Globalization, Inequality and Economic Development

In the new issue of the Boston Review, Nancy Birdsall on inequality and globalization.

In 1993 I left the World Bank to become the executive vice president at the Inter-American Development Bank. By then I was persuaded that Latin America’s high inequality was an economic problem, slowing its growth, as well as a social problem. I advocated more research on the issue. By that time—soon after the fall of the Berlin Wall had liberated the mainstream from the taboo of Marxian thought—academic economists were also beginning to study inequality as a possible cause of low growth, and thus as a phenomenon that mattered, at least for understanding growth itself.

Subsequent work by many economists has strengthened my conviction that while inequality may be constructive in the rich countries—in the classic sense of motivating individuals to work hard, innovate, and take productive risks—in developing countries it is likely to be destructive. That is especially true in Latin America, where conventional measures of income inequality are high. It also may well apply in other parts of the developing world, where our conventional indicators are not so high but there are plentiful signs of other forms of inequality: injustice, indignity, and lack of equal opportunity.