Are Inequalities Compatible With Prosperity?

Growth and inequality are a complicated pair in economy: while inequality is inherent to advancing economies, recent political events have taught us that prosperity does not go hand-in-hand with inclusion. Rejection of our globalised development model, open to the world and its flows, has been the strongest in the United States and United Kingdom, where growth has been the highest and unemployment the lowest.

The ability of liberal democracies to absorb cultural, economic, social and territorial inequalities appears to be struggling. What’s more, these votes reflect the rejection of growth that divides the world between those who embrace globalisation and those who are frightened by the changes it brings.  Are disparities in wealth as well as lifestyles within a nation or, more broadly, advanced economies, sustainable over the long term?

This is an even more burning question given the vigorous political debate the issue has provoked, which could affect the prosperity of future decades. There are two opposing options to bridge the gap between globalisation’s insiders and outsiders. The first option is protectionism, with all parties withdrawing from the world and taking cover behind their own borders. This option often coincides with higher taxes on higher incomes, with both labour and capital, and even a refusal to acknowledge existing debts. The second option is to continue an outward-looking policy, with close attention paid to inclusion. These types of policies seek to redistribute revenues from globalisation and expand opportunities to be a part of and benefit from globalisation through fair access to quality education, continuous professional training and an opening to other cultures.

This session will provide an opportunity to evaluate policy diagnostics and recommendations beyond the economy. It is less about comparing supply and demand policies, and more about comparing outward- and inward-looking policies.