Will inequality rise in this recovery?

Uneven scales

Even in sclerotic Europe (well that's how we're seen by the Chinese), the global recovery is returning a bit of colour to the cheeks of the prone patient.

I won't labour the point about the UK's return to semi-respectable growth, although the Chancellor repeated his "it's-work-in-progress" message in a chat with 20 or so business leaders here in Davos this morning.

However, what George Osborne really wanted from them was that they should beat up the Labour leader for allegedly messing in a dangerous way in the energy and banking markets (although, incomprehensibly, I am told this wasn't a party political point).

And as it happens, Osborne repeated his denigration of the EU as chronically uncompetitive because of its excessive regulation and welfare bills that are high and rising (an analysis the Chinese share, as it happens).

But although the eurozone's revival lags chronically behind that of the US and UK, today's MARKIT survey of purchasing managers shows signs of life in the euro area - at last, some would say.

So here at the World Economic Forum there is growing confidence that it is safer than it has been for many years to take the kind of business risks that are the sine qua non of a sustained recovery.

Even the Iranian president, Hassan Rouhani, gave what would be called in the City and Wall Street "an investor presentation" - a not-very-subtle call to the world's most loaded investors, corporates and banks to invest in the Islamic republic.

The giant US bank Citi put numbers on the mood with this morning's forecast that global growth would rise from 2.5% last year to 3.3% this year.

So everything's tickety-boo again, and we can dismiss the 2008 crash as a bad dream?

Well not quite.

As you know (you do, you do), there is still a massive burden of debt and unfunded future welfare promises bearing down on the long-term growth prospects of most developed economies, including the UK.

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Strikingly, rising inequality is between individuals everywhere, whether in the US, UK, Africa or China”

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And the other thing which really worries all the spectacularly wealthy people here is how they are becoming so much wealthier, minute by minute, than the world's poor.

Or at least that is what these plutocrats with a conscience say. How to tackle growing income inequality is one of the big themes of this year's World Economic Forum.

Strikingly, and importantly, the rising inequality is between individuals everywhere, whether in the US, UK, Africa or China.

And it is happening even as the gap between the incomes of nations narrows. According to the IMF, for example, the GDP of African nations collectively will rise faster this year than that of almost any other region.

But even in Africa, a disproportionate share of the fruits accrue to a new class of billionaires and the mega-wealthy.

There are two conventional and contradictory theories of why inequality is so determinedly on the ascendant.

The version preferred by Davos Person is that in a world of globalised, easy-access capital and data, disproportionate rewards accrue to those with marginally greater talents.

You can see why they like this account - it implies their billions are their just desserts.

Boy in wasteland, South Africa Poverty in South Africa: Inequality is a global issue

The other theory is that nepotism and closed networks rule (OK?) and that there is little equality of opportunity when it comes to access to education and capital, so a smallish cadre of the privileged reinforce their privileges through the generations.

However, in a way, it doesn't matter which theory you sign up for. At least part of the prescription to roll back the tide of inequality would be the same on both diagnoses - better education for all, better access to affordable finance for all.

Which is neither controversial or desperately original, although that somehow doesn't mean we are galloping towards an egalitarian future.

And by the way, the fashionable theory here is that technology means that any of us who haven't already made our billions are knackered anyway.

The big chatter here is about the current acceleration in the refinement of artificial intelligence and robotics, which will allegedly see 80% of even quite high-skilled jobs replaced by machines within years.

Which would mean that redundancy looms for all jobs that aren't either desperately menial or creative in a sense that robots can't replicate.

You will be OK if you are a stand-up comedian, and (apparently) it is unlikely it will be cheaper to have a robot clean a bathroom than a human. But many accountants and software engineers, inter alia, should probably fret.

Consider yourself warned.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 28.

    Re: comment 15 blaming Thatcher (of course!) for comment 10's question re: why pensions are unfunded. So nothing to do with Gordon Brown's massive tax raid on private pensions then?

  • rate this

    Comment number 27.

    The false economy based on house prices I would like to say will end tears. But it will not, it will end in civil unrest. I am pleased people have got on and are living the life of riley. But for the government to neglect the poorer members of society at the bequest of the rich is stupidity. They burnt their own areas in the last riots.,next time it could be yours.

  • rate this

    Comment number 26.

    Looking at the OECD figures, the gap between rich and poor has been steadily growing since the figures began in the 1980's.
    What's changed in this recovery?

  • rate this

    Comment number 25.

    Any result of recovery will go to the top 1% of earners, with maybe the next 9% getting a few crumbs.
    The other 90% will have to make do with inflation level payrises if they are lucky and told to be glad they are getting that.

    But who adds more to the economy?
    a multimillioniare who puts his extra 1 million into shares
    Or 10 million people spending an extra 100 quid ?

  • rate this

    Comment number 24.


    "It is the job of governments to tax the exceedingly wealth fairly without penalising them for their endevours"

    They dont become exceedingly wealthy because of thier endevours but because they were fortunate to be born into an elite class that maintain thier wealth by scratching each others backs at the expense of the proles. The problem is not wealth its oppotunity inequality.

  • rate this

    Comment number 23.

    We live in a country where it is deemed "acceptable" for ordinary hardworking taxpayers to bail out fatcat bankers.

  • rate this

    Comment number 22.

    While we have the likes of Osborne and IDS in power in this country inequality will increase. One can actually see the theories of Marx in operation now; more and more people from the middle being pushed into the lower classes, large fish eating up the smaller fish, power in the hands of the few richest - the prediction was eventually there would be revolution! Just a thought!

  • rate this

    Comment number 21.

    Money has a gravity effect of its own whereby when a certain amount of wealth is accumulated it gets easier to acrete more.
    Similar to a black hole it seems that once the money has passed the event horizon of the wealthys pockets it is gone forever to the rest of society.
    We are desperately in need of some anti gravity correction otherwise things may implode catastrophically and cease to exist

  • rate this

    Comment number 20.

    10.S Box "Shale Gas bonanza"

    Even to use such language is faintly ridiculous.

    Remember your history. When a state tells you there will be a bonanza they are ALWAYS lying & they ALWAYS know it.

    We need to look at the division of the cake first and then to hope to expand it.

    Cap the super rich (my definition anyone getting > £250K a year or worth >£M2.5 ) - 100% tax on excess.

  • rate this

    Comment number 19.

    Probably, working people will have to work even harder to support the large number who don't or won't work!

  • rate this

    Comment number 18.

    The one great leveller money, power or prayers cannot influence is the weather.

    Enjoy the ride.

  • rate this

    Comment number 17.

    True capitalism is dead and we now have an artificial economy based on QE. Inequailty will have to increase in order to keep the top 1% in power. When the banks fail there is a chance to re-establish some new economic model where work really does pay.

  • rate this

    Comment number 16.

    For every banker who went to Eton and lives in a nice house in Surrey, there are 100 living in a similar place who worked their way through university, then worked long hours building up a business, and feel they deserve to have more than those who just plodded through life.

  • rate this

    Comment number 15.

    Re Comment 10: The answer was income tax cuts during the Thatcher era.

  • rate this

    Comment number 14.

    You know how you can make all people more "equal"? You can have a revolution, slaughter the thoughtful, educated classes - who maintain order and ensure civilised living conditions, and put a group of despots in charge. Then, I guess, some of you might feel -well if not content, at least, justified. Over my dead body!

  • rate this

    Comment number 13.

    Is the pope a catholic?

    Increasing inequality is an inevitable consequence of Tory govt no matter how much they dress up their policies with lies and spin. They are only out for themselves and those like them, if you don't have money you obviously did something terrible and don't deserve help.

  • rate this

    Comment number 12.

    Principled trillionaires are very much in a minority; so of course inequality is going to increase, after all the Chancellor believes that the poor should pay for the debt laid up during the recession caused by the banks. And 99% of us will be poor sooner rather than later. Maybe there will be change in my lifetime - vive la revolution.

  • rate this

    Comment number 11.

    It is critical to the UK for us to introduce a National Maximum Income policy (set at a 20 x multiple of the National Minimum Wage).

    Any political party that does not take up this challenge is working ONLY for the super rich and is unacceptable to the people and anyone who votes for such a corrupt party is betraying the British People.

    We will get there and the neigh-sayers will fail!

  • rate this

    Comment number 10.

    If there is a Shale Gas bonanza in the UK perhaps the money from it should be used to fund the unfunded pension and other welfare liabilities. I can't understand why we have these unfunded liabilities anyway when we had all that income from North Sea Oil.

  • rate this

    Comment number 9.

    "Will inequality rise in this recovery?"

    It already has. Static wages and inflation have eroded the spending power of the majority at the lower end. Why should it be any different now we have a 'recovery'? Any new wealth created with trickle upwards

    Business as usual then


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