Yes, inequality is getting worse. Yes, it is bad for economic growth, because it stunts consumer demand.
And yes, even the rich ought to worry about the way they are taking an ever-increasing share of society's wealth and income, according to a weighty new analysis of inequality in the richest, developed economies from Morgan Stanley.
It's not all gloom, according to Morgan Stanley senior economist Carmen Nuzzo. (This is an investment bank, of course, so they're looking for opportunities as well as dysfunction.)
But the report contains a gloomy thread for those who worry that Thomas Piketty might be right. Nuzzo et al. write:
... protracted, inequality can disrupt business models, fuel political discontent and trigger policy missteps. This could damage the growth potential. This risk is high in DM [developed markets], where inequality within countries is increasing, in contrast to inequality between countries globally, which is diminishing.
Here is Morgan Stanley's new ranking of the most-equal, and least-equal, rich countries:
The highlights:
- Inequality in the US is about the same as Portugal, Italy, Greece and Spain — countries that in Europe are regarded as economic basket cases.
- There is a wide gulf between Germany and France, the two big economies that neighbour each other at the heart of Europe. The UK sits between them.
- Those cliches about Northern Europe and Scandinavia? Basically true.
- Internet access is a good proxy for inequality. The more people have it, the more equal a society is likely to be.
Inequality has become worse more recently, Morgan Stanley says:
Here is how much the top 10% take of each nation's total wealth and annual income:
Morgan Stanley says that increasing inequality in the rich countries is killing off their middle classes. "Faced with stagnant wages, high debt and rising costs, the middle class is eroded by rising inequality," the authors write.
They cite increasing childcare costs and payments for health and retirement as the main factors that hurt middle-class wealth retention.
