Wealth Gap Fears Top Davos Debates

27th January 2012, 11:25

Lord Turner, the man who famously pointed out that much of what bankers did was "socially useless", has gone one step further.

In an interview from the World Economic Forum (WEF), he told Sky News that excessive bonuses are "not good for society", adding that the inequality they fuelled was seriously undermining the "legitimacy of capitalism".

Given Lord Turner's position as the chairman of the Financial Services Authority and his prominence in British policymaking circles, the warning is likely to be taken extremely seriously.

Inequality is proving to be the most significant of all discussion points here in Davos - a sign that the world's richest people and most powerful politicians are aware of the genuine threats it could pose to them.

 

In most countries in the developed world, the gap between rich and poor has yawned to the largest level since the late 1920s, before the world succumbed to the Great Depression.

But whereas the difficulties of the 1930s sparked an assault on wealth that narrowed that gap, this time the financial crisis has actually increased the divide.

Many of the wealthy have benefited from bank bailouts and policies such as quantitative easing, while middle and lower income families have faced an unprecedented squeeze on their disposable incomes.

 

Lord Turner raised the prospect that the Government may consider setting up an independent board to tackle excessive pay.

It came ahead of a speacial debate on Sky News about whether bankers really are worth the huge bonuses.

But Lord Turner's implication, however, was that despite the Business Secretary Vince Cable's recent proposals on executive pay, more remains to be done.

He also pointed out that although the European Central Bank's emergency cash injection into the euro system would give the policymakers "breathing space", they still needed to do more to confront the crisis.

He added that he was actively encouraging banks to consider their plans in the event of a country leaving the euro.

The comments echo many of the major voices here in Davos, where the fate of the euro and the problems of income inequality remain the most prominent issues.

(c) Sky News 2012