Income inequality is now the number one global concern, according to the World Economic Forum (WEF) — an assessment supported by research suggesting even economic elites now fret over the impact on society of the growing wealth divide.
In an annual WEF report released last week, United Nations adviser Amina Mohamed warns that income inequality can have pervasive social and political consequences. The deepening gap between rich and poor, she writes, “reduces the sustainability of economic growth [and] weakens social cohesion and security.”
That perceived threat to social stability may be why income inequality has steadily climbed the WEF’s list of priorities with each new edition of it annual economic assessment. In its 2011 report, the WEF listed inequality as “the most underestimated” global trend. By last year’s edition, it had climbed to second place.
In part, that’s because the global income gap has only continued to widen over the past few years. A recent Credit Suisse report estimates that the top 1 percent of the globe’s population possesses nearly half of the world’s wealth, whereas the bottom half of world’s population holds less than 1 percent of its riches.
Given those disparities, some members of the top 1 percent have begun to fret over the possibility of widespread political unrest. Income inequality, for example, was a major theme earlier this year at the WEF-hosted gathering of business and political elites in Davos, Switzerland.
Similarly, recent public opinion research from the polling group Pew found that a majority of citizens in both developing countries and richer nations are worried about the global income gap.
Economist Jeff Madrick, author of the book “Seven Bad Ideas: How Mainstream Economists Have Damaged America and the World,” said that elite consensus on the issue of inequality has shifted markedly over the past several years. Until recently, many policy makers and business leaders had not viewed inequality as a problem in of itself. That appears to be changing.
“Increasingly, people are saying inequality has a deep impact on economic growth and often precedes cataclysm,” said Madrick. “The best example is the Great Depression.”
That argument appears to have gained greater traction after the Great Recession. Not long before the 2008 financial collapse, Federal Reserve chair Ben Bernanke explicitly argued that “the challenge for policy is not to eliminate inequality per se but rather to spread economic opportunity as widely as possible.” Years later, his successor, Janet Yellen, delivered a controversial speech that positioned inequality as a potential threat to the American way of life.
“There has been really a serious change in attitudes,” said Madrick.