The problem of inequality has become so pressing that it needs coordinated global action to address it, a group of over 500 economists and scientists said on Friday. The group, which includes former Treasury Secretary and Federal Reserve Chair Janet Yellen along with French economist Thomas Piketty and Nobel Prize winner Daren Acemoglu, called in an open letter for the creation of a body akin to the UN’s Intergovernmental Panel on Climate Change (IPCC) to coordinate action against what it saw as disastrous effects on modern society. “We are profoundly concerned, as they are, that extreme concentrations of wealth translate into undemocratic concentrations of power, unravelling trust in our societies and polarising our politics,” read the letter, referring to the findings of a G20 research committee led by noted American economist Joseph Stiglitz. Just last week, shareholders of electric vehicle company Tesla voted to award the company’s CEO, Elon Musk, a pay package potentially worth $1 trillion, the largest in history. Musk, also the owner of social media platform X, is already the richest man in the world. The IPCC has spearheaded the collection and dissemination of the scientific consensus on climate change over the past four decades and acted as a powerful force to push green policy forward. The economists said a new “International Panel on Inequality” would play a similar role, gathering evidence and pushing governments to act to tackle wealth gaps.  The proposal was first contained in a recent report on inequality authored by a G20 research committee led by Stiglitz, who focused on inequality in his time as chief economist at the World Bank in the 1990s. The report found that between 2000 and 2024, the richest 1 percent of humanity had accumulated 41 percent of all new wealth — versus the 1 percent that had gone to the bottom half of the global population. That’s equal to an average gain of $1.3 million for the top 1 percent, versus $585 for people in the poorest half. There have been marked political consequences of these large differences between the rich and the poor, with the report finding that countries with high levels of inequality were “seven times more likely to experience democratic decline than more equal countries.”  Stiglitz said in an interview with POLITICO that the growing gap between rich and poor is evidence that the past four decades of middle-of-the-road governance on both sides of the Atlantic has failed. Populists across the West, including U.S. President Donald Trump, had seized the moment, playing on the grievances that failure had stoked, he said.  “I do think that centrist politicians on both sides of the Atlantic bought into the neoliberal fantasy that if you had trade liberalization, financial liberalization, privatization, you would have more growth, and trickle-down economics would make sure that everyone would benefit,” said Stiglitz.  He praised the recent victory of the Democratic Socialist mayor-elect of New York, Zohran Mamdani, who he said was addressing people’s everyday concerns, in contrast to politicians of both the center-left and center-right. Mamdani, who last week surged to victory after defeating both Democratic rival Andrew Cuomo and Republican contender Curtis Sliwa, ran a strikingly effective media campaign centered on the city’s spiraling cost of living. His platform included promises to provide free bus travel, state-owned supermarkets and rent-controlled apartments.   Stiglitz, who described himself as “very market friendly,” nonetheless said he thought the left-wing mayor had opened up space for debate. Zohran Mamdani, who last week surged to victory after defeating both Democratic rival Andrew Cuomo and Republican contender Curtis Sliwa, ran a strikingly effective media campaign centered on the city’s spiraling cost of living. | Sarah Yenesel/EPA “He’s saying things that are important to people: things like housing, food, transport, health care,” said Stiglitz. “He’s just ticking down the list of things that make for the necessities of a decent life, and he’s saying things aren’t working right.”  Stiglitz won his Nobel Prize in 2001 for work on information asymmetries in markets, and served as a chief economist at the World Bank and as chair of the Council of Economic Advisers during former President Bill Clinton’s administration, where he had a famously rocky relationship with Treasury Secretary Larry Summers. With its embrace of globalization and the Internet revolution, Clinton’s team was hugely influential in drawing the parameters for the modern world economy. The influential economist said that tackling inequality wasn’t just a moral choice, but a political necessity. He added that the yawning gap between the rich and poor was undermining the U.S. in its economic and technological competition with China. “[The U.S.] won’t win if we are a divided society, a polarized society,” said Stiglitz, echoing rhetoric of the last Cold War. “The greatest weakness in the U.S. today is this division.”

The leader of what was once Italy’s largest separatist party may end up being the politician who unites the boot from top to bottom.  Hemorrhaging support and risking control of the far-right party that he heads, Deputy Prime Minister Matteo Salvini is gambling his political future on a pharaonic bridge project that will connect the Italian mainland to the island of Sicily. The project faces a critical test on Wednesday when Italy’s Court of Auditors is expected to decide whether it complies with Italian and European Union law. A negative ruling by the court, which is a sort of public financial watchdog, would not necessarily prevent the project from going ahead. But it could prove politically costly for a project already under fire from Salvini’s political opponents.  Salvini, who is infrastructure minister as well as leader of the far-right League party, has called the project “the most important public work in the world,” and said construction could start in November. If built, the 3.7-kilometer suspension bridge spanning the strait of Messina would be the longest of its kind, connecting the toe of the Italian peninsula to the northeastern tip of Sicily.  It would provide the island’s 4.8 million inhabitants, who have until now relied on ferries and planes for access to the outside world, with road and rail lines to the rest of Europe.  The firebrand politician is an unlikely champion for the project. His party was founded more than three decades ago in the hinterlands of Italy’s industrial north with a goal of breaking the region away from the rest of the country.  The League’s founder, Umberto Bossi, made stopping “Roma Ladrona” (thieving Rome) his rallying cry, pledging to put an end to the redistribution of northern tax revenue to the more impoverished south. He vocally opposed projects like the redevelopment of the former steelworks in Naples’ Bagnoli district, which he saw as a northern-funded giveaway likely to end up lining the pockets of southern politicians. Now Salvini, who vocally opposed the bridge as recently as 2016, has become the foremost proponent of the massive public work, estimated to cost €13.5 billion. That would make it among the most expensive infrastructure projects ever built in Italy — and in the country’s southernmost regions to boot, known for the mafia and corruption. “Everybody in Lombardy and in Veneto is angry at Matteo [Salvini] and his obsession with the bridge,” said one senior League official who was granted anonymity to speak candidly, referring to the League’s two heartland regions. “Some think it won’t happen, and some think it will. But almost everyone in the party in the north thinks it’s a waste of money.” BRIDGE TO SOMEWHERE The idea of a bridge connecting the Mediterranean’s biggest island to the Italian peninsula has a long history. Already in antiquity, the Roman naturalist Pliny the Elder wrote of plans to span the strait with a series of interconnected boats. In 1866, five years after the unification of Italy, the future Prime Minister Giuseppe Zanardelli proclaimed: “Whether above the current or under it, let Sicily be united to the continent!” (His favored solution was an underground tunnel.) The idea of a bridge was revived in the 1970s and 1980s after scientific studies judged it was technically feasible. But it was only in 2009, under the premiership of Silvio Berlusconi, that workers symbolically broke ground on the Messina bridge. Technocrat Mario Monti, who replaced Berlusconi during the financial crisis, shelved the endeavor, citing the need to cut costs. In 2016 center-left Prime Minister Matteo Renzi briefly made his own push, which also ended up going nowhere.  Salvini — who built his political career on bold and divisive stunts, and who propelled his party into government after a Damascene conversion from regionalism to far-right nationalism — may be the politician who has come closest to seeing the millennia-old ambition realized. Deputy Prime Minister Matteo Salvini is gambling his political future on a pharaonic bridge project that will connect the Italian mainland to the island of Sicily. | Simona Granati/Getty Images When Prime Minister Giorgia Meloni took power in 2022, Salvini was hoping to land the position of minister of the interior, a natural fit for a politician who came to prominence campaigning against immigration.  But Meloni’s landslide victory left the League with little leverage in the coalition government, and Salvini found himself shunted into the less prestigious role of infrastructure minister. The bridge is his attempt to turn that relegation into a leading role. “Salvini is something of a political animal. He lives for the hot button issue of the day,” said Nicoletta Pirozzi, who heads the EU affairs program for the pro-European Istituto Affari Internazionali think tank. “This idea of a major public work serves as his way to make his mark … to give himself a bit more centrality in the public debate.” A spokesperson for Salvini declined to comment. BETWEEN SCYLLA AND CHARYBDIS Judging by the polls, Salvini’s gambit has yet to pay off. At 9 percent, the League is polling far behind its senior coalition partner, Giorgia Meloni’s Brothers of Italy party, which has the support of nearly a third of the electorate. The Messina bridge has divided public opinion: Supporters point to the economic benefits, while detractors cite everything from the risk of earthquakes to environmental impacts and graft in a part of the country famous for corruption.  “At the moment, Salvini is caught between regional governors who need to answer to their constituents, the SMEs that are the backbone of Italian capitalism, and a populism that I wouldn’t even define as conservative, but actually far-right,” said Teresa Coratella, deputy head of the Rome office at the European Council on Foreign Relations. Meanwhile, Salvini’s party has suffered a steady exodus of members, many from the north. Old-guard stalwarts like former Budget Minister Giancarlo Pagliarini have expressed skepticism: “It’s a bit of a mysterious object. That’s why whenever I hear about it, I say ‘Oh Lord.’” Coratella said that Salvini has so far benefited from a lack of challengers within his party. But his luck may be taking a turn for the worse. Roberto Vannacci — a former general and a member of the European Parliament who like Salvini built his reputation on colorful outbursts — has galvanized parts of the electorate uneasy with Meloni’s moderate foreign policy. Vannacci’s rising star risks eclipsing Salvini, beating him at the outrage game he pioneered. So far, however, Salvini has managed to keep his party backing the bridge, despite a previous warning from Italy’s Court of Auditors in September that raised doubts as to whether the project will be as economically advantageous as the government claims. Meanwhile, WeBuild, the company heading the consortium that is building the bridge, has started hiring the thousands of workers that will be needed for construction. The Messina bridge has divided public opinion. | aleria Ferraro/Getty Images “There are the outcasts of the League who still use the argument, ‘This is a waste of money,’” said League senator Claudio Borghi. “But most of the party understands this is something that’s been beneficial for the north.”   Borghi added that even the more old-school regionalist governors were “starting to understand” the purpose of the project. Construction was meant to start this summer, but has been delayed.  “I think it will benefit the country as a whole,” said Marco Dolfin, a League councilor in the Veneto region. He was quick to point out, however, that the project itself originated with Berlusconi, not Salvini.  “We don’t go on the streets or to rallies with a flag that says ‘Long live the bridge,’” Dolfin said.

Warning signs from an obscure part of the financial markets have got policymakers rattled, and one of their oldest and most profound fears may be about to get very real. As the world’s top central bankers and finance ministers descend on Washington for the annual meetings of the International Monetary Fund and World Bank, signs are increasing that the next bout of financial instability may be around the corner. The most worrying signs are arguably not from the foreign exchange market, where confidence in the dollar — the global system’s anchor — is gradually eroding, nor from the stock market, where the AI frenzy has driven equities to record highs in the U.S. and Europe. Rather, it’s what’s happening in the credit markets that’s sending a shiver down the spine of all those who remember 2008. The collapse of U.S. auto loan dealer Tricolor and parts supplier First Brands Group hints that something may be wrong in the world of private credit. Private credit refers to loans that are neither issued by banks nor publicly traded on an exchange like corporate bonds. It’s a broad description, and it can refer to anything from the aforementioned car loans issued by special credit suppliers to private funds lending money to help buy a family-owned company or financing for a new apartment block. It’s a young market, but has grown at breakneck speed. Goldman Sachs estimates it’s worth $2.1 trillion, and private equity companies, in particular, have made a fortune from it, helped by a vast amount of leverage. Because the money isn’t lent by banks, and because it’s structured as a private deal off the public markets, it’s a corner of the financial ecosystem that’s particularly hard to oversee — even when, as with Tricolor, the loans are then repackaged into tradable bonds. That means that if something is going disastrously wrong, it might only be detected once it’s too late. Officials are alarmed that something like that might be happening. For years, banking regulators have congratulated themselves on stamping out the kind of excessive risk-taking, questionable ethics and shoddy governance that caused the last financial crisis. But all along, they have fretted that, far from being dead, such behavior had just moved to other parts of the financial system outside their reach. In a speech last week, European Central Bank President Christine Lagarde warned that it was “imperative” to improve transparency in the non-bank financial sector, whose assets are now bigger than those of the regulated banking sector. “Policymakers must do so sooner rather than later,” she said. The Bank of England also took up the theme earlier this week, its Financial Policy Committee warning that “the risk of a sharp market correction has increased.” It said the defaults in the U.S. “underscore some of the risks the FPC has previously highlighted around high leverage, weak underwriting standards, opacity, and complex structures.” THE WHEELS COME OFF Texas-based Tricolor was an auto loan provider that lent to riskier clients, notably undocumented migrants. First Brands, meanwhile, is a car parts supplier that used opaque and complex financing schemes to pay its suppliers — until it wasn’t able to anymore. One of its creditors, Raistone, alleges that some $2.3 billion that it was owed “simply vanished.” Shares of investment bank Jefferies tumbled this week after it declared it had $715 million in exposure to First Brands. Swiss giant UBS, meanwhile, says it has $500 million at risk. The big question is whether the twin bankruptcies — concentrated in an inherently riskier segment of the market — are just two accidentally similar one-offs, or whether they are the first signs of a broader crisis brewing. Credit rating agency Fitch said defaults in the private credit market rose to 5.5 percent in the second quarter of the year, up from 4.5 percent in the first quarter. Meanwhile, in January, Fitch said auto loan payments that were 60 or more days late among the least creditworthy (subprime) borrowers were at the highest level on record, at 6.6 percent. A growing body of academic literature has found extensive links between non-bank financial institutions (NBFIs) — a category that includes hedge funds and private equity, as well as private credit — and the traditional banking sector. “Through these linkages, shocks can propagate rapidly across entities, sectors, or jurisdictions, especially when multiple institutions respond simultaneously to market stress,” said the authors of a paper at this year’s ECB research conference in Sintra, Portugal. They wrote that nearly one tenth of banks’ assets in the European Union were claims on NBFIs, and that 10-15 percent of banks’ deposits also came from non-banks. Loriana Pelizzon, deputy scientific director at the Leibniz Institute for Financial Research and one of the authors of the paper, said she wasn’t overly concerned about the two bankruptcies, given the relatively small size of the auto financing market. However, she said that interlinkages between European NBFIs and the U.S. financial system needed to be monitored, given the scale of the investments. “There’s a significant amount — trillions and trillions invested — in the U.S.,” she said, noting that investment chains are often long and complex, and that regulators lack insight into them. “The question is whether this is just a couple of rotten apples,” said Davide Oneglia, director at economic consultancy TS Lombard. He said that the risk in the private credit segment will grow further if U.S. interest rates don’t fall as quickly as expected, for example, due to high inflation. That would put a further squeeze on private credit providers. IN PLAIN SIGHT But it’s not just private credit that has policymakers on tenterhooks. The benchmark U.S. stock index S&P 500 is now trading at nearly 30 times the expected earnings of its components, far above its long-run average, and closer to the freak levels seen during the Dotcom boom and the pandemic. Over the last three years, the S&P has risen over 80 percent, largely powered by the performance of U.S. tech stocks on the back of a boom in AI investment. Companies have invested some $400 billion to build out the infrastructure — microchip factories and data centers — that powers AI. Should that money turn out to be misspent, for example, if AI doesn’t provide the productivity gains that investors are betting on, that bubble will burst with painful consequences. In parallel, unbridled government spending throughout the developed world, from the U.S., to Europe and Japan, have pushed market interest rates higher, amid growing doubts that governments can ever repay the debts they are building up. That has also helped push the price of gold — seen as a safe asset that won’t lose value — higher, with some investors piling into both gold and Bitcoin to avoid the debasement of their investments through inflation. It’s not clear which of these — if any — will light the wick of the next global financial meltdown. But what is clear is that policymakers will have no shortage of threats to obsess over next week.