WEF Agenda: Why is inequality in such stark focus at Davos this year?

It is no secret that the world’s wealth is held by a minority of individuals so small that soon one percent of the wealthiest global citizens will have more wealth than the other 99% of the population. To get an understanding of why inequality is such an important area of focus on the global agenda at the World Economic Forum this year, Alec Hogg spoke with Stewart Wallis from the New Economics Foundation, unpacking the magnitude of the issue and what it means for the world from a practical perspective. – LF

LINDSAY WILLIAMS:  Someone who’s not in shirtsleeves is my colleague from CNBC Africa.  That’s Alec Hogg, who’s in Davos, Switzerland.  Alec, how cold is it there?

ALEC HOGG:  Hey, Lindsay man, good to hear you.  We haven’t done our double-act for; well it’s over a year now, isn’t it?

LINDSAY WILLIAMS:  Yes, it’s good to rectify that.  What’s the atmosphere over in Davos, now that the ECB has done its thing?

ALEC HOGG:  We had two days of bright sunshine and that gave us optimism and hope and everybody felt here that maybe good news was coming.  Today we’ve got really grotty weather.  It’s gone back to what it was before Sunday, and it is almost like the mood of Davos, which has been creeping up on us, has now finally taken over.  It’s cold Lindsay.  Yesterday I was actually able to wear just my jacket.  Today I’ve got the lot, right from the thermals up until, as you can see, the beanie, which of course does improve my appearance but, you know, when you get to a certain age, as you well know as well, that is part of the game.

Let’s get onto our conversation with the first of our guests today, is Stewart Wallis, from the New Economic Thinking Foundation.

STEWART WALLIS:  Yeah, New Economics Foundation but it’s also, I think, a ‘do-tank’, so we think and we do.

ALEC HOGG:  Now we were together yesterday in a session, called ‘Stop to Think Who Matters’.  You were in the audience and we both heard Robert Johnson.

STEWART WALLIS:  Yes.

ALEC HOGG:  Who’s from a, almost a sister body to yours, talking about hedge fund managers who are buying (what did he call it) getaway cars…

STEWART WALLIS:  Yes, getaway cars the airstrips in New Zealand and all that sort of thing, so basically a way to get off.  If they can get off, onto another planet, some of them would.

ALEC HOGG:  Yes, and it’s very much a mentality that occurred in South Africa, when you had what they called ‘crash-boats’, where people would find a way of getting out, just before democracy dawned.  Is it really that serious though?  Are the rich really worried?

STEWART WALLIS:  I think the rich are worried and they should be worried, and I think this weather is a good time to talk about it.  I mean inequality, why does it matter?  I mean, most people have heard the Oxfam statistics that now we’ve got 80, the 80 richest people in the world, having more wealth that the bottom three-point-five billion, and very soon we’ll get a situation where that one percent, one percent of the richest people have more wealth than everybody else, the 99.

ALEC HOGG:  Is that a bad thing though and why?

STEWART WALLIS:  Yes and why does it matter?  Four reasons, first of all, social cohesion.  What’s happened now, there are extremes of inequality in many countries, means that we’re going to see all sorts of social problems.  We’ve seen the start of it but this is a breeding ground for, not just terrorism but for all sorts of social problems.  That’s one reason.  Secondly, it just makes us miserable.  It doesn’t…when you’ve got an unequal society; it doesn’t just make the people who are at the bottom of the heap less happy, it makes everybody less happy.

ALEC HOGG:  I get that but surely, the point of this must be how do you raise up the people at the bottom, rather than attacking those?  All right, I’ll ask you another question do you use Google?

STEWART WALLIS:  Yes I do.

ALEC HOGG:  Would you like Larry Page and Sergey Brin not to have created Google?

STEWART WALLIS:  No, one thing…

ALEC HOGG:  How much do you pay for Google?

STEWART WALLIS:  I don’t, exactly.  No, I mean I wouldn’t start and attack people just because they’re rich, and I think you use Larry Page as a good example.  The issue isn’t those people that are getting rich by producing things we all want.  The issue is, and we have to separate it somewhere.  Those people who have extreme wealth, who aren’t using it for productive purposes and are often making money out of money, and why does it matter?  It doesn’t matter just morally and socially, but it matters economically.  In my own country, the U.K., we’ve now got a situation, a report just came out from the Joseph Rowntree Foundation this week that said, ’40 percent of households’ that’s eight million people, ‘do not have enough now to participate in society’.  I mean, has their purchasing price gone down?

It means that the Government doesn’t raise much tax because the economy doesn’t function, and it certainly means you’ve got a much more unstable economy.  The IMF says, ‘well you’ve got extreme inequality, not only is it bad for growth, it is also bad for financial stability’.  I think that even economically.

ALEC HOGG:  Yes, everyone gets that but this continued attack on the rich, at particularly at the top-end.  It appears misguided and I’ll tell you why.  If you did not have some role model to ascribe towards, and every one of us wants to improve our situation, and of course, it’s unequal at that level, but you’re not going to get those guys to all be Bill Gates, the richest man who gives away all of his money.  Why shouldn’t we rather look at how do we bring up the bottom people?

STEWART WALLIS:  Well look, you’re absolutely right.  We’ve got to bring up…we’ve got to focus on bringing the bottom people up, no question, but inequality still matters for the reasons I’ve said.  It’s not about attacking people.  It’s about finding a way to improve the situation and we know it’s not just about taxes.  Everybody thinks it’s all about taxes.  It’s actually about decent education, it’s about things like childcare, and it’s about creating enough good jobs to people.

ALEC HOGG:  It’s about access, I guess, to opportunity.

STEWART WALLIS:  Yes, it’s about access to opportunity, so you want people being able to participate in the market and to have better lives, so this isn’t about putting the rich into the guillotine.  This is actually about changing our economic system, so it functions much better and that’s why we’ve got to tackle inequality.

ALEC HOGG:  I was very fortunate this morning to be in a small group, ten people, listening to an off the record discussion with Doctor Kim, from the World Bank, who is hugely impressive.  I’m sure he wouldn’t mind if, just the little bit that I’ve shared with you, is that the World Bank is now trying to measure improvement, by looking at the bottom 40 percent and whether their income levels are growing at a faster rate than economic growth.  That seems sensible to me.

STEWART WALLIS:  Yes, it is and I’m on a group here with the World Economic Forum, all about inclusive growth, and what we’re interested in is, is about both the inclusion and growth, and how do you get both those things happening?  That’s the key, so I totally agree with those measures.  That we’ve got to focus on how we get the people at the bottom, growing faster than others and that’s definitely…nobody is going to dispute that, so it’s not just about…