Tuesday 21 May 2019

Davos 2015: Inequality hampers growth - IMF's Christine Lagarde

IMF chief Christine Lagarde at the panel discussion yesterday. Reuters
IMF chief Christine Lagarde at the panel discussion yesterday. Reuters

Colm Kelpie in Davos

The onslaught of the financial crisis has led to a rise in inequality and an increase in the gap between rich and poor, a senior figure with Oxfam told the World Economic Forum in Davos.

Winnie Byanyima, Oxfam International executive director, also said that the extremely wealthy in the world make the rules, because they can afford to influence policy.

She told the BBC World Debate at the gathering of the rich and influential in Davos this morning that financial lobbyists spend hundreds of millions of dollars influencing policies.

''This is about shaping the rules of the market in their favour. In an ideal situation, you would have all people shaping the way that the economy is governed and society is governed,'' she said, as part of the wide-ranging debate including IMF chief Christine Lagarde and Bank of England Governor Mark Carney.

''Extreme wealth results in political capture, and then from there on, public decision making is in the interest of the wealthy.''

It comes just days after a report by Oxfam which claimed that the richest 1pc of people will own more than half the world's wealth by next year.

Ms Byanyima said the very wealthy all over the world can ''buy for themselves longer, healthier, happier lives.''

''While poor people at the bottom are trapped in poverty for generations. If you take the level of inequality that exists now in the United States, a child born in a poor family, will become a poor adult,'' she said.

''So, the American dream is just that, a dream. It is not tue because of he extreme level of inequality.''

She said one way to tackle inequality would be through global tax reform. She said Oxfam estimates that there is $18 trillion in tax havens not being taxed.

Ms Lagarde said excessive inequality was not conducive to sustainable growth.

And she said there had been a massive increase in wealth since the financial crisis.

"If you increase the income share of the poorest, you get a multiplying effect that you do not get if you increase the income share of the richest,'' Ms Lagarde said.

Ms Lagarde said excessive inequality was not conducive to sustainable growth.

But Martin Sorrell, chief executive of British public relations company WPP, said rising wealth had  helped lift many out of poverty. And during a contribution about the increase in executive pay worldwide, he struck an unapologetic tone, saying you have to ''pay for performance''.

''Over the last 40 or 50 years we have seen significant improvements in the number of people taken out of poverty, and in the number of people who have been put into the middle class,'' he said.

''Billions of people in emerging markets have come into the middle class.''

Online Editors

Also in Business