It’s a sign of just how extreme US and global wealth inequality has become that even the folks on the winning side of the class war are starting to worry about it.
Citi Research has released a new in-depth report on inequality, its causes and potential solutions alongside Oxford University’s Martin School.
The report’s emphasis on “why inequality matters” is especially striking, because it reflects a widespread shift in American discourse about the issue following the Great Recession and financial crisis of 2007-2009.
Before then, the issue of inequality was largely ignored by much of the economics profession, and most certainly on Wall Street. Now, the issue has become a major driving force of US and European politics, forcing even large financial institutions to come to grips with its implications.
The report’s findings are striking, if unsurprising, given the flood of alarming headlines on rising inequities.
“Economic inequalities have soared. Income and wealth inequality have risen significantly across most advanced economies since the 1980s,” Citi and Oxford write in the report. “Top income and wealth shares have driven much of the increase in inequalities. There is no sign of a reversal.”
Moreover, the rise is ubiquitous. Inequalities have been rising “between regions, between generations, between industries, and between firms.”
At the same time, inequality between rich and poor nations has narrowed, as has inequality within some emerging markets, as periods of rapid economic growth helped pull millions from poverty.
The report recognizes the spike in inequality cannot be easily attributed to technological shifts.
“While technological change is contributing to inequality, inequality was falling until the 1980s when tax rates began to become less progressive, labor unions were weakened and the financial sector was deregulated,” the report said, adding that differences in inequality levels across countries are large.
Countries with high inequality also experience lower levels of social mobility, the report says, making the trends self-reinforcing.
Inequality has led to a decline in public trust of institutions, social cohesion, and faith in the political process the report says. “Civic engagement and political participation have declined as economic inequalities have risen. Inequality is also linked to rising support of populism,” the report adds.
Citi Research and the Oxford Martin School also confirm a trend recently highlighted in research from the International Monetary Fund. That is, inequality can hurt economic growth, and more unequal countries tend to grow more slowly over time than more equal ones.