Wal Mart has surprising result after raising wages.

The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover didn’t know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night, anyhow. But it will at least have passed through the poor fellows hands – Will Rogers

At a panel moderated by the Harvard Business Review at the Washington National Cathedral, Christine Lagarde tackles inequality.

Moderator Idi Ignatius, editor of the Harvard Business Review, posed this question: “Is Christian faith incompatible with vast wealth?”

Lagarde, who grew up Catholic in France, parried the question with aplomb.
“I think it’s how you use it, what you do with it, and what purpose you give to your life as a result which really matters.”

Those words echoed her June speech before a Catholic conference in Belgium in which she asserted, “It is not immoral to enjoy one’s financial success.”
Summers, who’s Jewish, drew laughs when he observed, “I hope this is the last time I’m asked to opine on Christian morality,” then agreed with Lagarde:

The discussion of public morality, sustainable economic growth and government policies that encourage redistribution of wealth included themes touched on by Pope Francis during his apostolic visit to the United States in September.

The pope, in fact, was the only religious leader quoted during the evening. Ignatius referred to the pope’s speech in Bolivia July 8: “Let us say ‘no’ to an economy of exclusion and inequality, where money rules, rather than service. That economy kills. That economy excludes. That economy destroys Mother Earth.”

The Rev. Gary Hall, dean of the cathedral, reached back farther in his introduction to the program, quoting from the pope’s apostolic exhortation of 2013, in which he called capitalism “a new tyranny” and called on political leaders to address income inequality.

Lagarde avoided specific observations on the morality of income inequality. “As far as the IMF is concerned,” she said, “we’re not taking a political stand; we’re not taking an ideological stand.”  Instead, she said, “we have to ask ourselves, is that good for financial stability? Is that good for sustainable growth?”
She concluded that “excessive inequality is not good for sustainable growth,” adding, “We need to have a moral compass” in government economic policies.

Larry Summers lobbying for a position in a potential Clinton administration and Christine Lagarde, the real deal among women in finance, address a camel passing through the eye of a needle.

The usually loquacious former U.S. Treasury Secretary Larry Summers is rarely a man at a loss for words, especially on economic matters. But he was stumped at a recent event—at least for a moment.

The Harvard University economist was asked to expound on Matthew 19:24, the Bible passage that says it’s harder for a rich man to enter heaven than a camel to pass through the eye of a needle.

In the airy halls of the National Cathedral, Mr. Summers and International Monetary Fund Managing Director Christine Lagarde this week were exploring “Capitalism and Morality: The Inequality Challenge” with Adi Ignatius, the editor-in-chief of Harvard Business Review.

Mr. Ignatius asked the two economic policy leaders whether the Christian faith is compatible with having vast wealth.

Ms. Lagarde quickly tapped her catechism of old, pointing to the “parable of the talents,” a biblical lesson on the use of personal resources. “It’s how you use it, what you do with it, and what purpose you give to your life as a result which really matters,” the head of the world’s emergency lender said.

All eyes in the cathedral turned to the man who had largely dominated the panel discussion for the previous hour. Mr. Summers had adopted a puzzled pose not too dissimilar from Rodin’s “The Thinker.”

“I really don’t know what to say,” he said.

“I’ve been on a lot of panels in my life–a lot of panels–and I have to say as a Jewish economics professor, this is the first occasion, and I frankly hope the last, on which I have been asked to opine on Christian morality.”

A few more “umms” later, however, Mr. Summers was able to regain his composure and his words. He proceeded to walk the congregation through Henry Ford’s revolution of the U.S. economic geography, iPad education, higher taxation on the wealthy and philanthropy.

Policy possibilities for reducing the income gap between the top of society and the bottom often include salary caps for executives of publicly-held companies and government agencies.  Recent efforts to cap salaries at Fannie Mae and Freddie Mac are succeeding.

A congressional push to limit the salaries for the CEOs of Fannie Mae and Freddie Mac moves closer this week when the House version of a bill that already passed theSenate unanimously goes to the House floor for a vote.

The House’s Equity in Government Compensation Act of 2015, introduced by U.S. Rep. Ed Royce, R- Calif., is expected to pass with bipartisan support.

“Near universal support in both the House and Senate for capping GSE CEO pay is proof positive that multi-million dollar raises at taxpayer bailed-out and backed organizations are unconscionable ” said Rep. Royce. “I applaud Senator Vitter for his quick work in getting this bill through the Senate and will work to replicate his success in the House.”

The Senate version of the CEO pay cap bill is part of a larger suite of legislation designed to jumpstart GSE reform.

The U.S. Department of the Treasury has stated it “does not support FHFA’s new approach to CEO compensation at Fannie Mae and Freddie Mac and urged the agency to reject any increase.”

The White House appears on board with the bill.

How inequality impacts growth and what to do about it.

Zia Qureshi Income inequality has been increasing in most major economies – and in many of them, it has been increasing significantly. This is a cause for growing concern, and rightly so: inequality not only can undermine an economy’s long-term growth prospects; it can restrain growth in the short term by depressing aggregate demand.

The typical approach to tackling inequality – redistributive tax-and-transfer fiscal policies – can be controversial and divisive, owing to perceived tradeoffs between economic growth and greater equality. The result is usually heated debate and passionate rhetoric, but little concrete action. Politicians are especially prone to this dynamic – as evidenced by much of the conversation about inequality in the ongoing presidential election campaign in the United States.

There is a better way, one that is less controversial and politically more amenable to action: putting in place reforms that promote strong, inclusive growth that by its nature reduces inequality. This approach focuses on reducing inequalities of opportunity and broadening the base of participants in the growth process, thereby ensuring that more people benefit from it. Politicians who champion this approach may find it easier to build winning coalitions to enact it.

The range of policies that can stimulate inclusive growth is broad. It includes improving access to markets, leveling the playing field for large and small firms, investing in human capital, and promoting job creation. Regulatory and institutional reforms that strengthen the rule of law and promote open, competitive, and fair business environments are one example. This agenda also features the development of infrastructure that expands economic opportunities and policies that make it easier to access finance.

Education is a key area to consider when promoting inclusive growth.

It is important to remove barriers in the labor market: Providing opportunities for an educated workforce to find well-paying jobs – especially when efforts to do so are complemented by macroeconomic policies that boost demand for labor. The removal of barriers to women’s participation in economic activity is another important lever for sparking inclusive growth.

The effectiveness and appropriateness of reforms that promote inclusive growth will differ from place to place. But few countries lack significant opportunities to strengthen several policies in this area.

To be sure, redistributive fiscal policies often will remain necessary. But it is important that they be designed in a way that causes as little economic harm as possible. Well-designed tax-and-transfer policies may not be inimical to growth – or at least can minimize the efficiency cost of redistribution. On the tax side, examples include expanding the base of the personal income tax, ensuring that the rate structure is progressive, removing excessive and regressive exemptions, and improving property taxation.

This agenda is all the more important because rising inequality can produce a backlash against globalization and technological change, both of which are major drivers of economic growth.

At a time when the world is concerned with both slowing economic growth and rising inequality, policies that can be simultaneously pro-growth and pro-equality merit close consideration. It is time to stop trying to re-slice the pie and start ensuring that it gets bigger in a more inclusive way, so that there is more to go around and more people get a slice.