Of Davos, Luxury Boats and Downward Spirals

By Suhaib Riaz.

At the recently concluded gathering of world elites, also known as the World Economic Forum at Davos, one issue seemed to come up more than it has in the recent past: societal inequality. Oxfam released a well-timed report on economic inequality and directly asked for world elites at Davos to turn their attention to it.

The report highlighted how the 85 richest people in the world (who could hypothetically fit into a double-decker bus) now own wealth equal to the lower 3.5 billion people (half the world’s population). Interestingly, the Oxfam site’s link to the report had the picture of a boat, or more precisely, that of a luxury yacht – presumably the kind that those elites may own or have access to. The water all around it seems stable and beautiful as ever. It is hard to resist a metaphor here, which I will expand on through this article.

On the face of it, the call by Oxfam can be puzzling. The fact that societal elites are being asked to give attention to inequality raises a fundamental question: Why should they care?

Addressing Inequality with a New Business Architecture

by David Levy

Last week, Bill de Blasio was sworn in as the Mayor of New York, and in a ceremony replete with references to sharp class and racial divides in the city, de Blasio pledged to devote his energies to “put an end to economic and social inequalities.” So what can a new administration with a solid mandate for progressive policies do to encourage shared prosperity in a major urban region? Even large cities have limited power and resources, and they are tightly integrated into the wider national and global economy. Inequality is largely a function of more structural economic forces, from the dominance of the financial sector to the pressures created by immigration, globalization, and technological change.

De Blasio’s plans for addressing inequality remain rather unclear. His most substantive proposals include building more affordable housing and raising taxes on the wealthiest New Yorkers to pay for universal kindergarten. His wide margin of victory indicates some appetite for redistribution, but higher taxes are often perceived as “anti-business”, deterring mobile investment and hurting employment. Indeed, De Blasio is proposing to raise taxes by less than $1000 on those earning between $500,000 and $1 million a year. De Blasio has also supported raising the minimum wage, but the city is powerless to act on this without support from the state legislature.  Other proposed measures, such as helping people enroll for food stamps and other benefits to which they are entitled, are important steps but their limited scope means they won’t have much of a systemic impact.