If the rich get richer, then it’s in no way a given that the poor also get richer. Or at least a little better off.
That’s the main conclusion of a new report from the International Monetary Fund (IMF) that’s been reported in The Guardian. In rather dry economic terms, the IMF has rejected the concept of a ‘trickle-down’ of wealth. Or more simply, there’s a widening gap between the ‘haves’ and the ‘have nots’. The IMF’s report has echoed the frequent warnings by its managing director, Christine Lagarde, who has for months warned of rising inequality in national economies and advocated efforts to raise the incomes of the poor in society.
The conclusions of this report should not, sadly, come as much if any of a surprise. But political commentators and political strategists will note that the conclusions reflect one of the problems that the British economy – and Chancellor of the Exchequer George Osborne – will have to address in the coming months and years.
This problem has been that economic growth has not translated to rising wages for many within the population. This has been compounded by a rising cost of living, while regular news reports have suggested that higher wage earners have bucked the trend and become better rather than worse off. At the same time, new research has also challenged the existence of social mobility in the UK, indicating that higher paying employers are likely to favour applicants with private or selective educations.
Britain is something of a case in point for the IMF’s report, and it is a problem the Chancellor will have to tackle – particularly as he also endeavours to carve out further billions in savings from the public sector.
There may have been a public acceptance of stagnant wages, and even government spending cuts in the aftermath of the credit crunch. It was at least more easily explained. But the British public is unlikely to be sympathetic if more public services are stretched or even cut further, while wages struggle to keep up with rising living costs.
This would create a scenario for the opposition parties to capitalise on. The Conservative government will have to guard against such a possibility – showing not only why its cuts to public spending are important, but also that British society is meritocratic and egalitarian. Failure to do so will reduce the Conservatives’ prospects in 2020 and will reduce the possibility of Mr Osborne achieving what many have suggested is his goal of becoming Prime Minister.