The unraveling of the social contract

Across much of the developed world, income inequality is increasing, according to a recent OECD research report. It is part of a trend that will continue unless governments move aggressively to arrest it. Don’t expect any concerted action anytime soon, however. Governments are fixated on their fiscal crises and the run-up to the American elections in 2012 effectively places the issue on the back burner.

Employment is the most promising way of tackling inequality, the OECD notes. But that’s another problem that waits in line behind fiscal challenges, apart from responses that are inadequate to the task.

What’s at stake? “The social contract is starting to unravel in many countries,” OECD Secretary General Angel Gurria said in a statement to the Washington Post. “This study dispels the assumptions that the benefits of economic growth will automatically trickle down to the disadvantaged and that the greater inequality fosters greater social mobility. Without a comprehensive strategy for inclusive growth, inequality will continue to rise.” The meaning of “unraveling” differs from country to country and often regionally as well. Even countries whose economies have fared well in aggregate are experiencing unrest. But in many nations what has suffered already is trust in government and public confidence that income inequality or unemployment issues are priority issues.

In some countries, the boiling point has already been reached.

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Filed under economic development, Income Inequality, Social contract

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