Why this story matters:
For the most part, the middle classes in Europe and the US have not benefited from income growth since the 1980s, unlike their counterparts in China and India. The biggest beneficiaries of the phenomenon are of course the richest 5% of the population. Unsurprisingly, middle-income citizens are increasingly worried that such wealth might be converted into political influence.
In a recent interview with the Der Standard, economist Branko Milanović admits that he believes in this threat:
"The growing inequality and the fact that large parts of the population, especially in the US and the UK, no longer benefit from growth, lead to a strengthening of pluto-populism."
However, he also explains the situation is not necessarily alarming in continental Europe, especially in Austria and Germany and in the Anglo-Saxon world.
Milanović's interview offers a clear and balanced explanation of how social factors can mitigate economic inequality, and this should be of interest to all of us -- or at least, to 95% of us.
Details from the story:
- Shrinking of the middle class, which is attributed to the unequal distribution of wealth, technological revolution and globalization, affect all countries.
- However, according to statistics, the average income in the Austrian middle class has increased by 9.3% since 2008.
- In general, the fortunes are the problem. Since the late 1980s, in all industrialized countries more ad more people have begun to invest their money in the financial markets and some were able to build real estate assets. Because wealth is distributed more unequally than earned income, only a small group benefited from this development, claims economist Wilfried Altzinger of the Vienna University of Economics.
- This is why, according to economist Branko Milanović, it is crucial to find a way to tax high incomes and large fortunes more effectvely.
- A worrying development is that, recently, the inheritance tax has been abolished in Austria. This trend can also be observed in other European countries.
- According to the Collins Dictionary, pluto-populism is “a political movement in which a wealthy individual offers ideas and policies that appeal to the common person.”
- Der Standard has set up an interactive calculator that allows to estimate whether one belongs to the middle class.