It is essential to engage in exploring equality/inequality further in light of the recent multiple crises, expansion of vulnerabilities, rapid digitalization, aspirations of citizens for welfare, and EU accession. Policies addressing the multidimensionality and complexity of inequalities must be developed with the determination and participation of all stakeholders. Inclusive growth and prosperity require a fair process of wealth creation and distribution of economic development.
Reflections for Albania: The major concern in Albania is that we see a concentration of wealth that is also accompanied by the concentration of political power, capture of the media and the state, thus the question remains that what forces will compel the elite to become transparent and redistribute wealth and to achieve inclusive prosperity and growth?
These are some of the key messages of the e-discussion “Equality in transition economics: The case of Albania” organized by the Center Science and Innovation for Development (SCiDEV) in cooperation with the Swedish Embassy in Albania under the auspices of HE Ambassador, Elsa Håstad. The panel was composed of distinguished speakers: Madam Elsa Håstad, HE Ambassador of Sweden in Albania, Keynote speaker Professor Jesper Roine, Madam Fiona McCluney, UN Resident Coordinator in Albania, Professor Selami Xhepa, a senior expert in the economy, and Marsela Dauti, Ph.D., affiliate researcher at Uppsala University and Mrs. Ermelinda Xhaja, Programme Officer at SIDA, Albania.
Swedish Approach and Support in Albania in relation to equality
Madam Elsa Håstad, HE Ambassador of Sweden in Albania, pointed out that Sweden allocates 1% of GDP for development cooperation and Sweden allocates annually about 15 million euros in Albania with the main priority being the EU accession process. In particular, Sweden looks into poverty by tackling the following issues: How do we analyze poverty and how do we address multidimensional poverty? Who is poor in Albania? What choices do we make for our development cooperation? Do we have a dilemma when we support poverty elimination and EU integration? In Albania, Sweden looks into root causes of poverty and tries to assess different dimensions of it: who lack resources, who lacks opportunities, who is insecure, and who lacks power by considering gender, age, sexual identity, disability, ethnicity, regional and other indicators.
“While poverty is a complex issue that affects different groups in different ways, people who live in poverty can be agents of change.” – HE Ambassador Elsa Håstad.
Official statistics from 2018 show that inequality is high in Albania: 40% of households are deprived of material income and 23% of the Albanian population are at risk to fall into poverty. The data also shows poverty affects mostly people who are unemployed, nonskilled, live in rural areas, vulnerable women, Roma and Egyptian communities, and persons with disabilities.
How does Sweden work with issues of equality/inequality within development cooperation?
Sweden works with Roma and Egyptian communities, who have very low participation levels in the labor market, poor access to education, public services, infrastructures such as water and electricity especially in rural areas, and low access to health. Sida supports these communities to strengthen their advocacy and access to public services. In addition, Sweden works with municipalities helping to raise capacities to provide better services to citizens and vulnerable groups through UNDP. In terms of gender, gender economic equality is a major issue of concern although official data shows that women’s employment is not so bad. The COVID-19 pandemic has posed further hardship to women. For instance, an Albanian woman spends more than 6 times unpaid household works than a man. As Sweden has a feminist foreign policy, Sida supports interventions to fight gender-based violence and gender mainstreaming in institutions that go hand in hand with EU accession. Sida is also supporting rural women and support them with economic empowerment.
“Do we have a dilemma when we work with poverty elimination and EU integration? We have discussed this in Sweden, but this needs to be addressed in Albania as well. The dilemma occurs when we have both goals: EU accession and poverty elimination. Maybe it should not be a dilemma, but definitely, it is important to have this discussion in Albania and thus find interventions that address both goals.” – HE Ambassador Elsa Håstad.
Long-run developments of growth and its distribution: Why equality/inequality matters?
Keynote speaker Jesper Roine, holds a Ph. D. from Stockholm University (2002). Before joining SITE in 2006 he was a research associate at the Department of Economics at the school and prior to that Post Doc at STICERD, London School of Economics. Most of his research is related to economic inequality. In addition to his research, he participates widely in the policy debate. He is one of the founders and a regular contributor to Sweden’s leading economics blog, ekonomistas.se (in Swedish) as well as to the FREE Policy Briefs (in English).
Keynote speaker Jesper Roine provided a macroeconomic view of the issue of equality/inequality that served to provide a broad general frame around which these issues can be further explored. He focused on the long-run economic development globally and why it matters. Generally, equality has been studied more through growth and GDP-per capita, but it is thanks to Piketty’s work that we know more about economic inequality development particularly in the 20th century. In connection to that Professor Roine touched upon economic inequality and what we mean by it and why should we care, touching on issues of multidimensionality and complexity of inequality.
“Considering multidimensionality and complexity of the issue of inequality and poverty, it is important to consider them in their local and contextualized settings. Also, it is crucial to define what we understand about economic inequality. It is very common in debates to talk about inequality as if it was a self-evident word. It is a broad word, which has to be defined carefully. One frustrating thing is that in many situations there is not really a true disagreement about factual things, but the debate consists of people speaking of different aspects of economic inequality.” – Professor Jesper Roine.
Professor Roine briefly touched upon the comparison between Eastern and Western Europe and why we should care about equality addressing the questions: Why are some countries rich and other poor? Why in each country some are rich, and some are poor, and how large are the differences over time?
“Long-run development of GDP per capita shows the great divergence in terms of development in GDP per capita. This is important as it is related to human development, education, health, self-reporting happiness, life satisfaction, and others. We care because economic development is related and is a fundamental aspect that seems to give other things we care about, so it is not simple materialistic. When we are concerned with welfare, we have to look at economic development. This is the same when we look within the country.” – Professor Jesper Roine.
Professor Roine then addressed the question of the distribution of economic development and the distribution of growth. When considering inequality, it is important to consider questions: inequality of what? Inequality between whom? Inequality measured how? Most measures of poverty take the household as a unit of analysis. This is not straightforward. For instance, if we see this along gender lines: a woman who lives in a household where the man makes a lot of money, it is assumed that she is not poor. But that is not equally oblivious. She can be poor in many other dimensions such as power relations. Households’ circumstances matter for material welfare but in other dimensions of equality, it is important to consider individuals as a unit of analysis. One way to measure economic inequality is through income shares: for instance, how much goes to the top 10% or low 50%. The more goes to the top 10% the less is for the rest and thus inequality is higher. However, relying on official data is a challenge and it would be interesting to know more about the availability of data in Albania about inequality.
Professor Roine presented a stylized version of the economy by looking at the initial distribution of skills, education, capital, and others based on which people take actions and this materializes as economic activity / GDP. This resolves in turn in labor income or capital income divided in population. In between, there is taxation, redistribution, and individual household formation, consumption, and saving decisions and then gives rise to a new distribution. The relationship between income inequality and economic development has popularly been characterized by the Kuznets’ inverted-U curve, which argued that income inequality tends to increase at an initial stage of development and then decrease as the economy develops, implying that income inequality will fall as income continues to rise in developing countries. After the 1950s we see Piketty’s U shape: the idea that development will lead to a decrease in inequality does not hold. There are debates about what has happened in the past fifty years and why in terms of development and inequality. That is the main focus of the work of Piketty. In this development, inequality is increasing at the same time because the top income shares are growing faster than the bottom. In Albania as well in broad terms inequality is increasing. It is difficult to say that transition economies have been very different from Western Europe in terms of this dimension: inequality and development.
“Why do we care about equality? For most of us, it is evident because we care about equality and justice in their own right. We care also because if there is no shared growth and inclusive prosperity the repercussions can be economic, but also impact the political system perse. Too much inequality hurts equality of opportunity. It is important that there is inequality so as it pays off to do the right thing. But that difference cannot be too large, because if we look at this across generations if we have too much inequality then we have people living without equal opportunities. Too much inequality leads to protests and social unrest. If this growth goes only to a small fraction, then there is increasing social unrest. If there is too much concentration of wealth and economic power, this impacts the political process in a way that is anti-competitive over time. So, it is important to have enough equality to prevent elites from capturing the whole process. This is important for a competitive economy.” – Professor Jesper Roine.
Finally, in response to questions from participants, Prof. Roine highlighted that inform vs formal economy and impact on equality are important both in terms of what the economic incentives are you create and ways in which people prosper. We need to think about this economic but also political power. The market is one part and the other is political power. If political power is too skewed and if the playing field is not leveled, then it creates inequalities.
Equality in Sustainable and Development Goals
Madam Fiona McCluney, the UN Resident Coordinator in Albania brings over 30 years of experience as a development practitioner and urban planner, including 12 years of service to the UN system. Madam McCluney focused on how equality is addressed through SDGs.
“The evidence started to emerge that the economic inequalities have been exacerbated by the COVID-19 and thus the issue of equality should be explored further.” – Madam Fiona McCluney, the UN Resident Coordinator in Albania.
There are five specific goals that offer opportunities to address issues related to equality and inequality. SDG No 10 – Reduce inequality within and among countries – is specific to reduce inequalities: distribution of wealth, gender, reducing people at risk of poverty. This SDG gives a policy space to address groups at risk of poverty. SDG No 5 – Gender equality and women empowerment – addresses gender equality. Within the household, gender is masked particularly in terms of power relations. COVID-19 pandemic has impacted household work distribution and women differentially. In Albania, many issues still remain particularly to ensure for more disadvantaged women to have access to primary healthcare, key services, reproductive rights, and access to equal opportunities. SDG No 13 – Climate actions – the climate crisis and how to address it is a driver for equality. the crisis related to climate affects the poor more and it is a global priority. The other area where SDGs offer space for policy interventions in terms of digital technology can be a force for good, but the digital divide is another keyspace where inequality needs to be addressed. Digitalization has become mainstream but not all have access, and the pandemic has exacerbated the divide.
“SDGs are a blueprint for policy actions in terms of equality and it is important to keep SDGs in people’s minds and on track. It requires energy and innovation. the way people have adapted to COVID-19, we do have as a global community to innovate and focus on key priorities.” – Madam Fiona McCluney, the UN Resident Coordinator in Albania.
Equality and wealth distribution in Albania: Towards a renewed economic model
Professor Selami Xhepa, President of the European University of Tirana and senior economist. At the start of the transition, Albania was one of the poorest countries.
Professor Xhepa noted that although the transition has produced some welfare for the country, the inequality remains high and stable. In 2002-2008 Albania saw a decrease in inequality due to a specific policy focus and government determination on fighting poverty. A second reason is that Albania maintained a high growth rate at this time. What is concerning is that starting from 2008 the poverty remains high and stable with 40% of the population under the poverty line with less than 5 US dollars per day. Independent research shows that the poverty line we are using is half of what it shall be. Another feature for Albania is the very high vulnerability to poverty and it depends on the idiosyncrasies of families’ households. Although the poverty is 40%, depending on negative shocks the poverty can be up to 3 times higher considering earthquake and COVID-19 crisis. The evidence is mixed regarding the impact of growth rates in reducing poverty. Generally, although we have maintained growth rates, it has not been inclusive, and inequality has increased. However, if there is a growth rate then there are more opportunities for the government to fight poverty.
“Income and remittances are the primary sources of income for the majority of the population in Albania. Weak economic and employment structures are the key factors for increased inequality in Albania. The extreme inequality in Albania is much more serious and it is increasing. In the early transition, Albania had progressive taxation and inequality remained high.” – Professor Selami Xhepa.
In 2007, Albania applied a flat tax rate of 10%, and initially, a slight reduction of inequality was noticed. In 2014, Albania switched to progressive taxation and inequality increased. The tax policies are thus crucial for fighting inequalities. In Albania, the share of labor in the gross value added is 46% in 2018, which shows there is so much skewed income distribution in terms of capital rather than labor. The profits to sale indicator are 10% to 20% depending on the industry which shows that the income distribution in the country is in favor of capital rather than labor. The role of policy is crucial in this regard such as government choices of taxation and welfare programs. For instance, in Albania, the Government spends less than 10% of GDP on welfare. Also, progressive taxation should include not only wages but all other income sources.
“More than 90% of people believe that inequality in income and wealth distribution is becoming serious for social cohesion in Albania. The process of wealth creation is unfair in Albania. People think that wealth is created in an unfair way and thus protecting private poverty will be challenged. The majority thinks that the political system works for the interest of a few and not the public general interest. Policy to remedy the situation: first, the process of wealth creation should be fair and equal, and the second pillar of policy relates to correction of the income distribution.” – Professor Selami Xhepa
Women’s political agency in the local councils of Albania: Some lessons learned after the implementation of gender quotas
Marsela Dauti, Ph.D., Research Affiliate, Uppsala University presented lessons learned after the implementation of gender quotas in local councils in Albania.
The implementation of gender quotas in Albania was reintroduced in 2015 and the percentage of women in local councils increased almost threefold reaching 34,8% in 2015. There is still however stigma regarding gender quotas, for instance, the assumption that women elected through gender quotas are not qualified, they end up in politics because of connection with party leaders. There is a debate in the public sphere and findings challenge these assumptions. In the study conducted in 2016 and 2018, 38 local councils were observed. Marsela Dauti, Ph.D. focused on characteristics of councils, service responsiveness, quality of government, and reported vs. actual behavior. The study shows that women were more likely than men to participate in training programs for local councils and that women were more likely than men to have master’s or Doctoral degrees. Also, women promoted through gender quotas were younger than their female counterparts. Men were more likely to take the floor than women but the % of times that women took the floor increased from 2016 to 2018. In terms of quality of government, councilors were more likely to take the floor and engage in the discussion of law enforcement, impartiality, transparency, and community participation in decision making.
Mrs. Ermelinda Xhaja, Programme Officer at Development Cooperation, Embassy of Sweden in Tirana made a brief summary of the discussions and highlighted that Sida new development cooperation strategy in Albania will be in line with IPA III with the EU integration in focus including poverty elimination and work in line with SDGs. She also underlined that it is important to continue the discussion with all stakeholders to contribute to policy development.
Dr. Blerjana Bino, Co-Founder of SCiDEV, moderated the e-discussion and noted that participation and inclusion are at the heart of SCiDEV’s work in four key areas: democracy and good governance, media and communication, research to society links, and digital transformation. SCiDEV is now a member of four regional / European networks and seeks to consolidate the profile as a think tank also by contributing to the public debate. The event was a success with a full digital house with more than fifty participants who engaged in discussions with the speakers on various dimensions of equality and inequality. She underlined that SCiDEV is starting with this e-discussion to unpack equality as a critical dimension of prosperity, growth, and democracy in Albania, and based on the great inputs and high interest, SCiDEV aims to continue discussing issues of equality in the public sphere and in cooperation with various stakeholders.
Topics raised during discussions and with interest for follow up:
- The impact of political power on inequality as compared to market forces
- Process of wealth creation and income distribution
- Role of policies in reducing inequalities and poverty elimination
- Is there a dilemma between the elimination of poverty and EU integration?
- Contextualizing multi-vulnerability and multiple poverty indexes in Albania
- How to measure inequality and poverty? Struggle with complexity and no ideal measurement index
- Informal vs formal economy and impact on inequality
- Causes of inequalities in Albania: employment structure and unfair wealth creation and income distribution