Trickle down -- forget it

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Trickle down -- forget it

Trickle down -- forget it
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Another nail has been driven into the coffin of the theory that if the rich became richer wealth would trickle down to the poor.

Research by the Organisation for Economic Cooperation and Development think tank shows the divide between the rich and the poor is growing in most of the world’s major economies and is at its highest level in decades.

It blamed spending cuts on social programmes and lower taxes on the wealthy.

OECD Secretary General Angel Gurria said: “Income inequality in OECD countries is at its highest level in the past half-century. The average income of the richest 10 percent of the population is nine times that of the poorest ten percent across the OECD. Twenty-five years ago the number was seven times.”

Mexico — with the greatest income gap — is actually improving, but things are getting worst in traditionally egalitarian countries including the United States, Israel and Britain.

In the case of the United States, the OECD found that the earnings of the top one percent richest people had more than doubled from eight percent of the total in 1979 to 17 percent in 2007. Meanwhile, the lowest earners’ share fell from seven percent to five percent.

“Without a comprehensive strategy for inclusive growth, inequality will likely continue to rise,” Angel Gurria said .

Only France, Turkey and Greece saw their levels of income inequality decline.

The report also found that some of the highest disparity between incomes is in rising powers such as Russia, Brazil, India and China.

It calls for a rebalancing of society and said countries should consider raising taxes on the rich.

While higher marginal tax rates might be a option, the OECD also said that other measures such as improving tax compliance and scrapping tax breaks might more effective.