Business

The rich, worried about inequality?

  • 25 January 2012
  • From the section Business
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Davos sign

The UK is certainly not alone in debating whether the widening gap between the super-haves and the have-littles is an altogether good thing.

It is one of the big talking points here at the World Economic Forum, for an obvious reason.

Widening inequalities were widely seen as the necessary price of growing global prosperity during the boom years.

But since the great crash of 2007/8, when most countries in the developed West went from slump to stagnation, it is not clear what advantage is being conferred on the vast majority of people by a tiny elite of high earners seemingly becoming ever richer.

The governor of the Bank of England, Mervyn King, caught the mood yesterday when he pointed to the perceived unfairness that it was the well-heeled bankers who caused the mess we're in, but it's those on average and below-average incomes who are paying the price.

Even relatively mainstream economists are questioning the consensus of the past 30 odd years which said that the only way to grow the cake for all is to incentivise the great wealth creators by allowing them to have more and more of that cake (what you might call the Thatcher/Blair consensus).

Which is why the 2011 bonus for Stephen Hester, RBS's chief executive, is such a lightning rod for discontent in the UK, even though he was actually running a commercial property company, British Land, when the bankers' risk-taking party was at its frenzied peak (and see my post of last night for more on this).

As for the World Economic Forum itself, one of its pre-Davos reports identifies growing income inequalities as a threat to economic and social stability.

Statement of the bloomin' obvious?

Maybe. But it's a shift: only last year a plea made in Davos by the head of JP Morgan, Jamie Dimon, for an end to banker bashing was widely applauded by his peers; today, as the Occupy Wall Street and Occupy the City campaigns have resonated with both left and right on the political spectrum, few bankers would make a public appeal for love and understanding.

That said, will there be more than platitudes uttered here about how important it is for capitalists to be seen to be caring and working in the general interest?

Some, like Davos regular Bill Gates, lead by example, by giving away their vast fortunes in the cause of poverty alleviation - and as it happens he today has written his annual letter, in which he calls on well-heeled citizens and governments of wealthier nations not to use these tougher economic times as an excuse to squeeze the financial help for poorer nations struggling to become self-sufficient.

What could snuff out this apparent new spirit of solidarity between plutocrats and protesters? Well a strong sustainable global economic recovery would probably see business leaders revert to the argument that if they get rich, the world is also enriched.

Fat chance of that, you might think.

But interestingly, for all the apparent despair about prospects manifested in PwC's annual global survey of chief executives, I find the bosses I encounter surprisingly optimistic. They've moved from a "glass-half-empty" despondency just before Christmas to something a bit more positive (and see my post of Monday for why).

There are signs of thaw from this bleak economic winter, especially in the US, and even in northern Europe. But the risks remain that the unsustainable debts of southern Europe could bring the global economy to its knees.

So there is certainly an element of wishful thinking in the rosier view of the boss class.

Which is why I am sticking a microphone in the mooches of billionaires and chief execs, in an exploration for tomorrow's Today Programme of whether there is a genuine recognition by business leaders that intensifying inequalities are a matter of fundamental concern - or whether they are simply saying what they think people want to hear.