In­equal­ity

Rotman Management Magazine - - FROM THE EDITOR - Karen Chris­tensen Karen Chris­tensen, Ed­i­tor-in-chief ed­i­tor@rot­man.utoronto.ca Twit­ter: @Rot­man­mgmt­mag

the stan­dard of liv­ing has never been high-GLOB­ALLY SPEAK­ING, er. Ac­cord­ing to the United Na­tions, 200 mil­lion fewer peo­ple are now liv­ing in ex­treme poverty than 25 years ago, and life ex­pectancy in­creased by five years be­tween 2000 and 2015 — the fastest in­crease since the 1960s. In other words, in many im­por­tant ways, the world it­self is more equal than it has ever been.

And yet, in ad­vanced economies, the gap be­tween the rich and the poor is at its high­est level in decades — lead­ing the World Eco­nomic Fo­rum to iden­tify in­come in­equal­ity as “the most chal­leng­ing prob­lem the world faces to­day.”

The dis­course on in­equal­ity of­ten makes a dis­tinc­tion be­tween in­equal­ity of out­come (as mea­sured by in­come or wealth) and in­equal­ity of op­por­tu­nity (at­trib­uted to cir­cum­stances be­yond an in­di­vid­ual’s con­trol, such as gen­der, sex­ual ori­en­ta­tion or fam­ily back­ground). As we have seen re­cently, high lev­els of both types of in­equal­ity come with sig­nif­i­cant so­cial costs.

It is not sur­pris­ing, then, that the ex­tent of in­equal­ity, its driv­ers — and what to do about it — are hotly-de­bated is­sues. In this is­sue of Rot­man Man­age­ment, we look at some of the key is­sues re­lated to both in­equal­ity of op­por­tu­nity and in­equal­ity of out­come, and show what to­day’s lead­ers can do to ad­dress both.

In­equal­ity is a re­flec­tion of per­sis­tent dis­ad­van­tage for par­tic­u­lar seg­ments of so­ci­ety. On page 6, Pro­fes­sor Sarah Ka­plan, found­ing di­rec­tor of the Rot­man School’s In­sti­tute for Gen­der and the Econ­omy, ar­gues that in­no­va­tion is the only way to tackle this is­sue in Be­cause it’s 2017: Em­brac­ing Gen­der Equal­ity as an In­no­va­tion Chal­lenge.

Bos­ton Con­sult­ing Group Chair­man Hans-paul Bürkner re­cently noted that in to­day’s global econ­omy, many peo­ple feel trapped, and “they want their fu­tures back.” To fa­cil­i­tate this, he says, the world’s lead­ers need to fo­cus on one goal: De­liv­er­ing in­clu­sive growth. On page 20, the World Eco­nomic Fo­rum’s Richard Sa­mans et al. discuss Ris­ing to the Chal­lenge of In­clu­sive Growth.

In Canada, the top 1% earns more than 10 times as much as the av­er­age Canadian and in­equal­ity is most pro­nounced in our cities: Toronto, Van­cou­ver and Mon­treal have the coun­try’s high­est lev­els of in­come in­equal­ity. On page 28, Rot­man Pro­fes­sor Richard Florida looks at the key causes of what he calls The New Ur­ban Cri­sis.

Else­where in this is­sue, we fea­ture for­mer TD Bank CEO Ed Clark in our Thought Leader In­ter­view on page 14, and in our Idea Ex­change, Har­vard Be­havioural Econ­o­mist Iris Bohnet de­scribes how to ‘de­sign’ di­ver­sity on page 90; in­equal­ity ex­pert Branko Mi­lanovic ex­plains who has gained the most from glob­al­iza­tion on page 98; Bank of Amer­ica’s Jackie Van­der­brug talks about in­vest­ing with a ‘gen­der lens’ on page 112; and Rot­man fac­ulty Daniel Tre­fler, Stéphane Côté, Dae­hyun Kim and Will Mitchell present their lat­est re­search find­ings.

In Why Na­tions Fail, Daron Ace­moglu and James Robin­son write: “The real rea­son to worry about eco­nomic in­equal­ity is not the un­fair­ness of it all. The prob­lem is that eco­nomic in­equal­ity of­ten comes bun­dled with in­equal­ity of op­por­tu­nity and po­lit­i­cal in­equal­ity.”

As they note — and few would ar­gue — pros­per­ity de­pends upon in­no­va­tion. The truth is, no one knows where the next Google or Ama­zon will come from, and we waste un­told in­no­va­tive po­ten­tial if we do not pro­vide a level play­ing field for all.

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