Inequality — the permanent crisis

Lamia Kamal-Chaoui is the director of the Organisation for Economic Co-operation and Development’s Centre for Entrepreneurship, SMEs, Regions and Cities.

Crisis has become the new normal. 

As the world struggles to recover from the pandemic, Russia’s war on Ukraine has plunged us into a cost-of-living crisis. Though inflation has come down from its peak, prices continue to rise and incomes are not keeping up. And while governments are rightly focused on responding to the challenge of taming inflation, there’s another, more pervasive threat that connects these crises: inequality.  

Over the past three decades, the gap between the rich and poor has widened in most member countries of the Organisation for Economic Co-operation and Development (OECD). During the first two years of the pandemic alone, the wealth of the world’s 10 richest individuals doubled, while over 100 million people globally fell into poverty. And now, the cost-of-living crisis is disproportionately affecting poorer households, which spend twice as much of their incomes on essential items compared to richer ones. 

Each passing crisis leaves behind even deeper scars from inequality, undermining our capacity to deal with the difficulties ahead — and this is perhaps most stark when it comes to housing. 

House prices have risen by over 70 percent in the last 30 years — currently rising faster than incomes — and many low-income households now spend 40 percent of their earnings on rent alone. These high costs are exacerbating inequality, squeezing out any room for investment in education and health, while also pushing lower-income households out of city centers and away from job opportunities.

Unaffordable and inadequate housing also disproportionately exposes the most vulnerable to the negative consequences of each new crisis. For example, overcrowded housing exacerbated the spread of the pandemic, and underinvestment in insulation meant lower-income households bore the brunt of the massive spike in energy costs following Russia’s invasion of Ukraine. 

Meanwhile, this toxic mix of crisis and inequality is leading more and more people to lose trust in the system, straining the social contract on which our societies depend. 

Trust in government had dipped sharply during the 2008 global financial crisis, from which it took a decade to recover. And while there was an early bump in trust following the outbreak of the pandemic, it fell again quickly, and by the end of 2022, it was only slightly higher than in the aftermath of 2008.  

Regions that have economically suffered the most have even lower levels of trust in their governments, as studies show that across Europe, higher levels of social and economic inequality are associated with less trust, with people losing faith in a political system that fails to deliver opportunities for all or ease their plight. 

Breaking this reinforcing cycle of rising inequality and falling trust is a multidimensional problem that needs action from all levels of government. However, it is often cities — and the mayors that lead them — that are on the front line. 

Cities are engines of opportunity and development, accounting for 70 percent of global GDP growth over the last two decades — but they also host the highest levels of inequality. So, amid this cost-of-living crisis, the OECD Champion Mayors for Inclusive Growth convened at last month’s Brussels Urban Summit with a clear purpose: making their cities more affordable. 

In the short term, this means responding to the rising costs of essentials like food and energy, but over the long term, one issue that simply cannot be ignored is housing — and the ways in which it is further entrenching inequality. 

The good news is that across their cities, mayors are indeed leading the fight against the rising cost of housing, as well as the wider challenges of inequality: In Glasgow, city leader Susan Aitken is leveraging the climate crisis to address the legacy of inadequate housing — decarbonizing 400,000 homes to reduce emissions, cut energy bills and create job opportunities.

In Buenos Aires, Mayor Horacio Rodríguez Larreta has a plan to integrate the city’s most underprivileged areas and address structural policies by building new houses, as well as improving connectivity — a project that includes nearly 10,000 new or repaired houses and over 46 kilometers of transport infrastructure, which translates to 131,000 square-meters of pavement, 508 new streets and 7 bus lines to connect isolated neighborhoods.

While in Brussels, the Champion Mayors drew on these examples and many other innovative policies from across the coalition to develop the “Brussels Blueprint for Affordable Cities and Housing for All” — an ambitious set of commitments to put housing on a more sustainable and affordable path as a basis for inclusive growth.  

The pledge also serves as a global call to action — a signal from mayors to the international community that while crisis response is essential, resilience in an uncertain world can only be achieved by reducing inequality and delivering inclusive growth. Affordable and adequate housing is the essential foundation of that vision, and it’s time to act now — before the next crisis strikes.