Abbott's Society Denial at Davros

Tony Abbott’s World Economic Forum speech can be juxtaposed with President Obama’s State of Union address delivered several days later on January 28.

Obama’s key message is that there is a divide in the United States that has been growing over the past 30 years, exacerbated by the global financial crisis, and unresolved through recent economic growth and record levels of business profitability. The divide is embedded in the labour market where there have been massive losses of middle income jobs and reduced opportunities for upward social mobility.

The same story is painted by the OECD across member countries in its 2013 report on inequality and poverty. The International Labour Organisation’s Global Employment Trends 2013 also reflects consternation on the slow recovery of middle level jobs following the financial crisis which has translated into growing inequality in many countries.

The role of the super rich

Robert Reich’s new documentary 'Inequality for All' explores why inequality has been so crippling in the USA. While the fruits of growth are disproportionately absorbed by the wealthy through profits, there is depressed demand for goods and services by the rest of society. The small minority of the super rich do not drive consumption in the way that a thriving middle class can and this effect dampens economic activity. It also stalls upward social mobility.

Oxfam goes further in its new report, 'Working for the Few', released for the World Economic Forum. It examines the link between “capture” of the very wealthy of the political process where there is high inequality which subsequently corrupts the operation of markets and ultimately deadens and distorts growth.

Tony Abbott might argue that the scenarios painted in these reports do not apply in Australia. But the OECD report on inequality and poverty shows that Australia has a robust level of income inequality, not as high as in the USA or Mexico, but certainly not at the low end of a number of European countries.

From Veronica Sheen - 'The Conversation'