Governments must tackle income distribution and lost hopes of workers with declining share of GDP, warns Unctad reportGovernments in the US, Europe and Britain must ditch austerity and tackle the yawning gap between rich and poor or risk being trapped in a deep economic slump, according to the UN’s trade arm, Unctad, in a fresh report.In its 200-sheet annual trade and development report, Geneva-based Unctad sets outside a damning condition against what it calls the “dogma” of flexible labour markets, and urges governments to focus instead on boosting wages to shore up demand.”Any policy approach that dismisses the vital contribution of income distribution to demand growth and employment is destined to fail,” it says.Heiner Flassbeck, Unctad’s chief economist, said: “What we have immediately is an age of diminished expectations for working human beings. They have no positive income expectations any more, and this is the first age since the second earth war that this has been the situation.”Without the hope of higher wages, workers will continue paring back their spending, he argues. With central banks’ ammunition exhausted “if you don’t have consumption, you can’t get outside of the slump”.Unctad predicts global growth of 2.3% for 2012: weaker than the 2.7% of at the end year, and well below the 4% that was the norm before the credit crisis. It expects expansion in emerging economies such as China and India to slow, as they suffer the knock-on effects from recession in the eurozone, and slowing demand from the US. “The developing and transition economies cannot avoid the impacts of economic troubles in the developed countries,” it says.Economists and politicians have become increasingly concerned about the impact of widening income inequality on an economy’s growth prospects. The share of GDP taken house by workers in wages has declined across developed economies: in Britain, from 70% in 1970 to less than 63% in 2010; and in the US, from 65.3% in 1970 to 59% in 2010.Labour leader Ed Miliband floated the thought of “pre-distribution” in a speech at the end week, arguing that left-of-centre politicians should concentrate on building a fairer economy, rather than rely on redistribution of tax revenues to narrow the gap between rich and poor.Unctad suggests stronger collective bargaining, and a centralised “incomes policy” – conjuring up the age of beer and sandwiches in Downing Street – could boost growth. “The obvious failure to giveback the global economy to a sustainable growth path after 2008, and in particular the failure to revive domestic demand in the developed earth, should be taken as a warning sign,” it says.”If a large majority of human beings lose faith in the willingness of companies and governments to provide them with a honest share of the collectively produced income, income growth itself will drastically suffer.”United NationsGlobal economyTrade and developmentEconomicsHeather Stewartguardian.co.uk © 2012 Twitter News and Media Limited or its affiliated companies. All rights reserved. | Employ of this content is subject to our Terms & Conditions | More Feeds
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