Inequality is one of the defining challenges of our time and now features prominently in both the academic and public debate around the world. But it was not always so: Twenty to forty years ago, the word “inequality” appeared much less frequently in the dominant political discourse, at least in the United States and other Anglo-Saxon countries. Indeed, a concern with inequality was often attributed to envy, and frequently dismissed as being of little relevance, at least among mainstream economists. When he wrote that “[of] the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution...” Nobel laureate Robert Lucas (2004) was not too far off from what had been the undisputed mainstream view in the 1980s and early 1990s.<sup>3</sup> In this paper, which is part of a project on the future of multilateralism, I attempt to describe how the treatment of inequality has evolved in the thinking, analysis, and discourse of multilateral institutions.<sup>4</sup> Limitations of space and, most importantly, of my knowledge cause me to focus on two institutions, namely (and primarily) the World Bank, but also the International Monetary Fund (IMF).

The question is important because, if inequality is as serious a problem as many now accept, then it probably figures both as an (inverse) objective of, and as a constraint to, the process of development itself, which is the central concern of the World Bank, and may even matter for macroeconomic and financial stability, which are key objectives of the IMF. If, as some have claimed, “...the Bank is the single most important external source of ideas and advice to developing-country policymakers” (Gavin and Rodrik, 1995, p.332), then clearly how the Bank – and the Fund – think about and formulate policy on inequality matters – both for their member countries and for their own relevance and legitimacy.

The paper makes three main arguments:

- I. Although inequality – both between and within countries – has been a pervasive feature of the postwar world, the two Bretton Woods institutions have been slow to incorporate it into their thinking and discourse. Attention to inequality at the World Bank has ebbed and flowed, with a first significant episode in the 1970s, deafening silence in the 1980s, and a gradual resumption of interest in the 1990s, leading to a more stable engagement from the 2000s onwards. At the IMF, inequality was not a subject of much analysis or discourse until the 2000s, and work on inequality has only become meaningful in the last decade.

- II. Historically, the nature and timing of those ebbs and flows have largely been determined by two external factors: (i) the intellectual profile of inequality in the academic literature, particularly in Economics; and (ii) the dominant ideology of the major shareholders – particularly those that (effectively) appoint the Bank’s President (the United States) and the Fund’s Managing Director (mostly Western Europe) – propagated and enforced within the institutions by senior management. Data availability, driven largely by data collection decisions taken by national statistical institutes beyond the control of the Bretton Woods institutions, also played a role.

> 3 Although he was, perhaps, a little more recalcitrant than most to change his mind.

> 4 By inequality I refer primarily (but not exclusively) to inequality in the size distributions of income or consumption expenditures within countries. Acknowledging that the concept is much broader, I briefly unpack it further in the next section.

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