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