January 19, 2014 5:06 pm

IMF warns on threat of income inequality

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The International Monetary Fund has highlighted the threat posed to the global economy by growing income inequality as the world’s business and political leaders prepare to head off to the World Economic Forum in Davos this week.

Christine Lagarde, managing director of the IMF, is concerned that the fruits of economic activity in many countries are not being widely shared.

“Business and political leaders at the World Economic Forum should remember that in far too many countries the benefits of growth are being enjoyed by far too few people. This is not a recipe for stability and sustainability,” she told the Financial Times.

The World Economic Forum has identified the gap between the rich and poor as an important theme for this year’s gathering.

The message is hitting home. Shinzo Abe, Japan’s prime minister, is coming to Switzerland with the message that Japanese companies must raise wages, while the government of David Cameron, his UK counterpart who is also attending the forum, called for a large inflation-busting rise in the British minimum wage last week.

Tony Abbott, the Australian prime minister, will outline his country’s ambitions as chair of the Group of 20 leading economies this year in Davos. Ensuring progress is made on tackling multinational corporation tax avoidance is high on Australia’s list of priorities.

The change in sentiment comes as campaigners argue that the world’s population has rarely had such unequal access to wealth and power. In a report published on Monday, Oxfam, the charity, used the Forbes rich list to calculate that the $1.7tn in wealth owned by the world’s richest 85 people is the same as that shared between the bottom half of the world’s population.

Winnie Byanyima, Oxfam executive director, who will attend the Davos meetings, said: “It is staggering that in the 21st century, half of the world’s population – that’s three and a half billion people – own no more than a tiny elite whose numbers could all fit comfortably on a double-decker bus”.

As well as discussing geopolitics, global economics and business in Davos, the elite audience has poverty and inequality on the agenda and can leave the conference hall for an interactive experience of a day in the life of Syrian refugees.

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