Editor's opinion: ‘Finding a workable solution to global wealth inequality is a long-term challenge’

It is seven years since the failure of the US sub-prime loans market triggered the longest and deepest financial crisis since the Great Depression. Although recovery in the UK continues to strengthen and the International Monetary Fund is uncharacteristically bullish over its economic prospects, some members of the eurozone have little to cheer.

France, Germany and Italy generate about two-thirds of the eurozone’s GDP, but all face a troubled financial outlook. Italy, which came close to meltdown two years ago, was always going to have a difficult journey back from the abyss – not least because its fractious political landscape generates the type of indecision that can prove terminal. Meanwhile, France is getting sucked deeper into its economic quagmire. When fiscal dynamism was required to restore growth, what the country got instead was a budgetary agenda from president François Hollande so insipid that its only success was to attract almost universal opprobrium. 

The fate of Italy and France is perhaps not too surprising, but economists are shocked and alarmed by what is happening in Germany. For so long the engine of the continent, Germany is experiencing what appears to be a slow motion car crash. GDP growth forecasts for this year and 2015 were last month reduced owing to falling domestic demand and exports. Although the country’s decline is not on the scale of the troubles experienced by other eurozone countries such as Spain, it is nonetheless dramatic because its economy usually reflects the quality of the products it manufactures: strong and reliable.

Whether the eurozone is heading into another recession is difficult to forecast at this stage – particularly when considering the recovery, for example, of Ireland, which was granted a bailout but is now flourishing. Markets are jittery for several reasons: the Middle East crisis, Ebola, tensions with Russia – particularly the effect on gas supplies – and a potential slowdown of China’s economy. Nonetheless, unease is growing among some single currency’s members over its future relevance. What is clear is that economic turbulence continues to have ramifications for the eurozone and the businesses that operate within it.

The current situation will do nothing to alleviate fears that the European economy is lagging behind other regions of the world, Asia-Pacific in particular. Not only is this area experiencing prosperity, but it is also eroding potential market share for European business. Emerging markets should also be seen as emerging – or indeed emergent – competition. I have spent much of the past few months meeting risk managers in Asia-Pacific and although many businesses are based on western models, they have the distinct advantage of being leaner and more flexible and therefore better able to adapt quickly to change.

Paradoxically, perhaps, although some European countries struggle with their national economies, the financial health of the continent’s citizens has never been better. In the same week that saw Europe’s economic troubles laid bare once more, Crédit Suisse released its fifth annual Global Wealth Report. Seven European countries – Norway, Sweden, France, Belgium, Denmark, the UK and Switzerland featured among the top 10 with the highest average wealth per adult. The Swiss, each worth an average $581,000 (€455,000) (including property) came top, Australia was second while the US and Singapore made up the rest of the list.

The report indicated that more dollar millionaires live in the US than anywhere else in the world. France is the second most popular home for the very wealthy and is expected to retain that position despite Hollande’s taxation strategy, which prompted some high-profile residents to move elsewhere. Among the super rich – ultra high net worth individuals worth more than $50m – the US again is the dominant domicile; China second.

The Crédit Suisse report showed that people around the world are, broadly speaking, becoming better off financially, which has to be a distinct positive for businesses with goods and services to sell. However, scratch beneath the surface and concerns arise. The rich are getting much richer: 1% of the global population owns more than 48% of its wealth, and this create a huge potential problem.

Earlier this year, statistics from the charity Oxfam revealed that 85 people control as much wealth as the poorest 3.5 billion people combined. The World Economic Forum cited severe income disparity among the biggest global risks in its 2014 report. The latest figures from Crédit Suisse reinforce the scale of the imbalance.

The current trouble in the eurozone is worrying and will take time to resolve, but a positive outcome is possible. Finding a solution to global wealth inequality is a more long-term challenge. Tackling the problem needs to start now as failure to do so could be damaging not only for individuals, but also for businesses and nations.