Hamish McRae: In a sombre year Davos worries about greater equality

Economics

Share

It is Davos again. The annual meeting of world leaders in the Swiss ski resort has this year a predictably sombre tone. There are notable absences. Rupert Murdoch will not be there. Nor will Dominique Strauss-Kahn. Nor will Saif al-Islam Gaddafi, celebrated by the World Economic Forum as a Young Global Leader in 2006. It is, as Margaret Thatcher said when she was deposed, a funny old world.

But many global leaders will be there, for it is a very efficient way of setting up a string of meetings. So the gathering will, as always, crystallise the mood of the moment. That is, of course, one of concern – and at two levels. One is the way the developed world economy is failing to recover as swiftly as seemed likely even a few months ago, with the eurozone probably back in recession. The other is the failure of our mixed market system, not just to generate growth, but to spread wealth equably.

On the first, there is not much new to say, except perhaps to note that the present wobble is very much a European phenomenon, associated with the tensions of the eurozone. The US recovery seems more secure and the emerging world continues to grow at a rapid rate. (China adds the equivalent of another Greece to the world economy every four months.)

On the difficulty of delivering equity, though, developed and emerging economies are alike. We worry about boardroom pay and the US is aware of the lack of tax paid by its super-rich. But concern about rising inequality is equally evident in China, India, Latin America, Africa – just about everywhere. Inequality in the emerging world is arguably even more socially destructive than in the developed world. It has grown more swiftly and is more overt: for example, last year China overtook the US as the largest market for Rolls-Royce cars. Deng Xiaoping declared that to get rich was glorious, but I suspect he had the country as a whole in mind, not a handful of business people.

Any society that seeks to survive without revolution has to find ways of channelling social pressures and "haves" everywhere recognise that. What is new is that whereas a decade ago this was recognised (though maybe insufficiently) in the West, it was not much of an issue elsewhere. I think that is changing, particularly in India, but also in China and indeed much of Africa. The question of course is what is to be done.

Well, there won't be any answers to that in Davos, nor could there be. But open discussion among "the one per cent" is a first step towards taking measures to reverse the march to an increasingly unequal world. You can see from the line-up of speeches, and statements from prominent attendees such as George Soros, that this discussion has begun.

You can be cynical about this and say the "haves" are just protecting their pile by calling for greater equality and using philanthropy to project their own influence. But we should recognise that this is easier for the old developed world to cope with than for the emerging world. We have a century of experience in fostering greater equality: mass education, access to healthcare, public pensions, progressive taxation and so on. We know what we have to do, even if we don't do it as well as we should.

The emerging world does not have that experience because, until recently, it didn't have the wealth to share. Globalisation has reduced inequality between countries, but increased it within them. We are right to celebrate the first and it would be hard to reverse it. But the second does undermine globalisation and the fact that "Davos Man" is worried should be a relief to the rest of us.

Fine-tuning the GDP figures

When you see the final quarter GDP figures today, remember this: they are preliminary ones and they are almost certain to be revised upwards. The average annual upward revision of GDP figures over the past 20 years has been 0.8 per cent. This is particularly marked in the early period after a recession. During the two recoveries most similar to this – the early 1980s and 1990s – the quarterly upgrade was 0.35 per cent, or an annual rate of 1.4 per cent. So it is perfectly plausible that growth last year could be initially estimated at 0.9 per cent, yet turn out to be 2.3 per cent.

The trouble is that we won't know for several years. GDP is calculated from three different sets of numbers: for output, income and expenditure. In theory, they should be the same, but until you have final figures from things such as corporate and personal tax returns, you cannot reconcile them. Quite why there should be such a persistent under-estimate is a bit of a puzzle. The US has the opposite issue, for it consistently over-estimates GDP and has to revise down. It would be nice to attribute the divergence to national characteristics: British understatement and American bragging. The truth is no one has yet managed to explain what has been going wrong.

However, people looking for some comfort that growth last year might have been faster than reported can point to the borrowing figures out yesterday. So far, we are still on track in cutting the deficit, with revenues running reasonably strongly. Fingers should remain crossed.

h.mcrae@independent.co.uk

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Client-Side web developer (JQuery, Javascript, UI, JMX, FIX)

Negotiable: Harrington Starr: Client-Side web developer (JQuery, Javascript, U...

Structured Finance

Highly Competitive Salary: Austen Lloyd: CITY - An excellent new instruction w...

SQL Server Developer

£500 per day: Harrington Starr: SQL Server Developer SQL, PHP, C#, Real Time,...

C#.NET Developer

£600 per day: Harrington Starr: C#.NET Developer C#, Win Forms, WPF, WCF, MVVM...

Day In a Page

Read Next
 

If children with guns are safer than their unarmed peers, then Somalia must be the safest place in the world to grow up

Mark Steel
Theresa May  

Democracy and the police: a system in crisis

Nigel Morris
Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone
Amazon is buying Twitch for £600m - but why do people want to watch others playing Xbox?

What is the appeal of Twitch?

Amazon is buying the video-game-themed online streaming site for £600m - but why do people want to watch others playing Xbox?
Tip-tapping typewriters, ripe pongs and slides in the office: Bosses are inventing surprising ways of making us work harder

How bosses are making us work harder

As it is revealed that one newspaper office pumps out the sound of typewriters to increase productivity, Gillian Orr explores the other devices designed to motivate staff