Rolling coverage of the second day of the World Economic Forum in Davos
- Lagarde, Summers, Dalio debate middle-class crisis
- Lagarde: Wealth redistribution needed
- Summers: Populism hurts the poor most
Another takeaway from that session:
Italian finance minister Pier Carlo Padoan concludes the session on the middle class crisis with a three-point plan.
1) We need to take populists seriously, he argues, and not just paint them as the bad guys. Often they are the good guys, with genuine concerns about the future.
To fight populism, Padoan says “we need to provide a vision, which in Europe lacking”-Trump/ Brexit show a vision, even if w disagree #wef17
Italy’s finance minister Padoan says those voting for populists aren’t ‘bad guys’ but ‘good guys’ with real concerns for their future #wef17
Lagarde insists there is still time for “courageous” politicians to reconnect with the people.
They must create policies that address concerns such, as what future their children face and what safety net will be in place.
Lagarde argues that globalisation needs to take “a new turn”, and we need more analytical work how jobs are being lost to new technologies.
To turn our back to globalisation, to helping development, is entirely the wrong approach.
More from Larry Summers:
Hedge fund chief Ray Dalio warns that the age of globalisation may be over, as provincialism and nationalism rise.
The people who will be the victims of populist policies are the lower income and middle class people in whose name the policy is offered.
Italy’s finance minister points out that many Europeans blame the leaders in Brussels, or the central bankers in Frankfurt, for the situation today.
The problem in Europe is Europe. Our problems are generated in Brussels or Frankfurt, says Italy’s finance minister Padoan #wef17
Larry Summers, though, disputes whether concerns over income inequality really explain the crisis in the middle classes.
The US has just elected the world’s biggest example of conspicuous consumption, he says
That is a bizarre manifestation of a concern over inequality.
Lagarde reveals that she felt a backlash from economists, including in the IMF, after she warned about rising inequality in 2013.
Policymakers need to get the signal now, and really think about how to address the public discontent.
It needs to be granular, it needs to be regional, it needs to be focused on what will people get out of it.
It probably includes more redistibution than we have in place at the moment.
Christine Lagarde says she “got strong backlash” from economists and even the IMF for looking at redistribution of wealth
Bridgewater’s Ray Dalio says populism is now the biggest issue in the global economy, overtaking central banks.
Harvard professor Larry Summers says that populism is on the rise because many people in the middle classes of advanced economies feel their governments aren’t fighting for them.
They feel the governments are fighting for people in developing countries, for people who have recently come into their countries, for minority groups who used to suffer discrimination, but not the people “in the centre of the country”.
They feel they are not being heard, and they’ve expressed that in the Brexit vote, the Italian referendum and in the US election.
Italian finance minister Pier Carlo Padoan agrees with Christine Lagarde that the middle classes are in crisis.
It is hard to find a country where there isn’t dissatisfaction with the situation today, says Padoan.
The session gets under way – here’s a live feed:
With lower growth, more inequality and much more transparency, you have the good ingredients for a crisis of the middle classes in the advanced economies.
Speaking of things that make people angry…
I’m told David Cameron & George Osborne are both being paid tens of thousands of pounds to speak at private dinners at Davos this year #wef
Mr Cameron is speaking at a PwC event. Mr Osborne is speaking at an HSBC dinner for 20 of the bank’s most lucrative clients #WEF
Here’s the pitch for the first big session of the morning:
Good morning from Davos, where the second day of the World Economic Forum is getting underway.
Today, some of the world’s richest and most powerful people will be discussing why the rest of the population are increasingly angry and disillusioned with the state of the world.