:00:00. > :00:11.Now on BBC News, Talking Business. In chlamydia quality is the highest
:00:12. > :00:15.in nearly a century. `` income inequality is the highest in nearly
:00:16. > :00:19.a century. Is it bad for economic growth? What can be done about it?
:00:20. > :00:38.Here in Singapore, I'm Linda Yueh and we are Talking Business.
:00:39. > :00:47.A warm welcome to the programme. Income inequality has risen to be as
:00:48. > :00:52.high as during the worst period of the 1920s. The Gilded Age captured
:00:53. > :00:55.by the great Gatsby. Firstly, the share of income going to the top 1%
:00:56. > :01:02.has grown since 1980 into the richest Americans now hold one fifth
:01:03. > :01:08.of all of the income. In fact, the top 10% hold half of all the income
:01:09. > :01:13.in the country. It is no wonder that this era has been dubbed the second
:01:14. > :01:17.Gilded Age. And it is not just in the developed world. Poverty has
:01:18. > :01:20.fallen `` fallen dramatically in developing countries. 1 billion
:01:21. > :01:27.people have been lifted out of poverty since 1990. But income
:01:28. > :01:32.inequality has been unchanged since 1960. Worldwide, nine out of the ten
:01:33. > :01:39.richest people still live in the US and Europe. What is striking is how
:01:40. > :01:43.unequal the US has become. Inherited wealth is part of the reason. But it
:01:44. > :01:47.doesn't explain the high income is earned by executives and those in
:01:48. > :01:58.the financial sector. Samira Hussein sends this report from New York.
:01:59. > :02:05.New York, a city of glitz and glamour. If you've got cash, few
:02:06. > :02:12.other places are better than the Big Apple. But if you are only making $8
:02:13. > :02:19.an hour, like many of these workers, living here is not easy. New York
:02:20. > :02:24.does have its stereotypes, that we are making so much money, we are
:02:25. > :02:29.spoiled, we take advantage of opportunities that we have here. But
:02:30. > :02:34.we are struggling here as well. Nowhere is the gap between rich and
:02:35. > :02:39.poor more clear than New York. Some are just scraping by. Others are
:02:40. > :02:46.making millions on Wall Street. But this is not just a New York model.
:02:47. > :02:53.It's an American one. Between 1993 and 2013, average income growth for
:02:54. > :03:01.all Americans was 17.9%. But the growth for the top 1% was a
:03:02. > :03:10.staggering 86.1%. Compare that to the bottom 99%, who only saw 6.6% of
:03:11. > :03:14.income growth. Income inequality in America has reached such heights
:03:15. > :03:20.that people like Jesse are trying to do their part to spread the wealth.
:03:21. > :03:25.I inherited money when I turned 21, from my grandparents and I
:03:26. > :03:27.personally felt the dissonance between graduating from college
:03:28. > :03:34.without debt and having a pot of money that I had personally not done
:03:35. > :03:36.anything to earn. She has already given away two thirds of her
:03:37. > :03:42.inheritance. Through the organisation she runs she is showing
:03:43. > :03:46.others how to do the same. But for those who don't have the benefit of
:03:47. > :03:51.a generous inheritance or any money at all, moving up is tough. I think
:03:52. > :03:56.a lot of young people who don't get these wealth transfers are kind of
:03:57. > :04:01.stuck in a low financial rut. This tends to last a good part of their
:04:02. > :04:05.lifetime. It is very hard for them to move up economic Lee. Much of
:04:06. > :04:11.what makes the gap between the rich and poor so vast it actually
:04:12. > :04:17.systemic. Until some of those issues are addressed as time goes on the
:04:18. > :04:24.disparity will get worse, putting the quality of life for future
:04:25. > :04:29.generations into question. So across the world it seems that
:04:30. > :04:33.inequality has been and continues to be an issue. It has caught the
:04:34. > :04:38.attention of policymakers, who are debating solutions. I caught up with
:04:39. > :04:42.the head of the OECD in Paris to discuss how severe the problem is.
:04:43. > :04:48.We have been looking at inequality for more than ten years now and of
:04:49. > :04:55.course in the crisis inequality grew faster than in the 12 years before
:04:56. > :04:59.that. In the first three years of the crisis inequality just exploded
:05:00. > :05:07.because most of the inequality is born in the labour markets. In the
:05:08. > :05:11.wage differentials, or in the end, if you don't have a job, clearly
:05:12. > :05:17.that is a big source of inequality. Now why is it that inequality became
:05:18. > :05:21.a big issue today? Well, I don't think it is because people were
:05:22. > :05:27.unaware of its importance, but the fact that it is now clear that you
:05:28. > :05:34.have to deal with inequality specifically. It is not going to go
:05:35. > :05:39.away by the mere recovery. Second, the causes of inequality are not the
:05:40. > :05:45.recession, are not the crisis itself. It can be worsened by a
:05:46. > :05:49.crisis, when people lose their jobs. But that is not the only
:05:50. > :05:56.explanation. Actually inequality was growing before the crisis. Now it
:05:57. > :06:01.has deepened and it continues to grow. The more unequal a society,
:06:02. > :06:04.the less trust it will have in the institutions we have built over the
:06:05. > :06:08.last 100 years. That includes the prime ministers and presidents and
:06:09. > :06:15.ministers and political parties and the multinationals and the banking
:06:16. > :06:20.system. Everything that we have built, these institutions today do
:06:21. > :06:24.not tell very much to the people who are out there trying to get a job or
:06:25. > :06:31.improve their income. I think one of the reasons why inequality continues
:06:32. > :06:34.to rise in, as you say, it is not a new problem, it has been a problem
:06:35. > :06:37.that has been around for quite a long time, and one of the
:06:38. > :06:43.instruments which has been proposed as a wealth tax to try and tackle
:06:44. > :06:46.some of the accumulation of wealth which can happen in different
:06:47. > :06:53.countries. Is that an instrument that you think is worthwhile
:06:54. > :06:59.imposing? It is not a question of just a wealth tax. It sounds so
:07:00. > :07:03.simple. It is not so simple. It doesn't work like that isolated from
:07:04. > :07:11.a much more organised, much more structured approach to dealing with
:07:12. > :07:14.the question of inequality in a more societal way, but one that has the
:07:15. > :07:20.support of the whole of the members of society and that is understood
:07:21. > :07:24.better by the members of society. Where does this all go? What it is
:07:25. > :07:30.all meant `` what is it all meant to be? Why is it that societies were
:07:31. > :07:37.inequality is lower do better? Why is it that societies were inequality
:07:38. > :07:43.is lower are more competitive, have more employment, have a better
:07:44. > :07:48.quality of life? A lot of what you outline in terms of active labour
:07:49. > :07:52.market policies, fiscal spending and taxing in different ways, to push
:07:53. > :07:57.towards employment, all of these things again are policies that I
:07:58. > :08:07.would think most governments are not unaware of. So why has, what would
:08:08. > :08:11.it take for governments to really implement these? Not only are they
:08:12. > :08:17.aware, we documented extensively. They are measured. They are
:08:18. > :08:22.compared. They are benchmarked. Clearly this depends on domestic
:08:23. > :08:27.political conditions and also on the type of concerns and the type of
:08:28. > :08:31.mandates that governments have when they are sworn into office, or when
:08:32. > :08:38.they are voted into office. But I would say that this question of
:08:39. > :08:42.employment and unemployment, equality, inequality, is one that is
:08:43. > :08:46.very much shared and there the answer to your question would be one
:08:47. > :08:51.would imagine that there would be much greater awareness and at the
:08:52. > :08:57.same time much greater willingness to bite the bullet, if you will, and
:08:58. > :09:05.more and more we are going in that direction. So how our country is
:09:06. > :09:09.tackling inequality? The experience of Brazil, which has one of the
:09:10. > :09:14.highest levels of incoming `` income inequality in the world, reveals
:09:15. > :09:16.worrying picture. Our South America business reporter Katy Watson has
:09:17. > :09:21.this report. This is Helly obelisk, Sao Paulo's
:09:22. > :09:29.biggest favela, home to more than 200,000 people. This is one of the
:09:30. > :09:33.residents, sharing a house with 17 other members of her family. She
:09:34. > :09:38.gets help to pay the bills through a welfare programme as long as she
:09:39. > :09:43.keeps her two children in school and gives them regular medical
:09:44. > :09:48.checkups. The government gives her just under $30 a month to top up her
:09:49. > :09:52.income. TRANSLATION:
:09:53. > :09:56.It is not much but in my case, with two children and at the moment I am
:09:57. > :10:04.unemployed, it helps. It should be more but it definitely helps. More
:10:05. > :10:08.than 13 million people receive the payment. It benefits around one
:10:09. > :10:12.quarter of the country's population. It is seen as one of the most
:10:13. > :10:15.successful programmes to reduce inequality in the country and it is
:10:16. > :10:19.neighbourhoods like this that have seen some of the biggest benefits.
:10:20. > :10:29.But lifting people out of extreme poverty through the project is just
:10:30. > :10:32.part of Brazil's story. The past decade has seen strong economic
:10:33. > :10:38.growth, which has narrowed the gap between rich and poor. The most
:10:39. > :10:41.important thing that has contributed to reducing policy in Brazil has
:10:42. > :10:45.been a labour market. The minimum wage has increased in real terms
:10:46. > :10:52.quite substantially in the last 15 years. Moreover, growth has
:10:53. > :10:59.benefited the less skilled workers in Brazil, contrary to what has
:11:00. > :11:02.happened in developed countries. Despite the estimated 4 million
:11:03. > :11:06.people that have entered the new middle class here in Brazil, the
:11:07. > :11:09.country is rated as one of the most unequal societies in the world and
:11:10. > :11:20.it is easy to see that here. But with economic growth slowing,
:11:21. > :11:26.frustration is building. Salang G Conn sees that life is better than
:11:27. > :11:31.it was. Her grandmother was one of the first residence here in
:11:32. > :11:36.Heliopolis. But the challenge to reduce inequality is far from over
:11:37. > :11:39.in Brazil. Joining me now to talk about the
:11:40. > :11:46.experiences of different countries when it comes to inequality and
:11:47. > :11:50.potential policy solutions are a senior research fellow at the new
:11:51. > :11:57.America foundation, the World Bank's chief economist and in Hong
:11:58. > :12:03.Kong, a spokesman from the global Institute tomorrow. What is the
:12:04. > :12:11.evidence of inequality when you look between countries? Well, on the very
:12:12. > :12:17.global level, if you put every person in a row, and look at the
:12:18. > :12:20.inequality in income, global inequality has declined. The reason
:12:21. > :12:23.for that is that developing countries have been growing more
:12:24. > :12:29.rapidly than developed economies so their average income has come up.
:12:30. > :12:34.Some continents like Latin America, traditionally very high in
:12:35. > :12:42.inequality, a lot of countries have seen a decline in interest country
:12:43. > :12:48.inequality. Other countries, especially in the region, like China
:12:49. > :12:54.and Indonesia, they have seen a rise in income equality. When you look at
:12:55. > :12:58.the issue of inequality, what are the differences that most concern
:12:59. > :13:03.you, comparing what is happening in developing countries to developed
:13:04. > :13:09.countries? It is very interesting that much of the discussion about
:13:10. > :13:14.inequality has been distilled down to one basic issue which is
:13:15. > :13:19.essentially how financial capital plays out in terms of the
:13:20. > :13:24.measurements of inequalities. The first four are most important,
:13:25. > :13:34.national compact ash compatible `` capital. And then we have human
:13:35. > :13:40.capital, social capital, managing capital and financial capital. In
:13:41. > :13:45.most business platforms etc, we have distilled the wages to the lower
:13:46. > :13:51.rank which is essentially financial capital. It has no value in itself,
:13:52. > :13:58.it is purely a way to organise the way we owe and trade assets. That is
:13:59. > :14:06.actually one of the drivers inequality. Financial capital, that
:14:07. > :14:10.has been the reason why inequality has risen to very high levels in
:14:11. > :14:18.some countries in a rich world. Is it about then? Is it something
:14:19. > :14:26.policymakers should worry about? In countries where inequality has
:14:27. > :14:32.increased, where you have had rapid urbanisation, that urbanisation has
:14:33. > :14:37.been something we have celebrated. Opportunity for people to move out
:14:38. > :14:43.of agriculture into cities to access public services and get higher
:14:44. > :14:47.paying jobs but that does increase the gap between the rich and the
:14:48. > :14:52.poor, between the urban and connected and the rural and
:14:53. > :14:58.disconnected. You have that job creation. One of the things that is
:14:59. > :15:04.important is that nothing creates jobs like urbanisation and
:15:05. > :15:08.manufacturing and basic services and those parts of the economic value
:15:09. > :15:13.change that are often concentrated in cities. If we can couple that
:15:14. > :15:17.with more public investment, you would see much greater opportunities
:15:18. > :15:24.for large numbers of people and that could serve to diminish inequality.
:15:25. > :15:28.I'd like to pick up on your point about whether we should be worried
:15:29. > :15:33.about it. Inequality gives people motivation to work harder and go to
:15:34. > :15:39.school and invest in companies so that is good. But at some middle of
:15:40. > :15:44.inequality, you might have the very rich say, I want to stay rich. And
:15:45. > :15:51.they start tweaking them. Rich people usually have a lot of
:15:52. > :15:55.political into red `` influence. They start tweaking things so they
:15:56. > :16:02.stay rich. Secondly, that every put cannot get the type of services. The
:16:03. > :16:06.rich don't want to pay in after taxes so the poor don't get those
:16:07. > :16:12.services, health care, schools, social protection. That means you
:16:13. > :16:16.exclude part of the population, and that is bad for the whole society
:16:17. > :16:22.because you could grow more rapidly than you actually do. Thirdly, and I
:16:23. > :16:28.think that is what we see a lot in the number of countries, if there is
:16:29. > :16:32.a perception of inequality, of unfairness in society, political
:16:33. > :16:38.support for measures that continue to be good for countries and make
:16:39. > :16:43.countries grow will dissipate, they will not be there. People will say,
:16:44. > :16:52.that is only for the bridge. So, high income inequality bad for
:16:53. > :16:55.countries. At what point is inequality worrying or do you
:16:56. > :17:03.disagree that it can be good at some initial level when it countries are
:17:04. > :17:05.industrialising and urbanising? I have a more fundamental disagreement
:17:06. > :17:10.with this narrative. The narrative seems to be that if you can
:17:11. > :17:17.replicate the way in which the West became rich and modern, the
:17:18. > :17:21.developing world will achieve the stability and all of those other
:17:22. > :17:25.things that have become the mantra is for how progress is to be
:17:26. > :17:33.achieved. But the simple question is this. There will be five to 6
:17:34. > :17:37.billion people in Asia and can they aspire to live the lives of the
:17:38. > :17:43.Europeans and Americans except at a time when we are absolutely clear
:17:44. > :17:49.that the economic model of the 20th century which was based on consumer
:17:50. > :17:53.relentlessly through exploiting resources, plundering the planet,
:17:54. > :17:57.externalising the cost, is crumbling. And yet we are saying
:17:58. > :18:02.that these formulas, because they have almost become doctrines of
:18:03. > :18:08.economic theory in the West should be exported to Asia. I cannot
:18:09. > :18:14.advocating that urbanisation is a solution, I am observing that
:18:15. > :18:17.urbanisation is happening, it has happened in Western societies and it
:18:18. > :18:21.is happening rapidly in Asian societies and that is not because
:18:22. > :18:27.they are copying the Western model but because there is a demand for
:18:28. > :18:30.high wage jobs and public services. I am not denigrating the rural
:18:31. > :18:33.populations of the world who do provide the most essential natural
:18:34. > :18:39.organic nutrition that people need, whether they lead `` live in cities
:18:40. > :18:44.or rural areas, and having that others is essential. But I think to
:18:45. > :18:51.connect both of the point that you both have made, what is healthy in
:18:52. > :18:54.all of this is that the political discourse is shifting. What we are
:18:55. > :18:59.witnessing in Istanbul and New Delhi and Sao Paulo and maybe going back
:19:00. > :19:07.to the occupier Wall Street movement, this sense of injustice
:19:08. > :19:10.due to inequality and a backlash demanding much better use of public
:19:11. > :19:18.funds and potentially more Brit disputed it `` more redistribution.
:19:19. > :19:27.What policies have worked to address inequality? It is important that
:19:28. > :19:34.everybody has equitable access to opportunities. There has been a
:19:35. > :19:38.whole report about that. It will never be perfect but it does mean
:19:39. > :19:44.supplying for everybody accessible health and education and some social
:19:45. > :19:49.protection for extreme outcomes. Second, more open markets. That
:19:50. > :19:52.means labour markets. A lot of labour market regulation protects
:19:53. > :19:57.the very few but doesn't give access to the very many. So, giving more
:19:58. > :20:03.flexible regulations while providing protection gives more access to
:20:04. > :20:07.people of income opportunities. And the third most important is
:20:08. > :20:11.financial markets. Often, they are distorted in many ways and so the
:20:12. > :20:16.money goes to the connected firms. The evidence is there be clear that
:20:17. > :20:21.the more developed the financial system is, the more equitable
:20:22. > :20:27.society is, and that tells you something. You speak to a lot of
:20:28. > :20:31.stakeholder groups. What kind of policies are most likely to make a
:20:32. > :20:37.difference, given all of these complicated issues? From an external
:20:38. > :20:43.standpoint, I would say the opportunities for negativity,
:20:44. > :20:45.whether internet access or physical infrastructure that allow for
:20:46. > :20:49.mobility, one of the things we have seen is that some people have said
:20:50. > :20:55.these are white elephant projects. The World Bank has demonstrated that
:20:56. > :20:58.they have been huge in able as of social and economic mobility, they
:20:59. > :21:04.allow people to move and look for work and to service clients faster.
:21:05. > :21:10.The physical basic connectivity is a huge enabler of growth and economic
:21:11. > :21:15.opportunity. Countries need not just physical master plans, but economic
:21:16. > :21:19.master plans. How will we aligned the labour force and the education
:21:20. > :21:23.sector and the global, me so that our citizens have the skills to take
:21:24. > :21:28.advantage of the opportunities that exist to attract investment, to be
:21:29. > :21:32.part of global supply chains. I see not nearly enough of that kind of
:21:33. > :21:37.strategic thinking going on in countries and I think we reassured.
:21:38. > :21:40.The wealthy do know how to generate capital and preserve it. It is not
:21:41. > :21:45.the government of Mac job to take care of them, it is the government
:21:46. > :21:58.of Mac job to enable people. `` government's job. Thank you for
:21:59. > :22:02.joining us. The causes of a return to win a return to inequity are
:22:03. > :22:08.complex and include workers earning less, inheriting wealth and tax
:22:09. > :22:12.regimes, if the causes, located, then the solution is certainly are
:22:13. > :22:15.as well. But more than any other issue, inequality and poverty go to
:22:16. > :22:20.the heart of the type of society that we want to live in and that
:22:21. > :22:25.explains why this issue is at the forefront of global policy debates.
:22:26. > :22:27.That is all we have time for. Check out our website. IM Linda Yueh. Join
:22:28. > :22:47.us next time. `` I am Linda Yueh. No need for an expensive mini break
:22:48. > :22:48.this weekend. If you want hot