The Inequality Wildcard

As the dramatic events in North Africa continue to unfold, many outside observers smugly tell themselves that it is all about corruption and political repression. But high unemployment, glaring inequality, and soaring prices for basic commodities are also a huge factor – and look set to roil the developed world as well.

DAVOS – As the dramatic events in North Africa continue to unfold, many observers outside the Arab world smugly tell themselves that it is all about corruption and political repression. But high unemployment, glaring inequality, and soaring prices for basic commodities are also a huge factor. So observers should not just be asking how far similar events will spread across the region; they should be asking themselves what kind of changes might be coming at home in the face of similar, if not quite so extreme, economic pressures.

Within countries, inequality of income, wealth, and opportunity is arguably greater than at any time in the last century. Across Europe, Asia, and the Americas, corporations are bulging with cash as their relentless drive for efficiency continues to yield huge profits. Yet workers’ share of the pie is falling, thanks to high unemployment, shortened working hours, and stagnant wages.

Paradoxically, cross-country measures of income and wealth inequality are actually falling, thanks to continuing robust growth in emerging markets. But most people care far more about how well they are doing relative to their neighbors than to citizens of distant lands.

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