David Prosser: Why inequality has moved up the agenda

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The Independent Online

Davos Outlook One more lasting effect of the financial crisis has been the growing awareness of the unfair way in which the world's wealth is distributed. Zhu Min, the former deputy governor of the Chinese central bank, who now works for the International Monetary Fund, goes as far as saying: "Inequality is the biggest single issue facing both the advanced and the developing economies this year."

Quite right too, most people will say, but why should inequality, which is hardly a new phenomenon, suddenly be front and centre in places such as Davos?

Well, one reason is that the emerging markets have begun to confront more openly the question of redistribution. Millions of ordinary Chinese people want to share in the spoils of the economic awakening, just as people in the West are angered by corporate excess at a time of general austerity.

Another is the understanding that inequality goes hand-in-hand with systemic risk. It is noticeable in the US, for example, that wealth inequality peaked in 1928 and then again in 2007 – just before awful crashes. Concentrated in the hands of too few people, wealth begets speculation, asset price bubbles and ultimately disaster.

Hopefully, too, the emphasis on inequality reflects the shaming of those with huge wealth by a public enraged at their greed and irresponsibility. One needs only to think of the outrage over bankers' bonuses, for example, and the more general antipathy towards big business that has become a feature of Western society, at least. Maybe they do get it after all.

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