Can Prosperity Lead to Equality?

OECD logoConceptually, an increase in productivity should reflect an increase in improved salaries, which will in turn increase market demand. So how is it that in the last 30 years the economy growth has actually generated an even greater inequality? Because as the Nobel laureate and professor in economic sciences, Joseph Stiglitz, explained during the Organization for Economic Co-operation and Development (OECD) world forum in Guadalajara, Jalisco, prosperity does not mean equality. In order for us to achieve that kind of equality we have to make sure that any increase in an economy’s productive capacity will translate into distributing its profits equally among all sectors of society and generating equal opportunities.

Over the last recent decades, the weight of the economic crisis has affected the impoverished class the most and has continue to widen the gap between the rich and the poor. A great example of this ongoing, disappointing scenario is Mexico. The OECD stated that even though the Free Trade Agreement between Canada, the United States, and Mexico was put into motion 20 years ago, the results in economic development have been less than average. These odd results occurred because even though the impact of the trade accord has created more jobs and has boosted exportation in Mexico, the improvement in quality of work, education and safety has been neglected. For example, the country’s growing inequality can be seen not only in different social groups, but also in a regional scale: in Chiapas 3 out of 5 people live in poverty while in Nuevo León one in five people suffer from the economic grievances.

The effects of a country, such as Mexico, with these kinds social and economic conditions represent an even bigger problem. Inequality based on exploitation and injustice will ultimately lead (and is already leading) towards more poverty, social instability, and emigration. For example, Mexico is currently looking at about 50% of its population living in poverty and according to  data from the 2014 Mexican National Survey of Demographic Dynamics (ENADID), between 2009 to 2014 1 million Mexicans and their families left Mexico.

So what are we doing about this? As I have said before, the first step is to recognize that an economic policy that guarantees greater purchasing power, but does not improve the quality of life of the great majority is a useless strategy. We must reform the tax systems and monetary policies, always keeping in mind that the main goal is to obtain a fairer distribution of wealth. Modern research and analysis shows that well-designed programs that strive to target people in need, but that can also be applied to decision-makers, policy-makers, and people of power can lead to a successful and a healthier economic growth. So instead of continuing to think of unimpressive policies like the Trans-Pacific Partnership, which only promotes lower salaries, differences in education and training, and unequal competition, let’s focus on creating policies that are more about accessibility and life improvement. As countries like Great Britain and Canada have recently proven, it is never too late to put in place a new system of greater justice and dignity.