Kate Rogers: Inclusive growth is vital in war against inequality

Our columnist asks how charities can, as asset owners and investors, promote equality and social cohesion

Kate Rogers
Kate Rogers

At the end of last year the Joseph Rowntree Foundation published its annual poverty report, bringing together the most recent data to present a picture of poverty in the UK. It says 21 per cent of the UK's population live in poverty, with most of those having no savings. These figures are little improved since the 2008 financial crisis, despite economic statistics showing the broader recovery of the UK economy.

Important research from the Equality Trust continues to show the scale of inequality in the UK, with the richest 10 per cent of households owning almost half of the country's wealth and the average household in the south east owning almost twice as much wealth as the average household in Scotland.

It has been suggested that this has been exacerbated by the extraordinary monetary policy employed by central banks to keep the show on the road after the financial crisis. Quantitative easing has a variable effect on different income distributions and can create asset bubbles. Those with assets have seen a significant boost to their values, but many of those without have been left behind as real incomes have stagnated. Inequality is an important metric for society, with much research showing that large disparities in income and wealth hamper wellbeing for all.

It is therefore good news that global measures of inequality have fallen over recent decades, as poorer, emerging countries grew faster than developed nations. However, the UK, the US and Japan have seen increased inequality within their borders, undermining social cohesion. Some have linked this to the rise of populist politics, with recent London School of Economics analysis showing correlations between regions with higher income inequality and the likelihood of a leave vote in the EU referendum.

Keith Wade, chief economist at the asset management firm Schroders, asks if globalisation is in crisis. Free trade and movement have been key political battlegrounds in developed nations, and the election of Trump and the Brexit vote could be seen as evidence of the depth of feeling. The flexible labour market has created jobs, but there is a scarcity of good ones. Technology has improved productivity, but gains are not being recycled into the economy. Eighty per cent of job losses in the US have been due to technology, not trade. Gains from growth have not been evenly distributed and real incomes have been squeezed. Combine all this with a weak picture for growth and it is easy to see why people wish to secure their slice of the cake.

For many charities, looking after the most vulnerable in society will be second nature. But as asset owners and investors, how can we seek to promote equality and social cohesion? We can bear witness to the trends and use our economists' and analysts' insights to help frame policy and corporate decision-making. We can continue to act as responsible stewards of assets, encouraging corporations to pay the living wage, to consider the implications of zero-hour contracts and to examine their remuneration structures. Top of the resolution list should be the need to spread the benefits of globalisation more widely, focusing on what the Organisation for Economic Cooperation and Development calls inclusive growth.

Kate Rogers is head of policy at Cazenove Charities

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