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Davos dilemma: Can the 1% cure income inequality?

The World Economic Forum in Davos officially kicked off today. Political leaders, Fortune 500 CEOs and the brightest minds in dozens of fields are gathered in the Swiss Alps to discuss the challenges in the coming years.

One of the most ironic challenges, perhaps, is the growth in income inequality. The WEF itself noted this increasingly drastic division back in the fall of 2013, but the problem has only gotten worse. This year, the NGO OxFam, released a report to coincide with the conference highlighting how much worse. The richest 85 people control the same amount of wealth as half of the world. Last year, it took 388 people to do that.

But is it hypocritical for the world leaders gathered at Davos, many who are part of the 1%, to discuss what to do about this problem? “Hypocrisy. Irony. Take your pick. But also, maybe this is the group that should be having the conversation,” said Lizzie O’Leary, anchor of Marketplace Weekend in a conversation with Yahoo Finance.

“One of the conversations that you have about this is sort of, ‘Who is the right body to do that [address inequality]?' We don’t have a world government. We have a lot of competing and conflicting people in power,” she pointed out. So perhaps a forum where all of these people are gathered is precisely the time to begin the discussion.

In 2014, the conversation about income inequality ramped up, thanks in large part to the book “Capital in the Twenty-First Century” by economist Thomas Piketty. The book was released in English in the spring (it had previously been released in French) and gathered wide praise from politicians like Democratic Senator Elizabeth Warren. Piketty argues that the income equality experienced in the mid-20th century was largely a fluke, and that we’re likely to see a continued increase in inequality unless some drastic measures, largely tax-based, are implemented.

But according to OxFam, an entire overhaul of taxation may not be necessary. The organization provided a handful of suggestions to the Davos attendees, including increased transparency and universal education.

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Education is one of the suggestions that gets discussed the most. “If you could have all these folks in Davos have a conversation about people getting educated at the very beginning of their lives, then maybe that moves the ball,” said O’Leary.

The other question might look at what the private sector can do. After all, many of the Davos attendees are CEOs. (Including, in the interest of disclosure, Yahoo CEO Marissa Mayer.) “If you run a public company, are you less focused on shareholder wealth?  Are you less focused on pumping up your stock price?  Do you start to give more of that to your employees?  Do you set up some form of compensation plan that does that?” asked O’Leary.

Finding a capitalist solution to this problem could help capitalism overall in the end. A 2011 study from the IMF showed that increasing inequality can harm growth, “by amplifying the risk of crisis” and other findings. Another study from the OECD came to the same conclusion: “Econometric analysis suggests that income inequality has a negative and statistically significant impact on subsequent growth. In particular, what matters most is the gap between low-income households and the rest of the population.”

Despite OxFam's appeal to the Davos crowd to fix inequality, it doesn’t look to be a primary focus on the forum’s agenda. However, there will be a briefing on inequality at Davos Thursday. While journalists like O’Leary may remain skeptical that anything concrete will come out of the panel, “You have to start somewhere,” she said.

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