The Finance Foundation
Reinventing capitalism for all
AUTHOR
Michel
Gabrysiak
President of the Finance Foundation

Rising inequality in the West is an anti growth drug says Oecd
December 17, 2014 , Michel Gabrysiak - Financial Markets
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Inequality and growth are very much linked, says the OECD.

The 10% richest members of the population in developed countries earn 9.5 times more than the poorest 10%. This has increased by 1/3 since the early 80’s. The OECD stresses a very crucial point” income inequality has a sizeable and statistically negative impact on growth”. This extraordinary difference is very bad for growth.

The spending and buying comes from the masses. The richest part of the population consumes. But as the old saying goes, you can only eat three times a day, and wear one suit at a time.

I was walking the streets of Paris a few days ago right before Christmas. An enormous crowd had invaded the Champs-Elysees. This crowd consumes and buys by the millions. On the nearby avenue Montaigne, a few people only buy. Prices, of course, are quite different, but nevertheless it is obvious that the big spending and successful Christmas season will come from the crowd,  not from the happy few. Because of this inequality, growth in rich countries has been around 40% since 1990. It would have been 50% without the rising inequality factor. OECD believes that wealthy individuals should pay higher,  income tax, scrap tax breaks etc.

In other words, the most important economic think tank in the West suggests higher taxes for the rich, in order to bring money to the States, allowing them to spend and invest more. The secretary general, the Mexican Angel Gurria, suggests that “countries that promote equal opportunity for all at an early age are those that will grow and prosper”.

Those numbers and comments should be implemented in political thinking all around Europe and North America. They are the key to the West continuous leadership of the world. Inequality will kill that leadership.

Write to The Finance Foundation at info@finance-foundation.com
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