Rich-poor gap wider in rich countries

Jim Lobe

The “American Dream” of upward social mobility appears to have emigrated from its birthplace in the United States to northern Europe, according to a major new report by the Organisation for Economic Cooperation and Development (OECD) on the growth of economic equality over the past 20 years. Of its 30 member states, most of which are also members of the European Union, the US has the largest gap between its wealthiest and poorest households after Mexico and Turkey, according to the report, “Growing Unequal?, which was released at OECD headquarters in Paris Tuesday.

That gap has grown particularly large in the US since 2000 — that is, under the administration

of President George W. Bush — according to the report, which found that the gap between the US middle class and the wealthiest 10 per cent has also increased. The growth in the divide has major implications for social mobility, according to OECD Secretary-General Angel Gurria, who said the report’s data had demonstrated that the notion that inequality encourages the poor to do better is false.

“Social mobility is low in countries with high inequality like Italy, the UK, and the US. And it is much higher in the Nordic countries, where income is distributed more evenly,” he told reporters. “This means that, in most high-inequality countries, dishwashers’ sons are more likely to be dishwashers and millionaires’ kids can assume that they too will be rich,” he said, adding that governments could do much to promote mobility, particularly through progressive tax policies, greater social spending, job creation, and increasing investment in education.

The new report, which found that inequality in most OECD countries — not just the US — has grown markedly over the last two decades, comes at a critical moment given the ongoing global financial crisis and its impact on the presidential election here. The crisis has sparked unprecedented worldwide criticism of the “free-market” economic model that the US and Washington-based international agencies like the World Bank and the IMF have vigorously promoted since the administration of President Ronald Reagan.

Among OECD countries, social mobility as measured by the relative earnings of fathers and sons was highest in the Nordic countries where the rich-poor gap was narrow, and lowest in Italy, Britain and the US — all countries where the gap was significantly wider.

The report noted that while poverty among the elderly has fallen in OECD countries, poverty among young adults and families with children, particularly single-parent families, has increased.On average, one child out of every eight living in an OECD country in 2005 was living in poverty. For the US, the ratio is closer to one in five.

In a companion article published by the OECD ‘Observer’, Oxford University economist Anthony

Atkinson argued that government will have to take a stronger role in reducing the wealth gap and creating jobs, particularly if the world economy goes into recession. “If the government can take on the role of lender of last resort for troubled financial institutions, then we should think about the government taking on the role of employer of last resort,” he wrote. “Put bluntly, governments have to step up to the plate, as US President Franklin Roosevelt did in the Great Depression.”