Source: Financial Times
Inequality will be the central theme of 2012. It has always existed and is not going away, but this year it will top the global agenda of voters, protesters and politicians running for office in the many important elections scheduled.There is nothing new in the fact that a few people have too much and too many have too little. In some places (the Soviet Union and most countries with authoritarian regimes) inequality was once largely hidden from the population, in others (Latin America) it was known but tolerated and in some (the US) it was celebrated. In 2011, the economic crisis made the world more aware of the extent and scope of economic inequality. In 2012, peaceful coexistence with inequality will end and demands and promises to fight it will become fiercer and more widespread than they have been since the end of the Cold War.
Headlines such as this recent one in the Los Angeles Times – “Six Walmart heirs are wealthier than US’ entire bottom 30 per cent” – epitomise the new mood. Such scrutiny of the lives and deeds of the “one per cent” will become obsessive. Alongside the newfound intolerance for inequality, we will also see the occasional attempt to explain that not all inequality is bad. Jamie Dimon, chief executive of JPMorgan Chase, said recently: “Acting like everyone who’s been successful is bad and that everyone who is rich is bad – I just don’t get it.” Behind his perplexity is the assumption that great wealth often results from innovation, talent and hard work that are justly rewarded by society.
But as we know, great wealth and inequality can also originate in corruption, discrimination, monopolies, abusive corporate behavior or Madoff-like malfeasance. Students of inequality like to equate it to cholesterol: there is bad and good inequality, and the trick is to boost the good one while keeping the bad one at its lowest possible level.
Therein lies the problem: lowering inequality without harming other goals (investment, innovation, risk-taking, hard work) is not easy. The fight for a more equal society was the goal of countless experiments that resulted in even more inequality, widespread poverty and loss of freedoms.
Yet there is compelling evidence that high inequality is also bad for a nation’s health: it leads to higher political instability, more violence and it also hurts competitiveness and long term growth.
Elections will take place in the US, France, Russia, Taiwan, Mexico, Egypt, and Korea in the coming twelve months. Spain and China will also change leadership. Inequality will become part of electoral debates that will influence the conversation even in countries where it has long been taken for granted. Inequality will be the protagonist of 2012.