As in Europe or Japan, the financial crisis and subsequent monetary policy might be a major cause for this development. However, another factor could also be the digital revolution which, at least for the main protagonists, is increasingly turning out to be a “wealth catalyst.” In any case, it is important to recognize that America’s situation is extraordinary. It does not represent the state of Western capitalism. It is the exception, not the rule.

All of this has important implications for how to tackle inequality. Simply put, if the causes and impacts of inequality differ across countries, so should the policy prescriptions.

For some countries, such as in southern Europe, tackling unemployment is critical to enable middle- and lower-income households to save and consume. Other countries should focus on improving the conditions for long-term savings, such as through occupational pension schemes. Still others would do well to reduce the tax burden, in particular for low- and middle-wage earners.

There is, however, one policy prescription that would benefit many of the countries with the highest levels of inequality. Central banks must bring down the curtain on zero and, especially, negative interest rates. Doing so would certainly be a good start to combating rising wealth inequality.

Michael Heise is chief economist of Allianz SE and the author of Emerging From the Euro Debt Crisis: Making the Single Currency Work.

©Project Syndicate
 

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