We discussed in a recent post the relationship between technological innovation, jobs and income. We suggested that, as we stand on the cusp of a new age of automation and robotics, this could be another significant driver of inequality in the near future. This week we’d like to extend that discussion to include the relationship between inequality and well-being.
And of course inequality is a hot topic at the moment, not least at the recent WEF meeting in Davos. The irony of that particular elite grouping discussing inequality and poverty so earnestly was not lost on many commentators including CNN’s Richard Guest: “How can a bunch of billionaires truly understand the difference between privilege and poverty asked commentators including myself”.
But something significant is clearly happening. As Gillian Tett explained in the FT – inequality has now broken free of its traditional emerging market homeland and emerged as a new plague of the developed economies.
The recent 2013-14 Shaping The Future report which has a generally positive outlook raised three areas of significant concern: the environment; crime and corruption; and income inequality – of which it says: income gaps are increasingly obscene.
In fact such an analysis only confirms that of the WEF itself in its annual global risks report – which has majored on the subject in recent years. See the 2014 report here.
Philip Stephens in the Financial Times has compared the excessive pay of bankers to those in charge of the French Revolution: ‘Their power and riches are largely untouched. Whatever happened, I sometimes wonder, to Robespierre’s guillotine?’
And The Atlantic, which has been tracking the issue for some time, this week published a fascinating analysis of the so-called 1% (anyone still remember Occupy?), breaking down what is really happening even among that small group.
Their conclusions are startling – such that it’s not at all the 1% versus the 99%, but rather the 0.01% versus the 99.99%. See the article here. Thinking about the implications of this concentration of wealth, this week’s ruling by the US Supreme Court to remove the cap on individual political contributions is particularly interesting as reported here.
Thus we might conclude that at this point wealth inequality is less related to technological innovation, productivity, structural employment or similar issues but rather with the elevated position of financial services within the wider context of a shift away from wages and towards capital as the major component of wealth.
OK, so world leaders are worrying about income inequality, what else? Well, another hot topic is wellbeing – shouldn’t the improvement of this be given equal priority to that of economic indicators? The idea has been given increasing consideration by a number of world leaders not least David Cameron.
We’ve been analysing global data on inequality and wellbeing and the two seem to be linked. There are other complicating factors of course (wellbeing is higher in more competitive and more productive countries) but one aspect in determining how happy one is seems to be is how rich or poor you feel compared to others.
Given that, isn’t it rather surprising that David Cameron and other national leaders aren’t doing more to combat income inequality?
There is an easy way to reach their goal of improving their citizen’s lives. And we all know what that is.