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Time:March 18-20, 2017
Beijing Diaoyutai State Guesthouse
Sponsor:Development Research Center of the State Council
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World Day of Social Justice: Economics should pay attention to inequality issues


Editor’s note: The World Day of Social Justice is observed on February 20 each year. It was created by the United Nations in 2009, aimed at supporting efforts of the international community in poverty eradication, employment and decent work, gender equity and access to social well-being and justice for all.


Inequality is not only a problem faced by developing countries but also a global challenge. The widening of wealth gaps and slowdown of income growth has had a profound impact on European and American countries. The China Development Forum 2017, due to take place in March, will discuss the issue of global inequality and relevant topics. Amartya Sen and Joseph Stiglitz, two renowned scholars concerned about social justice, will attend the Forum.

 



Social justice is essential to the society and a guarantee for social harmony, stability and sustainable economic development. However, the so-called history of “human civilization” is practically the history of “winners”. Affluence, decent work, access to social welfare, and social justice are still a luxury for many people. In the process of economic globalization, social justice has been affected by varying degrees in different countries. The gaps between rich and poor have widened, leading to a series of political and economic consequences that cannot be neglected.


As Stiglitz once said, economics was much more than the study of money; it was actually a form of inquiry that could address the fundamental causes of inequity. Only with careful analysis on the social and economic mechanisms that eliminates inequality can we create a more just and effective redistribution mechanism.



I. “Economist for the poor”


Amartya Sen was born in 1933 in British India and received a doctorate from Cambridge University in 1959. Later, he taught in India, Britain and the United States consecutively, and participated in the design of the Human Development Index (HDI). Although having taught and worked in Britain and the United States for a long time, he has retained Indian nationality and helped formulate many Indian economic development plans. Hailed as “economist for the poor”, he is the first citizen of a third-world country to have received the Nobel Memorial Prize in Economic Sciences since it was established in 1969.


Sen was awarded the Nobel prize in 1998 for his work in welfare economics. He is devoted to applying ethical standards to economic systems and combining economics with ethics in order to benefit the people. His capabilities approach has filled the gap in welfare economics. Different from traditional theories that focus on efficiency and the use of resources, the Capabilities Approach regards poverty as a deprivation of capabilities. Sen believes that the ultimate ends of social development are human development, i.e., the improvement of human capacities and increase in real freedom. In his book The Idea of Justice, Sen reviews the theories of justice of his mentor John Rawls, and argues that justice, as a universal value, should be discussed on a global scale rather than within national boundaries, and justice should not be binary. Even if we fail to establish Utopian, the abstract ideas of justice, it’s possible to make meaningful comparisons and choices between different institutions.


Sen’s discussions about famine and democracy have also attracted much attention. He concludes that famine not only results from the lack of food, but also from the inequality in the food distribution mechanism and the deprivation of capabilities of people at the bottom of the ladder. His research interest in famine originates from his personal experience. At the age of nine, he experienced the Bengal famine of 1943, which claimed three million deaths. His research finds that the disaster could have been avoided. In that year, India’s food supply was even larger than that in 1941 before the famine. However, as a large number of farmers and workers at the bottom were out of work and lost the purchasing power and prices hiked up due to looting and hoarding caused by war, food couldn’t be properly allocated. By examining the environmental conditions and mechanisms of famines in recent years, Sen points out that in many cases, the supply of food was not significantly reduced. On the contrary, it is other social and economic factors such as wage cut, unemployment, food price inflation and collapse of food distribution system that deprivedsome people of enough food. In other words, a famine is not always caused by the shortage of food, but the inability of hungry people to meet their demand for food – their food consumption power is deprived.

 


II. “There I saw at first hand inequality, discrimination, unemployment, and recessions


Joseph Stiglitz is an American economist and a professor at Columbia University. He was awarded the John Bates Clark Medal in 1979 and the Nobel Memorial Prize in Economic Sciences in 2001. He was a member and chairman of the (US President’s) Council of Economic Advisers (CEA) from 1993 to 1997, and served as senior vice president and chief economist of the World Bank from 1997 to 1999. In 2000, Stiglitz founded the Initiative for Policy Dialogue (IPD), a think tank based at Columbia University. From 2011 to 2014, he was the president of the International Economic Association (IEA). In 2001, Professor Stiglitz received the Nobel prize for his contribution to the creation of information economics, an important branch of economics. Stiglitz believes that overlooking information asymmetry is likely to make economic model misleading. This warning has great political significance, because the conclusion is also applicable to public policy. When there is asymmetric information, the market won’t work well. The government and other agencies must step in for the market to function properly.


In The Price of Inequality published in 2012, Stiglitz argues that “The virtue of the market is supposed to be its efficiency. But the market obviously is not efficient. The most basic law of economics – necessary if the economy is to be efficient – is that demand equals supply. But we have a world in which there are huge unmet needs – investments to bring the poor out of poverty, to promote development in less developed countries in Africa and other continents around the world, to retrofit the global economy to face the challenges of global warming. At the same time, we have vast underutilized resources – workers and machines that are idle or are not producing up to their potential. Unemployment – the inability of the market to generate jobs for so many citizens – is the worst failure of the market, the greatest source of inefficiency, and a major cause of inequality.”


When recalling why he chose to study economics, he writes that “Part of this plan was rooted in my experience growing up in the heartland of industrial America, in Gary, Indiana. There I saw at first hand inequality, discrimination, unemployment, and recessions…My family was politically engaged, and I was told that money wasn’t important; that money would never buy happiness; that what was important was service to others and the life of the mind. In the tumult of the 1960s, though, as I became exposed to new ideas at Amherst, I saw that economics was much more than the study of money; it was actually a form of inquiry that could address the fundamental causes of inequity.” Today, inequality has become a global concern. How should we eradicate poverty, promote economic growth, and advance social development based on inclusiveness and equality? At this year’s China Development Forum, the two Noble laureates will share their views.