By Dan Hamilton
The Paris-based Organization for Economic Cooperation and Development (OECD) released a study Tuesday showing clearly that the gap between rich and poor is widening in Europe and North America. The report, which covers developments spanning 20 years in 30 countries, contains some interesting nuggets:
• The U.S. has the greatest inequality in the OECD after Mexico and Turkey -- and the gap has grown rapidly since 2000. The richest 10 percent of Americans earn an average of $93,000 (highest in the OECD) - whereas the poorest 10 percent of Americans earn an average of $5,800 (about 20 percent lower than the OECD average).
• Since 2000, income inequality has grown fastest in Germany, although Germany's gap remains below the OECD average.
• British inequalities have been falling since 2000, but the rich-poor gap there is still wider than in three-fourths of OECD countries.
• The rise in inequality is generally due to the rich improving their incomes relative both to low- and middle-income people.
• Older people are much less likely to be poor than in the past. Poverty has shifted from pensioners to young adults and families with children.
The report is likely to fuel popular resentment on both sides of the Atlantic about what is widely perceived to be the essential unfairness of this month's rapid, massive bank bailouts engineered by governments in response to the financial crisis. This week Ulrike Mascher, President of Germany's largest social welfare advocacy organization, drove the point home: "People ask themselves why 500 billion euros can be mobilized very quickly to recapitalize banks while an effective poverty-fighting program is rejected due to budgetary concerns."
The study offers fodder to those like Mascher who argue that the bailouts must now be followed by economic stimulus efforts. In the U.S., Democrats are pushing for such a package, and both President Bush and Fed Chairman Bernanke have voiced support. In Europe opinions are mixed, but many are watching the U.S. debate. Anticipation of a U.S. growth package has already pushed the dollar to its highest level against the euro since the summer of 2007.
The OECD report also offers a caution, however, to those arguing that the best way to curb poverty and reduce inequalities is for government simply to redistribute wealth through social policies. Such approaches are proving to be less effective because technological progress and globalization are making it harder for low-skilled workers to find work. Studies by the IMF and many other sources confirm that better access to education and training is more likely to close income disparities.
So who bucked the trend? According to the report, the big winner was France - where income inequalities have fallen as fast as the country's integration into the global economy has risen. C'est incroyable.
Dan Hamilton, director of the Center for Transatlantic Relations at Johns Hopkins SAIS, is the host of Next Europe.
The views expressed are those of the author and do not necessarily represent those of the Johns Hopkins University.