Reducing inequality will not happen on its own – explicit policies are needed
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For the past decades, in many countries of the world, the State has slowly retreated amidst the belief that by giving more space to market forces there would be greater economic growth and thus greater economic opportunities. This belief was manifest in the drive to liberalise goods and financial markets in the 1980s and 1990s across the world, and in the decreased investment by the public sector of many advanced economies in public services and goods as well as in redistributive policies.
Not all countries instituted these changes as wholeheartedly as others, and not all countries originated from the same starting point, but the overall effect has been rising inequality in most parts of the world: North America, Europe, Asia, and parts of Africa. Latin American in the 2000s (though not in the 1980s and 1990s) stands as an exception, largely because many countries in the region increased public investment, strengthened minimum wages and instituted redistributive policies during this decade.
Over the past few years, the increase in inequality has become a growing concern among policymakers and the public at large. But while the problem is now recognized, many of the policy solutions advanced are the same as those espoused during the onset of globalisation, namely improving workers’ skills so that they can better compete in the labour market.
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