-22 of lack of drive in between crises
  • On governance – acceptance that power needs to change, just need step-by-step changes to be worked out
  • On surveillance – we are not where we need to be on spillovers and multilateral aspects – it is in the “integrated surveillance decision”; membership not ready for an articles of agreement change
  • On norms for imbalances – we don’t have support from membership; External sector report – broaden assessment of country stability on exchange rates to look at domestic policies more broadly
  • Evaluating different political systems – This is an idea ahead of its time, won’t be support for this?

Discussion (selected contributions)

Stephen Pursey, ILO

  • Once a convention is adopted, country needs to report on it, and can be complained about
  • Minimum wages: what ILO doesn’t say is how much, but how to go about setting them; Abiltiy to pay for smaller enterprises, comparability with other countries, that’s discussed by trade unions/ employers, recommendation is made to a govt to accept or reject. Often this seems to end up with minimum wages somewhere around 40 % of median wages
  • Social protection floor is a very basic level, countries at all levels of development could aspire to have this
  • On surveillance questions quite big difference between advanced and developing economies about willingness to make commitments; emerging markets very reluctant to get too tied down, feel it’ll affect their ability to catch up, converge;
  • To address minimum/maximum income, how to treat different levels of development? Can you have system that’s differentiated, or should you be arbitrarily fair?

Carlos Braga, World Bank

  • peaks in inequality means political institutions should bring it back down, question is are the institutions good enough; while some pessimists argue this level of polarization was never seen before, we have seen inequality before;
  • The accountability and credibility of int’l organizations is in whether they can prevent the polaarisation leading to greater inequality
  • Some countries better prepared than others to cope with this increase in inequality.


Steve Killelea – peace index coming out this year, measuring national peacefulness; studying the various various variables that are found to be important; looking at spending on “violence containment industries” this is 16% of GDP in the US; social inclusion can be a capitalist argument

Bjorn Gillsater, UNICEF – lots of inputs on inequality (NGOs, UN institutions, IFIs, businesses, academics); governments fail when extractive, succeed when inclusive; Rio+20 also important to have social/inequality aspects, but must also be in post-2015 framework; UNICEF collaboration with IFIs shows the need for ex-ante PSIA and distribution analysis

John , OECD – interface of politics and economics important, need to invest more in knowledge and understanding; the tax system has become less redistributive – are there new and smarter forms of taxation that can move it back in the other direction

Amar Nour, Arab organisation – is the decline in global inequality a matter of convergence or of levelling the playing field? Increase in national inequality is evidence of the need for the “shared societies” project; we need incentive systems that level the playing field

Ramesh Muttukamaru – interconnectedness is the key, making inclusivity and sustainability crucial; need to look at the role of CSOs, private sector, international actors, not just the role of the nation state