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Reconciling Rights, Growth and Inequality

Date
Time (GMT +00) 13:00 14:15

Speakers:

Lord Brett, Director - ILO London
Andy McKay, Research Fellow - ODI and Professor of Economics and International Development - University of Bath
Chair:

Adrian Wood, Chief Economist - DFID

1. The third meeting in the series was held on Tuesday 25 January 2005 at the Overseas Development Institute. The meeting was chaired by Adrian Wood. The two speakers were Lord Brett and Andy McKay

2. Adrian Wood introduced the meeting as being about 'Human Rights meets Economics'. Amartya Sen was currently the only economist that had fully integrated the rights agenda into his economic analysis. For most economists, however, this integration was problematic.

3. Lord Brett started with the premise that 'one should go to work to live and not live to work', which he thought economists sometimes forgot. The ILO, with its tripartite membership of governments, workers and employers, had a long history of working to promote and protect a wide range of employment and labour rights. Its 'decent work' agenda put employment at the centre of policy (http://www.ilo.org/public/english/decent.htm).

4. The ILO's work had culminated with the 1998 Declaration on Fundamental Principles and Rights at Work' (http://www.ilo.org/dyn/declaris/DECLARATIONWEB.INDEXPAGE). The Declaration set out four core labour standards: freedom of association and right to collective bargaining; elimination of forced and compulsory labour; abolition of child labour; and elimination of discrimination the workplace. Some rights had not been included in the Declaration, such as those relating to health and safety, despite strong support from workers' associations or other parties in the discussion. Although governments had an obligation to adhere to the rights set out in the Declaration (even if they had not signed up to the ILO's Conventions), its strength depended on governments' willingness to implement them. They sometimes behaved differently in different official bodies. There is pressure for labour standards to be applied in trading groups (e.g. EU) and Worker Group pressure in the ILO for a "social clause" in the WTO, however this is not ILO policy.

5. The ILO had also examined the social dimensions of globalisation, through a World Commission, led by the Presidents of Finland and Tanzania (http://www.ilo.org/public/english/fairglobalization/report/index.htm). It had provided illustrations of the negative impacts of European agricultural subsidies through the Common Agriculture Policy and had also emphasised the need to create jobs.

6. However, the lack of coherence in the UN system meant that something as vital as job creation, could be ignored by other agencies. The IMF was still not fully on board with freedom of association and the right to collective bargaining. The MDGs did not include employment, though it would form part of the MDG review during 2005.

7. Lord Brett highlighted the imbalances between governments and multinational companies, which was particularly acute in the South. The World Commission's report could help protect national governments against multilateral companies looking for cheap labour. The report would also be essential in the future for countries such as China. In conclusion, he stated that fundamental rights were affordable for all countries; other Conventions could be ratified as countries became able to meet the commitments.

8. Andy McKay reflected on the widely held perception that there was a conflict between protecting rights and promoting economic growth. Many commentators had stated that rights were bad for economic growth and efficiency. But how valid were these concerns? In some cases rights could conflict with growth: for example, high minimum income guarantee could be a disincentive to accelerating productivity. The very nature of growth meant that there would always be winners and losers.

9. There had been relatively limited dialogue and research on the relationship between rights and growth. Very few people could talk on this topic, which had been identified by Mary Robinson, the former High Commissioner for Human Rights, as needing more attention. This was partly an issue of language and disciplinary perspectives. There was also a conflict between universal human rights legislation and resulting obligations, on the one hand, and resource constraints, on the other. While some trade-offs between rights, resource constraints and redistribution were inevitable, there was scope for dialogue. The work of Amartya Sen offered a conceptual bridge, as outlined in an ODI Briefing Paper.

10. Inequality offered a key point for dialogue. Some aspects of inequality reflected discrimination and the denial of rights to certain groups. Trade-offs between efficiency and equity were familiar to economists. There were clear links between poverty, inequality and growth, with unequal growth and high levels of inequality reducing the impact of growth on poverty reduction (outlined in another recent ODI Briefing Paper).

11. Andy McKay offered three points which could be the basis for future dialogue. First, growth should not be seen an end in itself. Its purpose was to achieve an expansion of human freedoms. Who benefited from growth and for how long were key questions. Pro-poor growth focused on the expansion of freedoms for the poor and the very poorest.

12. Second, growth was important in contributing to the realisation of the freedoms and rights. This was particularly relevant in low-income countries where negative growth constrained the freedoms of poor people. The distribution of these increasingly scarce resources could also be a source of conflict. While resource constraints meant that rights could not be achieved immediately, governments and development partners needed to formulate and implement policies and programmes that supported the progressive realisation of rights. This required difficult choices to be made about priorities. There were sometimes trade-offs between growth and equity. China was an example of rapid growth and poverty reduction accompanied by significant increases in inequality. Equitable policies on the distribution of growth were therefore vital.

13. Third, freedoms and rights could help promote growth. In Brazil and South Africa high levels of inequality seemed to have had an adverse effect on growth. Gender empowerment was good for both women's rights and promoting growth. Research on women-only local elections in some Indian states had showed how it created greater equity, and could have had a pro-growth outcome. Effective public service delivery and democratic political institutions had proven to be important for growth. In conclusion, Andy McKay argued that trade-offs existed but that there was less conflict than it appeared at first sight.

14. The discussion challenged aspects of the ILO's approach. Minimum wages could for example create bad distortions in labour markets and were not always enforceable. Workers in the poorest parts of the world were not tied to a formal employer-employee relationship and operated in the informal sector (e.g. migrants, casual or home-based workers). The ILO's regulatory mechanisms, focusing on the formal sector, needed to be extended. There were examples of workers' associations that supported informal workers, such as the Self-Employed Women's Association in India. It was, however, difficult to persuade governments that it was important to reach out to the informal economy. It was also problematic that health and safety standards had been left out of the Declaration - that was the price to be paid for a political consensus. There had been agreement on starting with eradicating extreme forms of child labour, which could be addressed by using incentives from labour and trade standards in developed economies.

15. It was noted that it would be easier to integrate rights with development (meaning increasing the ability of people to choose) rather than growth. Was there a derived right to growth as Arjun Sengupta, Independent Expert on the Right to Development, had argued? The appropriateness of discussing the relationship between rights and growth in the absence of growth in sub-Saharan Africa was raised. Growth was needed as a priority in Africa, but rights and freedoms also mattered in the absence of growth. Whether looking at development or growth, it was essential to take into account politics and the constraints on people's choices.

16. As in previous discussions, the importance of developing a 'community of practice' between those working in development and human rights was needed. Both had their own normative frameworks that needed mutual understanding. Economists might be less familiar with seeing state actors as duty-bearers with obligations. Sen's work was not only analytical (to understand capabilities) but also normative, with string links to obligations and the international human rights framework.

17. Bringing the meeting to an end, the Chair, Adrian Wood, reflected on the lessons of DFID's work on labour standards (http://www.dfid.gov.uk/pubs/files/labourstandardsJune04.pdf). The ILO's four core labour standards could positively contribute to poverty reduction but had to be applied sensibly. He suggested a way forward in the dialogue: economists had to accept they had something to learn about outcomes understood in a broader perspective; those working on rights had something to learn about inputs, opportunity costs and trade offs.

Zaza Curran
January 2005

Description

Many economists continue to be sceptical about the utility and affordability of economic and social rights as guides to resource allocation and policy-making. This session focused on the impact on growth of meeting rights claims, including through redistribution, examining the relationship between growth, poverty reduction and tackling inequality.