The main challenge related to the future of Wealth is how to maintain a high level of growth at the global level, while simultaneously tackling the issue of higher wealth inequality. Before the Great Recession, wealth inequality was a topic of discussion and concern mainly in developing countries where inequality was historically high. Nevertheless, in the post-recession era, there is an increasing concern on topics related to wealth inequality in Developed countries, most notably in the USA and the Euro Zone. According to an article by The Economist, 56% of people living in rich countries, believe the most pressing problem of the economy is inequality.

Another challenge is the need to reanalyse and review the role of capitalism in wealth creation and wealth distribution. Capitalism has been the engine behind wealth growth in the large majority of countries in the world since the industrial revolution. But, the model is currently under attack and an increasing proportion of the global population – even in OECD countries – believes capitalism has contributed to the global crisis without contributing to the search for a long-term solution. As a result, trust in capitalist societies (The Economist) as problem solvers, is at an historically low level. Even if the large majority of global leaders would agree that there is no better alternative to the creation and distribution of wealth, there is an increasing pressure to move to a new form of capitalism, one with a more human side to it; one that could probably be more connected to the roots of capitalism as proposed by Adam Smith himself, but not in his most celebrated book “The Wealth of Nations” but rather the view that he presented in his first book, “The Theory of Moral Sentiments”.

Finally, another major challenge that needs to be considered is the rapid growth in wealth which is taking place in developing countries, especially China and India. The increasing proportion of citizens from those massively populated countries who now have access to higher levels of wealth, will have important consequences in terms of global supply chains, global prices, environmental issues, as well as the geopolitical implications, that have already began to become evident. It is clear, for example, that the position of geopolitical importance of China before and after the Great Recession has completely shifted in favour of the Asian giant. But as the importance of China is growing in a large number of global value chains, both as a main producer and consumer, there is increasing concern about how a potential downturn in that economy will affect the rest of world, still feeling the pinch from the last recession.

So, some key questions to consider include: How will the countries equate the need to grow at a higher rate with the increasing inequality that is observed in many countries?

Is there a real trade-off between higher growth and less inequality? Are there any ways in which economies can have both? Is that solution sustainable in the long term?

  • Patrick Harris

    What might be the limits of growth? When do we review our limited resources and decide to pursue a world of slow or no growth? What would that world look like?

    • Dave McCormick

      Would it be helpful for those of us who are fortunate to live in “developed” economies to pause and consider whether we have enough stuff to satisfy our needs rather than continuing to consume (and throw away) more and more.
      There was a recent BBC magazine article looking at the reasons why we buy stuff and the thoughts of James Wallman in his idea of “stuffocation”
      http://www.bbc.co.uk/news/magazine-30849473

      • Patrick Harris

        Great Dave thanks. I’m sure that avoiding ‘stuffocation’ is part of the solution. I suppose what is interesting for me is that most companies and governments are still pursuing (Blindly?) a path of growth. What I would really like to see is a concerted effort by a legion of governments and others, exploring what a world of low or no growth look like and what would be its implications? Until we are willing to ask that question, we will be in the dark on the topic. And who’s to say that a low/no growth world is somehow less good? It might be infinitely better!

  • Tim Jones

    Timely report just out from McKinsey on continued rising of global debt (http://www.mckinsey.com/insights/economic_studies/debt_and_not_much_deleveraging) – Seven years after the bursting of a global credit bubble resulted in the worst financial crisis since the Great Depression, debt continues to grow. In fact, rather than reducing indebtedness, or deleveraging, all major economies today have higher levels of borrowing relative to GDP than they did in 2007. Global debt in these years has grown by $57 trillion, or 17 percent of global GDP. That poses new risks to financial stability and may undermine global economic growth.

    And good associated commentary by Robert Peston on the BBC – http://www.bbc.co.uk/news/business-31136707 @Peston

  • Patrick

    An interesting article in The Atlantic, by Alana Semuels, discussing How self-segregation and concentrated affluence became normal in America. To be honest, this post could have been listed under a number of Future Agenda topics, but wealth seems the best place to house it. It is called “Where the White People Live” and here is the link – http://www.theatlantic.com/business/archive/2015/04/where-the-white-people-live/390153/

  • Jon Freeman

    The first sentence contains the questionable assumption that growth is a requirement for our future.
    The second paragraph raises the need to review capitalism itself, but fails to recognise that capitalism as a system has changed over the decades and needs to change again if it is to address current existential conditions and challenges. What exactly is the “capitalism” that we are discussing. How far is today’s version from the Adam Smith model?
    How are we measuring wealth? Does this equate to money? Is it goods owned or lifestyle choices available? Does it take account of happiness or health?
    As Tim Jones illustrates, our belief in growth has led to a failure to distinguish between what we create that is real (i.e. goods and services) and what we create that is relatively unreal (i.e. money and debt). If all the money in the world disappeared overnight, or was replaced by half as much money, or twice as much money, nothing in the “real” world would change. Treating money as if it is real, and can be “created” has got us into great confusion. It is questionable whether the topic of “wealth” itself has a meaningful separate place as a topic.
    I discuss these issues in great depth in my book “Reinventing Capitalism: How we broke money and how we fix it”. It is available free (e-book) on this link

    http://www.spiralworld.net/rcfree.html

    until April 25th and I will make a copy available FOC after that date to anyone who requests it personally through my profile link.

    Jon Freeman