And yet it moves: economic policy at last recognises inequality as an important issue; for example at the World Economic Forum (WEF) in Davos this week. Each year representatives from politics, the economy, science and the media meet there to discuss the global economy, this year with the topic of “Responsive and Responsible Leadership”. This concerns the current political changes and challenges, for which, among others, the inequality of wealth and income has been identified.
Economic growth and the reduction of inequality have to go hand in hand
This is the case in the “Inclusive Growth Report” published in the run-up to the forum, which identifies inequality as a significant co-contributor to limping economic growth. The authors not only analyse gross domestic product but apply the so-called Inclusive Development Index (IDI), which also includes other relevant factors such as employment, productivity and healthy life expectancy. The results are intriguing: the best grades in this comprehensive analysis were given to Norway, closely followed by Luxembourg and Switzerland. 16 of the highest-ranking 20 countries are in Europe, with Austria being in 10th place. As it would have to be assumed, there is a certain correlation between GDP per capita and the IDI result, however, there are clear outliers, such as the US. Its GDP per capita is globally ranking in 9th place but because of the lack of inclusivity and sustainability of its economy ranks 23rd in the IDI. On the contrary, Iceland is ranking at 4th even though her GDP per capita only reaches rank 13.
Apart from growing inequality, the report also regards increasing automation as a risk, in particular through progress in robot technology and in artificial intelligence. The answer provided by the report is clear: economic growth and reduction of inequality of wealth and income have to go hand in hand. Reforms would be necessary but have to affect both the supply and demand side in order to broaden the base for growth and to make it “less dependent on short-term macroeconomic measures and export demand”.
Furthermore, the British charitable organisation Oxfam published its report “An economy for the 99%” which received great media attention. The report estimates that just the world's eight richest men own as much wealth as do the poorer 50% of the entire global population. If one not only looks at the eight richest men but the richest 1% of humanity, this 1% owns more wealth than all other people combined. Even though there was some criticism concerning Oxfam’s measuring method it is undisputed that inequality has reached worrying levels, also in Europe. According to figures of the European Central Bank (ECB), in the euro zone the richest 5% of the population own 38% of the entire wealth.
Europa has to work together for fairness!
All of the above clearly shows that the demand of the AK for a coordinated European approach to taxes on wealth, capital gains, top incomes and corporate earnings has to be urgently implemented, as must be the fight against tax evasion and tax havens.