Piketty was wrong. Seizing from the rich to help the poor won't solve inequality
Published 07/09/2015 | 15:54
Governments must put pro-business measures at the heart of policymaking if they want to tackle inequality, according to the World Economic Forum.
The WEF's Inclusive Growth report said focusing on policies such as wealth redistribution, advocated by economists like Thomas Piketty, had constrained the debate on inclusive growth.
The two-year study, which looked at 112 advanced and emerging economies including the UK, said removing red tape and building solid infrastructure was as important as high quality education and progressive tax policies for better living standards and economic security.
"An inclusive growth and development model is one that is inherently pro-labor and pro-business."
"The current debate on inequality and social inclusion is unduly narrow and unnecessarily polemicised," the report said.
"It is possible, indeed essential, to be pro-labour and pro-business, to advocate a strengthening of both social inclusion and the efficiency of markets."
Richard Samans, a member of the WEF board and architect of the report, urged governments to facilitate competition in markets and ensure a level playing field in order to boost growth and promote equality.
"If you look back at what happened after the financial crisis in the 1920s, governments introduced fantastic education systems, they 'busted the trusts' and made markets more competitive and they stamped out corruption. All of these things had the result of exactly the kind of high growth with social equity that we need," he said.
Mr Samans, who has served as an economic adviser to former US president Bill Clinton, said Mr Piketty's idea of a global wealth tax could not create more inclusive growth by itself.
He said: "On the merits [Piketty's proposal] is just way too narrow and doesn't really address the lessons of history. If you want to build a better growth model, you need to take a whole range of domestic economic institutions seriously, and at least half of that agenda is improving the investment climate and entrepreneurial climate. And it has been missing from the debate."
"Rock star" economist Thomas Picketty has suggested that a global wealth tax could help to address a growing issue of inequality.
The report praised the UK's progressive tax system and easy access to finance for small businesses. But the UK scored poorly on education compared to other advanced economies, which the report said could impact youth unemployment, which still stands at 16pc, compared with less than 14pc before the 2008 financial crisis.
The WEF also encouranged UK policymakers to improve access to affordable childcare.
Switzerland and Australia were among the top performing countries, ranked highly for basic services and entrepreneurship. The Nordic countries also scored highly, with Denmark, Finland and Norway all in the top ten.
However, the report said that, at a time when economists were warning about secular stagnation and the risk of an era of mediocre growth all countries had room for improvement.
"On the merits [Picketty's proposal] is just way too narrow and doesn't really address the lessons of history."
"In this sense, an inclusive growth and development model is one that is inherently pro-labour and pro-business," the report said.
"Political myths and polemics to the contrary serve only to distract attention from the practical work of governments to assess their strengths and weaknesses and then marshal the imagination and coalitions necessary to construct a coherent and durable national strategy."