Next week, the World Economic Forum will hold its annual meeting in Davos, and it’s out with the latest edition of what it sees as the biggest global risks. As Linnette Lopez notes, income disparity has been the WEF’s number one risk, at least in terms of likelihood, for the last three years.
That income inequality (or disparity) is now on the lips of the global elite isn’t surprising: here’s a chart of of Google searches for the term since the financial crisis. But there has been another spate of wonkish takes on income inequality, and a few hints of least some common premises. As Jonathan Capehart notes, there’s some crossover in the way President Obama and Marco Rubio have talked about inequality. Martin Wolf echoes the worries of IMF chief economist Jennifer Blanke that inequality is eroding the world’s social fabric:
A degree of plutocracy is inevitable in democracies built, as they must be, on market economies. But it is always a matter of degree. If the mass of the people view their economic elite as richly rewarded for mediocre performance and interested only in themselves, yet expecting rescue when things go badly, the bonds snap. We may be just at the beginning of this long-term decay.
John Cassidy has a good news / bad news look at global income inequality. In the good news category is Angus Deaton, whose 2013 book “The Great Escape” tracks recent economic gains by nations like China and India. Deaton argues that life, generally, is better now, as technology has improved lives and as millions in emerging economies have been pulled out of poverty.
The bad news comes from the IMF’s Branko Milanovic and Christoph Lakner. In a December paper on inequality, they find that overall global income inequality didn’t really budge between 1988 and 2008. As Cassidy puts it: “While globalization and technological progress have enabled some poor countries to engage with the global economy and catch up to their more advanced rivals, these same forces are generating big increases in inequality within countries.” Ryan Avent writes that “the political salience of the issue is exclusively national.”
In America, where some 95% of income gains since 2009 have gone to the top 1% of earners, the issue is increasingly political. James Pethokoukis calls for a GOP push against cronyism and takes aim at Big Sugar, Big Solar and big banks. Michael Spence calls inequality a “distributional challenge” that may require a delicate combination of raising the minimum-wage and redistribution through the tax code. Brad DeLong wonders why the multi-decade rise in inequality in America hasn’t led to sweeping political change, as it did after the Great Depression. “Most Americans should be as worried today about the quality of their democracy as they are about the inequality of their incomes,” he writes. -- Ryan McCarthy
On to today’s links:
UGH
The retirement homes that lure poor veterans with phantom benefits they don't actually qualify for - NYT
Housing
There's a housing market for cash buyers -- and one for everyone else - Carola Binder
JPMorgan
It cost JPMorgan $1.5 billion to value its derivatives right - Matt Levine
Charts
40 charts that explain the world - Dylan Matthews
Increasing income inequality, animated GIF chart edition - Center on Budget and Policy Priorities
EU Mess
France by the numbers - Paul Krugman
Francois Hollande: "Supply creates demand" - Francesco Saraceno
Financial Arcana
The roots of shadow banking - Enrico Perotti
Classic Bess
"Fox Business Senior Ballsack Correspondent has sources around every corner" - Bess Levin
Strange Religions
"We interviewed the founder of Yeezianity, the first religion based on Kanye West" - Vice
Remuneration
Goldman employees experience 3% decline in happiness - Will Alden
Underbellies
The dark side of the truffle trade - The Atlantic
Popular Myths
Psychopaths don't act like they do in the movies; you probably know a few - Quartz
Booth babes are bad for business - Chris Doctorow
Alpha
“Bank earnings are a joke", says bank analyst - Dawn Kopecki
Crisis Retro
Tales from the Miami housing boom (the 1920s edition) - David Sibey
Cephalopods
"After some soul-searching at a silent monastery in New Mexico", Martin Chavez returned to Goldman - Fortune
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