Rising income disparity hits global economic growth - IMF chief
WASHINGTON: International Monetary Fund chief Christine Lagarde has
decried rising income disparity, noting its harmful effect on global
economic growth. Lagarde, in a speech on poverty reduction in
Washington, said the top 0.5 percent of the global population holds over
35 percent of the wealth.
“This has not gone unnoticed: the Arab Spring and 'Occupy movement',
though very different, were motivated in part by discontent with these
trends,” the IMF Managing Director said, according to the prepared
text.In the United States, where the Occupy Wall Street Movement began
in 2011, the richest 1.0 percent of the population holds 18 percent of
all pre-tax income, compared with a share of 8.0 percent 25 years ago,
“Rising income inequality is a growing concern for policymakers
around the world,” she said, adding that the IMF had begun to look more
closely at the issue and its effect on the global economy.Lagarde,
speaking at the annual meeting of the Bretton Woods Committee, said that
economic stability was crucial for poverty reduction.
“For this reason, the first best contribution that the IMF can make
to reducing poverty is to help avoid crises.” She noted the global
lender had sharply increased resources available to low-income countries
and continued to charge zero interest on all concessional lending.But,
Lagarde said, growth in the global economy needed to be paired with
income equity to promote stability, calling for 'expanding the pie' and
“making sure it is distributed more fairly.”
“Equality is good for growth, but is growth good for equality? It may
be a necessary condition for reducing poverty, but it has not always
In advanced economies, Lagarde said that the impact of fiscal policy
in reducing inequality has been declining since 2000.“Why? Because many
countries have adopted reforms that have reduced progressivity in the
tax and spending mix, that is, reduced the generosity of social benefits
and lowered income tax rates, particularly at top brackets,” she said.
The IMF in recent months has criticised austerity programs and spending
reductions undertaken by governments seeking to close fiscal deficits,
saying they should be balanced with growth measures.Policies that can
help spread the wealth more fairly include reducing tax exemptions,
fighting tax evasion and increasing social spending to reduce poverty,
An OECD report released Tuesday said the global economic crisis had
significantly widened the income gap in the world's leading economies.
The Organisation for Economic Cooperation and Development said that
income inequality had increased by more over 2008-2010 than during the
previous 12 years for the 34-nation group.