 Well, good morning, ladies and gentlemen. Welcome to the very first issue briefing of day two of the World Economic Forum 2015 annual meeting. I can't think of a more interesting and timely briefing on the subject we're about to raise here, which is income inequality. It's been a major theme at the start of the week. We had a key report by Oxfam noting that Winnie Bienema, the executive director of Oxfam, is actually a co-chair of this meeting on the very subject of inclusive growth and inequality. The World Economic Forum itself published a discussion paper at the start of the week on Sunday looking at the possible interventions and policy levers available to leaders and governments in creating mutuality between growth and social inclusion. Following in through the week, of course, President Obama's State of Union was very much based on middle-class economics and how to improve social equity and lower inequality. This week, of course, as we're moving on to today, we have a very big announcement by the European Central Bank which may take the economic discussion in a different direction. But in the meantime, I'm very delighted to be joined by Christopher Pissarides, the Regist Professor of Economics, London's School of Economics and Political Science in the UK. He's also a member of the World Economic Forum's Global Agenda Council on New Growth Models and a Nobel Laureate. Christopher, I'd just like to invite you for the benefit of our audience and our audience watching us live on our web platform to just offer some remarks on how you see the state of the income inequality debate at this very moment in time. Yes, thank you very much and good morning everyone. I will start my remarks with some general comments about the free market system that we're pushing nowadays through structural reforms, what we're seeing happening in North America, Europe, and by extension throughout the world. And the key issue, I think, about inequality is that free markets are good for giving the incentives and working through the private sector for giving the incentives for productivity, for new innovation, new technology, productivity, rises, in other words, for wealth creation in the market. And we're seeing that happening, especially in the United States, as the leading free market economy, but also in Europe. However, they are not very good free markets in the distribution of the rewards from wealth creation. They tend to favor the successes much more than the ones that go along and whose input is absolutely necessary in the wealth creation. Of course, it's only right that those who succeed in inventing something good in new technology, a new formal organization of the company, those who read the market better, it's only fair that they should get paid more. But the way that voters nowadays in our democracies are responding is by saying that also those who go along and contribute to a whole host of services or production of manufacturing goods that are necessary for any economy to function should also be rewarded generously. And it is my belief, is what we are seeing in the market today, is that if we leave that alone, to take care of that, to some extent the way that it's been done in the United States, and not quite along the lines that President Obama was saying is a state-of-the-union address, but more of the way the market has been working there, is that the outcomes are that there is extreme inequality that is a matter of concern. And the question is what do we do about that inequality? It's not an easy question, but then there are many ideas being floated around here and in the literature, and that's something that we might be debating during this press briefing. And of course the debate to date is focused so much on redistribution through tax. And yet there must be other, one would hope, other options. And to the risk mentioning again the report, the discussion paper that the forum published earlier this week, which is very much the start of a debate, the start of our work and our expansion into looking into this sector, looking at possibly other ideas as to whether you can actually achieve economic growth and driving and achieve a social dividend at the same time. Is this possible? Is this a holy grail or is this something we can achieve indeed aim for? Well first, as a matter of principle, I believe that the way to achieve more equality is not through punishing high incomes, but through boosting low incomes, through more employment, more job creation, better jobs at the lower end of the market, through maybe better education, but if you think more specifically, and if you try to address the issue with examples, you know, what do we do about such and such, it's inevitable that some form of redistribution will have to take place. Otherwise where do the resources come from to create the jobs at the lower end and to provide the education and training that is necessary for people to have more respectable incomes and reducing equality. The redistribution will have to take place with full cooperation of private and public sectors. It's not something that has to be imposed only from one side and the other side trying to evade it. And in order to achieve that, it's got to be a kind of more cooperative solution to the problem of inequality. Everyone has to agree about what needs to be done. And there are many, many different options to give you an option that I don't think is good. And I don't think it can work in today's open globalized world. It is when you tax high incomes and you simply take the money and you pass it on as transfers to lower incomes. I don't think that's a good solution. It's being tried, of course, and it's still taking place in some countries. But it's not because it takes away the incentive from the lower-skilled people to acquire skills and go into the labor market because they get the money anyway by doing nothing. And it creates these incentives to high incomes to stay in the country and continue working hard, looking for new ventures to achieve the high incomes. There are, however, more imaginative, more creative ways of redistributing incomes, and that's what we should be looking at. Who's doing that well right now? Are there any shining examples of creative policy that is achieving at least measured success in reducing inequality? Well, the most successful countries in that have been the Scandinavian countries, and if we take Sweden as an example, reflects very much what other countries like Denmark and Norway are doing in that region of the world, is redistribution through the market, if you like. In fact, what's happening is that high incomes are taxed, average taxes in that country are high, but because there is trust in the public sector that is going to make good use of that money, people pay it. Tax evasion is very low. So number one thing that is essential to make that system succeed is that you do have to have trust in the public sector. It should be free of corruption. It should be trusted by the private sector that it will provide a good service. And the way that the revenue is used is to boost job creation. So instead of transferring the revenue directly to families with low income, what you do is that you use it to create jobs in the market that would provide services that otherwise wouldn't be created by the free market at a reasonable price that people will want to take up. The best example of such a service is childcare. What's happening in Sweden is that childcare services are subsidized and therefore, when a couple have a child, they can buy childcare services through the market at fairly low rates. What that encourages them to do is to buy the childcare services and then both parents going out to work. So there is incentive to create a job for both the mother and the father. And at the same time, you're creating a job in childcare services, which is subsidized by the revenue that is raised through the taxes on the higher incomes. This is boosting the family income at the lower end of the income distribution. The parents that otherwise wouldn't be able to afford the childcare is boosting the income of a childcare worker because his or her salary is subsidized. And it reduces inequality because it raises the lower incomes rather than not allowing high incomes to to take place and prosper. Of course, the downside some people might say is that there is tax, you know, Sweden is a high tax country, but it's a very good use of the tax revenue addressed at the issue of inequality. So ultimately, it's a decision of the voter because what is happening in other countries in this dimension, and Italy is a good example of the other country where this kind of channel doesn't work, is that when the government doesn't take much interest in services like childcare, what the mother will say, especially a mother that doesn't have access to high-income jobs, what she might say is why should I go out, get a job, earn an income that is, that can hardly pay for a childcare service in the market, and then I have to pass my child on to someone else to look after, and financially, I'm not better off in any way. I might as well stay at home and look after my own child. And that's one of the reasons, if not the main reason, that we're seeing extremely low rates of female participation in Italy. Indeed, and of course gender, and gender parity is an equality series, aren't you? Exactly, another global challenge of the forum. Pardon the shameless promotion of our own work here. Let's stay on geography for the time being. We had the chief economist of one of Brazil's largest banks here yesterday, and one of his comments was that Latin America was actually relatively successful in addressing inequality in relative terms to other regions in the world, and yet the growth outlook for that region is not so promising. Is inequality something that policymakers can only really afford to address in the good times? That again is very much a political decision, but it is much easier to address inequality in the good times because people get used to levels of income very easily. If incomes are rising and you take in part of that rising income, to use to reduce inequality, then it's much more acceptable than if incomes have been at a certain level for a long time, for a long stretch of time, and suddenly government comes along and says, ah, now there is inequality that I'm concerned about, and I'm going to take some of that income that you got used to, so you have to adjust your standard of living as a consequence so as to pass it on to lower incomes. That would be much less acceptable. So politically, it's much easier to do it when incomes are rising. Latin America, of course, as you mentioned, I have to say I don't know as much about the MSI I do about Europe given in my location, but from what I know Brazil does have one of the highest inequality indices in the world, so they do need to do something about it. Question, sir, can you please for a benefit of our audience, and Mr. Pissarides give us your name and your outlet, sorry, and your outlook possibly. It's Jim Edwards from Business Insider, UK. I was hoping you could talk about the Oxfam report. Is it true, is that a statistic true that the 1% now own more, I can't remember, is it more than 50% of everybody else, or is it more than everybody else? I don't think it's under 50%, but it's climbing towards that figure. Right. Do you agree with that? Is that true? I have no reason at all to believe that it's not true. It's a shocking statistic, of course, and given the inequality that we're seeing in the world today, it's not difficult to construct other shocking statistics. Even within countries, how much wealth is owned by the top 1% and how much with the bottom. It's not, I mean, it's obviously something to worry about, but I think there is more sensationalist attached to such statistics than substance of what you do really. You see, my view is that the real issue and what you should really addressing at this poverty. And there are ways and thinking about ways to address poverty and to raise low incomes is far more important for human welfare in the way our democracies will respond to these policies than punishing the very high incomes. Whereas if you present in a way of the top 1% or the 80 wealthiest people in the world have as much wealth as two or three billion people or something, then someone's immediate inclination is to say, who are they? Let's tax them, you know, take some of their wealth away and redistribute them. But that would be completely wrong approach to the problem. So, although such statistics are true and it's another way of saying there is extreme inequality in the world, I think we'd be doing better to emphasize ways of reducing poverty rather than sensationalizing the issue by saying how much the very rich people are worth. OK, so just to extend my question a little bit further, Piketty has made this great case that the structure of capitalism, by definition, creates more inequality as it goes along and the inequality becomes more extreme as it goes along. And he basically strongly suggests that this might lead to a level of political instability when the system just loses legitimacy because the vast majority of people see that they cannot possibly become successful as the 1% or whatever percentage it is right at the top. Do you agree with that? Yes, with the Piketty thesis, with the analysis at least, I agree and many, many if not most, I would say most if not all economists would agree with him. Of course, before he published this book he had a long series of articles in the professional journals where he was making similar cases and I agree entirely. In fact, he was a student at the London School of Economics and I taught him as a student along with others and he was a very bright person. I agree entirely and I also agree entirely that it's bringing political instability. But again, what I would emphasize is that the political instability and the objections are coming from the people at the lower end of the distribution. It's not jealousy because some people are very wealthy that are causing the problems. It's more the problem of how do you live, how can you get a comfortable standard of living in a country of plenty? And we are seeing that all the time. Let me use an example which is very much in the news now, which is the Greek election and what's happening in Greece, which is taking place on Sunday. The protest vote we are seeing and the reason so many Greeks are abandoning conventional parties with their centrist policies and moving to extreme left is not that there are wealthy Greeks and there are many wealthy Greeks, especially ship owners, bankers, most of them are based in London, Geneva and so on. But they are Greek, they are well known in Greece. But that's not the reason though there is that protest vote there. The reason that it's taking place is that the country has suffered a 25% fall in GDP and wages, especially low wages. It's suffered a fall in pensions and it's got 25% overall unemployment and 50% youth unemployment and that's been going on for four years now. And it's those people who are protesting and voting for extreme political parties. It's not that all of a sudden they realize that there are Greeks with billions sitting in mansions in Switzerland and Britain and owning whole Greek islands that they say, no, I have to vote for a party that is going to go after them, not at all. It's more that vote for a party that is going to go after the Eurozone institutions and Troikas have imposed those parties on Greece and have been followed by previous political parties. Okay, my last question and I'll stop monopolizing the questions. I was really interested in your childcare idea. Can you quantify that? How many billion would it add to a country's GDP if it rolled out a really big subsidized childcare program? Can you put it in percentage terms or dollar terms? I could but not right now and in fact I'm glad. We have three minutes of this session left so we're being ambitious. I'm glad you asked it because I am supervising a very big project financed by the European Research Council on precisely this issue of job creation and how much it would add to GDP and employment from this kind of service. I mean we started to work already. So far we looked at the employment numbers and how many jobs they're creating and they're creating, I think when I use the comparison with Italy, they're creating at least twice as many jobs in these services in Sweden as in Italy. Something like 12 to 13% of employment is in this kind of service. Not only childcare but also other health services, health workers and homes for older people to look after. So it would be substantial. Something like 12 to 15% of employment is in the provision of services that have to do with care in general, both healthcare and childcare. But to generalize from your question and I'm really glad you asked it is that if the money is to be paid in the form of tax without trying to find ways of evading the tax, it's got to be productive. In other words, you have to pay your taxes and you have to see the result in job creation and wealth creation in some sector of the economy and that's what we are seeing there. We're seeing in job creation which contrasts sharply with other countries. I don't know if I should name them, where taxes are almost as high but you don't see the result in anything other than extremely high pay for politicians and civil servants. I named already, maybe I could name it because the current prime minister is doing a fantastic job in trying to reform it but Italy is a good example. Italy has almost as high taxes as Sweden but the money goes to, you know, they have the highest paid politicians, highest paid civil servants, a big civil service and no market driven provision of services which will create jobs. And the only reason I'm mentioning it is that I do think the Renzi programme will perform is moving in the right direction and I hope it succeeds because it will be good for the country and it will be good for the Eurozone. Thank you. We have a very precious list of time but I want to get one of the questions we received over social media to put you, Mr. Pessaritas. Obviously today, European Central Banks are making a decision widely expected to be quantitative easing. So the question is, what would be your advice? Are there other tools in the toolkit that could be used? What's your advice to Mr. Draghi? My advice to Mr. Draghi is to do what he's been hinting that he was going to do. It's long overdue but it's never too late. Fifty billion a month for the next 12 months is not bad to begin with. In fact, it would be a very good QE, you know, it's got to be generous. But let's not now sit back and say good QE has been done so we can forget about everything else. There are three things that have to be done simultaneously. One is the QE to relieve the deflationary pressures. Two is the structural reforms because they will increase our productivity and they have to carry on. You know what Merkel was saying yesterday that she was against QE because they would undermine structural reforms is that I hope she's wrong because structural reforms are necessary, I agree entirely with that line. What I don't agree with is that you need all this austerity and no QE because of the structural reforms. I think they have to be carried on simultaneously and if anything the QE has to come before the structural reforms because deflation is not good for that. And number three, you need to deal with fiscal policy and I think the countries that have room within the master criteria within the eurozone to pursue a more expansionary fiscal policy have to do it. Now of course the main country that has that is Germany and they've already said that far from following expansionary policy they are going to reduce spending even more because they want to balance the budget next year, this year, 2015 for which there is absolutely no need. Germany has been benefiting from a weak euro because of the problems of the eurozone for many, many years if it remains within the master criteria but spends something like 1% of its GDP more, hopefully even more, 1.5% to help boost economic activity in the eurozone through investment, you know, not sort of carefully planned spending it will help both QE to have a bigger impact on our economies and it will help the structural reform process because there will be more investment to see positive results from the structural reform. So far from Mrs Merkel saying that she's worried that QE might under my structural reform what I'd say is that yes to QE, yes to more fiscal expansion within Maastricht and those will help structural reform rather than underline it, sorry, undermine it. I can go on in the morning, it's been fascinating, thank you very much Mr Pissaridis, thank you all for joining us here in the room and online. We look forward to welcoming you back for our next press conference which is later on this morning, thanks very much indeed.