It seemed to come out of nowhere, in the middle of Wednesday’s big plenary discussion on the “New Economic Reality” at the World Economic Forum in Davos, Switzerland.
Amid talk of global risks and the rebalancing of the world economy toward India, China, and Brazil and away from countries that border the Atlantic Ocean, suddenly a reference to the other hot ticket global gathering going on at a ski resort: Sundance. The unexpected film festival plug came from the mouth of the Chief Executive Officer of one of the world’s most influential corporations, Sir Martin Sorrell of WPP Group, the advertising and marketing conglomerate.
Sorrell said he had just seen at Sundance a documentary entitled “The Flaw,” which looks at the global financial crisis starting with Alan Greenspan’s 2008 testimony to Congress when the former chairman of the Federal Reserve admits he was “shocked” when he “found a flaw in the model of how the world works.” The flaw being that financial markets tend to be essentially stable and self-correcting.
Watch the trailer for “The Flaw”:
Sorrell mentioned the film because it contains what he sees as a very interesting graph that tracks economic inequality in the U.S. throughout the years (see the latest government figures in our chart to the right,and read more about it in our recent report: What is Rich?).
The graph in the movie, apparently, shows the gap between rich and poor peaking in 1929 before that stock market crash, and then it peaks again going into the most recent collapse. The doc has yet to be released in the U.S., but the film (directed by David Sington, who did the acclaimed Apollo astronauts movie “In the Shadow of the Moon,”) is on the way. “The Flaw,” according to the CEO who saw it, explores inequality and makes an argument that wealthy folk tend to invest in financial assets and create financial bubbles. If wealth is less concentrated, there may be an investment in more mass consumption, which can build more fundamentally prosperous economies.
“Concentration of wealth, particularly in the United States, is a big issue,” Sorrell said.
Another panelist, Zhu Min of the International Monetary Fund, called inequality the “most serious challenge to the whole world,” meaning for both developed and developing economies. He urged the Davos crowd to ask where wealth is created and suggested that policies that overly favor the stock market and the financial sector be reexamined.
It will be interesting to see if and how the Davos crowd picks up on this issue of income disparities. To what extent, for example, the issue might figure in French President Nicolas Sarkozy’s keynote later in the Davos conference. This year France leads the G20 club of richer countries and, in theory, Sarkozy has a special role in guiding global economic policy. NYU economist Nouriel Roubini, also on the Wednesday plenary panel, did raise questions about whether the G20 or anyone is really guiding global policy. With Europe and the U.S. preoccupied with their own economic challenges and China, India and Brazil focused on domestic growth, Roubini referred to our current predicament as “living in a G-Zero world,” with no perhaps no one’s hand on the global economic tiller.
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