The Complexity of Inequality

Governments delayed in accepting or tackling inequality as a major challenge. The concept “remains poorly defined, its effect is highly variable, and its causes hotly debated,” notes Michael Heise, chief economist of Allianz SE, for Project Syndicate. Inequality is concentrated in the developed world, and wealth is more broadly distributed at the global level: Since 2000, the ranks of the middle class have doubled and represent 20 percent of the population. Stimulus spending, low interest rates and other loose monetary policies after the 2007-2008 financial crisis have increased stock and bond prices and reduced interest rates offered by banks to ordinary middle-class savers, and Heise points out that “all but the wealthiest households will probably have to boost savings and/or reduce consumption, now and in the future,” which will reduce economic growth and “potentially generate social fault lines for the coming generations.” He recommends specific policies for nations – jobs creation, a reduced tax burden or incentives to promote savings – depending on the underlying cause of inequality. He also urges an end to zero and negative interest rates and borrowers adjust to the real costs of loans. – YaleGlobal