Davos elite: Inequality corroding democracy

January 25, 2014: 5:52 AM ET
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The widening gap between rich and poor is having a corrosive effect on U.S. politics, say Davos elite.
Davos, Switzerland (CNNMoney)

The elite have spoken from their mountain top retreat in Switzerland: Rising inequality is undermining democracy as big corporations and the wealthy buy ever greater political influence.

Nearly two-thirds of the delegates surveyed at a World Economic Forum debate Friday in Davos said the widening gap between rich and poor is having a corrosive effect on U.S. politics.

The same group also believed by a big margin -- 70% -- that democracy will defend itself.

"We have a tendency to re-engineer ourselves and I think we're on that path," said Anthony Scaramucci, founder of hedge fund SkyBridge Capital. "I do believe that the message from America is that people are ready for candidates who will tell people the truth."

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Others were less convinced that democracy will heal itself, arguing that changes to the political system are needed to ensure the powerful are constrained and governments held accountable.

"Huge pools of wealth are passed across generations with very little tax," said Harvard economist Ken Rogoff. "It's hard to believe that doesn't have something to do with political influence."

Rogoff called for a more progressive tax system, saying he was concerned about declining social mobility.

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Nobel laureate Joseph Stiglitz said American democracy was under threat from a system that results in under-representing some groups.

"The extent to which economic inequality gets translated into political inequality depends on the rules of the game," he said. "Poor people don't vote and there's a concerted effort to make it harder for them to vote."

The U.S. should consider compulsory voting, better funding for regulators, government support for public interest groups, and more public information as a counter-weight to corporate lobbying, Stiglitz said.

"If you don't have access to good information, you can sell bad ideas just as you can sell poisonous cigarettes, or products that lead to obesity," he said.

Stiglitz on how to fix the income gap

American historian and author T.J. Stiles put some of the blame on globalization, saying that has made it easier for corporations to escape regulation.

Companies haven't just been looking to exert control over regulation, but also making use of anonymous unlimited donations to try to dominate the cultural landscape.

"We need to have great wealth and we need to have critics of great wealth," he said.

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