Inequality is on the agenda for advanced economies…
In April, policymakers from around the world will gather in Washington DC to take stock of the global economy. Even though the numbers show the recovery is underway, rising inequality in many advanced economies mean the benefits of economic growth are not being felt equally.
…although this isn’t a new story
Inequality has been rising for more than 20 years. We think global economic trends can help explain why.
Our “Megatrends” framework looks at global trends that are having a major influence on the economy today, and will still be important over the next decade. They permeate all areas of the economy and society.
We think two Megatrends have contributed to the rise in inequality:
Our CEO survey suggests that 75% of leaders believe their firm has a wider role to play in society and inequality is emerging as a key issue to address.
Is China’s growth at risk?
2014 could be a landmark year for China. Sweeping reforms agreed at the 12th National People’s Congress affect practically all sectors. However, recent disappointing data on exports and investment suggest the reaffirmed 7.5% GDP growth target could be at risk.
The potential fallout from China’s decade-long credit boom is a major downside risk, given the strong interlinkages between banks, state corporations and local government. Further defaults and financial market volatility could slow down, or even halt, China’s reform agenda.
A “swings and roundabouts” UK budget
A continuing large structural deficit meant George Osborne didn’t have room for significant giveaways when he delivered his Budget on 19th March. Though there were some measures that will support UK business, such as a rise in the amount of export finance available and help with energy costs, they are unlikely to have a major impact at the macroeconomic level.
Fig 1: Inequality rose in each of the G7 advanced economies between the middle of the 1980s and the late 2000s