Equality at risk in the West, says Rupert Murdoch

RUPERT Murdoch has warned policies have caused a “massive shift” in ­societies to benefit the super-rich with a legacy of social polarisation.

IN a confronting message to the world’s leading ministers and central bankers, Rupert Murdoch has warned their policies have caused a “massive shift” in ­societies to benefit the super-rich with a legacy of social polarisation.

In the News Corp executive chairman’s speech to the G20 meeting this month — now available for the first time — he told global decision-makers the consequence of their policies had been “greater inequality” in Western society.

Speaking at the dinner in the Library of Congress building in Washington, Mr Murdoch said “the ladder of generational progress” was now at risk in the developed world and that a moment of “great global reckoning” had ­arrived. He said that, since the 2008 global financial crisis, leaders had made the mistake of responding to the domestic “political outcry” instead of devising long-term structural reforms to restore economic confidence, investment and innovation. The upshot was the sacrifice of a generation of young people.

“It is at moments of great reckoning that great leaders are fashioned,” he told guests including US Federal Reserve chairwoman Janet Yellen, European Central Bank president Mario Draghi and senior economic ministers from the top 20 nations, including Joe Hockey who organised the invitation to Mr Murdoch. It was the first time an outsider had addressed the G20 meeting.

Mr Murdoch said “the verdict was still out” on the great quantitative easing experiment — under which central banks put more money into economies by buying securities — “but we ­already know that one result has been greater inequality”.

“In America, the most highly paid 1 per cent now pay 46 per cent of all income tax,” Mr Murdoch said. “In Britain, the top 1 per cent pay 28 per cent of all income tax. That is a massive shift from what our society looked like 30 years ago. We should all be concerned about this polarisation which was never the intent of policy but is certainty a consequence.

“Quantitative easing has increased the price of assets, such as stocks and real estate, and that has helped first and foremost those who already have assets. Meanwhile, the lack of any real wage increase for middle-income workers means growing societal divisions and resentment.

“This is one of the core lessons of my professional life — I have seen many politicians who have the best of intentions but who ­deliver the worst of outcomes.”

With the global economy still struggling after the 2008-09 ­crisis, Mr Murdoch told economic decision-makers their prescriptions fell far short of the optimum economic and social ­results.

The significance of his nine-page speech is his argument about the limits to both monetary and fiscal policy and the imperative for a new approach based upon the need “for government to get out of the way”. Mr Murdoch called for: labour market reform; lower and more competitive corporate taxes; a crackdown on multinationals — naming Google — for not paying taxes where they make their profits; a rethink on excessive bank regulation, warning “you would have to be mad to join the board of a bank these days”; and recognition that high taxes and over-regulation were damaging economic growth and the public interest.

The October 9 dinner was hosted by Mr Hockey since Australia is the G20 host nation this year. Reports after the event said the speech was broadly appreciated by those in attendance. In the current global context, Mr Murdoch’s message is highly provocative. It conflicts with the domestic policies of many nations, not least Australia where the populist ­denial about the need for structural reform is intense. Mr Murdoch said he was still an optimist — if the right choices were taken.

He was confident because the world was shifting “from an industrial society to an information society”. The information revolution sweeping all societies would create new opportunities for entrepreneurs and private-sector growth.

The policy priorities he advocated were education and immigration reform, infrastructure investment and cheap energy. Mr Murdoch said cheap gas in the US had decreased manufacturing costs and lifted US manufacturing exports by 6 per cent. But his message to global leaders was that the results weren’t good enough — economic growth was weak, unemployment was too high and family incomes were inadequate.

He said growth in the eurozone was “basically static”. While the US was held up as a “bright spot” the reality was different. Real US median income was lower than 15 years ago and its 63 per cent ­employment participation was at the lowest level in 35 years.

“This has an enormous impact on quality of life for American families,” he said. “Today many Americans who have jobs aren’t satisfied with them. They would like to work longer hours or find higher-wage jobs with growth ­potential, but there just aren’t enough opportunities.”

Mr Murdoch said much of the burden of failed policy was falling on young people.

The lack of opportunity for the next generation was “especially troubling” along with the “inevitable social and political upheavals to come”. This was because the unemployment rate for people under 25 years in the US was 13 per cent and in the eurozone was 23 per cent. It was twice as high in Spain and Greece and parts of France and Italy.

The chief of News Corporation, ultimate owner of The Australian, told European and US leaders in the intimate setting of the dinner that many of their policies were a “tremendous disincentive to innovation and risk-taking”. He confronted them saying high taxes and overregulation “goes to ­extremes in many European countries and several US states”.

He said an “easier” problem to tackle was that posed by Google in Australia. “Google harvests nearly $1 billion annually in Australia — by pirating the copyrights of local taxpayers,” Mr Murdoch said.

“While I am sure they are not the only offenders, as the chairman of a company that is continuously financially wounded by that piracy, I feel quite justified in calling them out by name.”

On company tax, he quoted former president Bill Clinton saying the current system, notably in the US, was “crazy”. Action had to be taken to make corporate tax rates more competitive.