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 248.

    So few comments here.

    Alongside debt, we're told, our leaders at Davos are most concerned about inequality, not so much about us 'people' (poverty being OK for say 5-15%), but about impact on market stability (perhaps even social stability, the safety of gated-communities) given erratic ever-higher levels of unemployment, under-employment, under-payment & benefit withdrawal.

    Topsy-turvy world.

  • rate this

    Comment number 247.

    It's ironic that Peston, who clearly understands the importance of reducing inequality, misspells just deserts.

    All the grotesque blogs about dustbin men being poor because they don't work hard ignore the fact that we need dustbin men and if everyone worked hard we would still need dustbin men.

    Isn't there enough inequality now? When will there be enough? When will fear overtake greed?

  • rate this

    Comment number 246.

    Employment is a market.
    Whoever has the upper hand either gets more or pays less.
    The boss makes a profit and the worker makes a crust.
    Its not rocket science.
    Just now bosses have the upper hand because they have been allowed to import cheap labour.
    God help them when the pendulum swings!
    Until capital and labour cooperate more constructively to raise productivity, we are stuffed!

  • rate this

    Comment number 245.

    Inequality may not rise per se when 95% people become equally poorer

    .. and small minority of rich Davos money men and women become very much richer and more exclusive due to outsourcing automation globalisation and insolvencies of competition

    Mamma Africa will develop grow & catch up & will still be better dancers & friendlier communities than Capitalistic White Europeans spread all over world

  • rate this

    Comment number 244.

    Looking at 'theories', why inequality 'so determinedly in the ascendant' (as if conscious power against the will of protesting Man), part if not most of problem in deficits of comprehension (Africa to 'rise faster' in %, as if to catch-up!) & representation, no mystery in 'disproportionate rewards', & 'closed network nepotism', further detaching 'leaders' from 'their' - mostly 'redundant' - people


Comments 5 of 248


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