TEXT OF INTERVIEW
SCOTT JAGOW: A new report looks at the growing gap between rich and poor. It comes from, of all places, Wall Street — a huge investment bank called UBS. Our economics correspondent Chris Farrell has been doing a little light reading. Chris, what’s in the report?
CHRIS FARRELL: You know look, what’s been happening in the subprime market really is a reflection that lower-income groups have been in a recession — and a recession that’s been getting worse. And now the middle class, and I think this is the thrust of the report, now the middle class is getting nervous. They’re getting squeezed. They’re getting fearful. So if you’re investing, you need to take the trend toward rising inequality seriously.
JAGOW: OK obviously low-income groups are worried about inequality, but why is Wall Street, and rich investment bankers, worried about inequality?
FARRELL: They’re worried about it because of their wallet. What they’re increasingly worried about and they’re talking about and they’re going out on the stump and they’re saying ‘I’m worried about protectionism.’ These people who are losing their jobs, these people who are losing their health care, these people who aren’t getting raises, you know they’re more susceptible to the siren song of protectionism and we need to fight this. Well this is why Wall Street is concerned about it: Because if we do end up with protectionism or more protectionism, they’ve got to worry about their own incomes. So part of it is just pure self-interest. The other part of it is, when you’re investing you’re trying to understand, well what are the major trends in our economy? What is it that’s going on in our economy that I need to understand so here’s how I direct my money?
JAGOW: Chris, this country has been talking about inequality for decades.
FARRELL: That’s right.
JAGOW: Is there a new angle on this or is there something that’s widening the gap?
FARRELL: I think what is widening the gap is this abstruse phrase we use all the time and it’s called globalization. What has changed: People have not seen wage increases. You want to what thing drives me nuts?
JAGOW: Sure.
FARRELL: Drives me nuts, OK? People who go ‘you know, we’ve had the lowest savings rate since the Great Depression, you know Americans are these spendthrifts, they go out and they spend . . .’ No. It’s got nothing to do with we’re consuming too much, we’re spending too much. The only people who are spending too much are the upper-income ones who are making all the money. No, what people are doing is their wages have been stagnant, their wages have been declining relative to inflation. And that story, people are becoming more and more aware of it, but nobody can talk the inequality away anymore.
JAGOW: OK Chris, thanks for your thoughts.
FARRELL: Thanks a lot.
JAGOW: Our economics correspondent Chris Farrell.
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