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It’s rare that a week goes by without some statistical reminder of wealth and income inequality in the U.S.

In November, the Institute for Policy Studies, a Washington-based think tank, issues a report on the topic. One of its most salient findings was that the three richest Americans—Bill Gates, Jeff Bezos, and Warren Buffett—collectively had more wealth than the 160 million poorest Americans, or half the U.S. population.

This result isn’t that remarkable when one considers the sizable share of Americans who have zero or even negative net worth.

The Institute for Policy Studies calls inequality a “moral crisis,” but Torsten Slok, the chief international economist at Deutsche Bank, views it as more serious than that. He contends that income and wealth inequality has been rising for decades and, if left unchecked, could cause social and political unrest that creates a risk for both the economy and investment markets.

Recently, Slok talked to Barron’s about some of Deutsche Bank’s research on the topic—and his belief that inequality is an issue that investors can’t ignore.

Barrons.com: Can you explain the reasons behind the rise in wealth and income inequality in the past three or four decades, particularly in the U.S.?

Slok: No. 1 is globalization and the rise of cheap labor in China and other places. This hurt workers with lower skills and lower education [in industrialized countries]. The second reason is technology, which made it cheaper to produce products and created a premium for actually having an education for being able to manage the technology. If you have low skills and low education, you are at a disadvantage. A third and associated reason is education, which is getting better in emerging markets relative to education for regular workers in industrialized countries.

The final reason is changes in government policies away from higher taxes. If you want to lessen inequality, the answer is simple: Just raise taxes on people who make money, and give it to those who don’t have it. The problem with that is that it has all kinds of dynamic effects on the economy and opens up a number of political consequences. The fact that we continue to have lower tax rates is an important reason why income and wealth inequality have been trending the way that they have.

Bio Deutsche Bank Name: Torsten SlokAge: 47Hometown: Roskilde, DenmarkTitle: Chief international economist, Deutsche BankEducation: Bachelor’s, master’s, and Ph.D. in economics, University of CopenhagenInfluential Book: Superforecasting: The Art and Science of Prediction, by Philip E. Tetlock and Dan Gardner Torsten Slok47Roskilde, DenmarkChief international economist, Deutsche BankBachelor’s, master’s, and Ph.D. in economics, University of CopenhagenSuperforecasting: The Art and Science of Prediction, by Philip E. Tetlock and Dan Gardner

Q:Your data show that inequality is greater in the U.S. than it is throughout most of the industrialized world. Why?

A: Some of that has to do with the level of top marginal tax rates. The level is lower in the U.S. than in other countries; it’s a lot higher in most European countries. In most Nordic countries, the top rate is between 55% and 60%.

Q:From an investing standpoint, why should anyone care about this issue of rising inequality?

A: Well, these trends have been in place for a while. But we have now gotten to an inflection point where inequality may be a source of populism in politics. From a market perspective, it does become more and more relevant to investors if the average voter wants a different economic system than we have had in place all these years.

Q:But investors seem to be doing well in the midst of inequality. While we have a touch of populism with Donald Trump’s victory, we have also seen that same president champion tax legislation that lowered corporate tax rates and has helped the stock markets hit new highs. Why should investors worry?

A: Investors have certainly benefited lately. But the data also show, for example, that 30% of all households have no wealth or negative net worth, excluding their homes, and that’s been rising. So there’s a difference between what financial markets and home prices have experienced and what the average voter has been experiencing.

Q:So are you saying that things are good now for investors, but it can’t last this way?

A: Well, what the data are also showing is that beneficiaries of a rising stock market are a smaller part of the population than in recent years. [Editor’s Note: Fifty-two percent of Americans say they currently have money in the stock market, matching the lowest ownership rate over the past two decades, according to Gallup. In 2007, on the eve of the last bear market, 65% reported investing in the stock market.]

So, therefore, when you have an election again and many feel that they aren’t benefiting, it does open up the question of whether we have gotten to the point where there is a real risk of voters demanding candidates both on the left and the right side that can deliver change.

Q: Such as higher taxes on the wealthy?

A: Yes, and even higher taxes on corporations. I know that’s not where we are today, but it could happen in the future.

Q:What sectors of the economy and stock market are most sensitive to a widening of the wealth and income gap?

A: The consumer segment is No. 1, since rising inequality affects both the retail and services sectors and this area is 65% to 70% of U.S. gross domestic product. We have seen significant gains in home and stock prices, and nevertheless we have only seen relatively limited growth in consumer spending. So overall consumer spending has not benefited as much during this expansion because the wealth effect has been more unevenly distributed than in earlier years.

Q:Does your thinking drill down to sector or fund selection? Should one alter one’s portfolio to respond to this trend of rising inequality?

A: The trend is not directly investible as a theme with sector or stock-specific recommendations. It is more investible as a theme of political changes and risks from a more broad-based perspective.

Q:Would you say at least that this trend suggests a more risk-off mentality?

A: That’s exactly what I am saying: This is a macro risk that I think people are underappreciating. It’s been brewing in the background and is becoming something that people should pay attention to.

Q: Given that inequality has been growing just gradually over time, is there an argument to be made that it is almost too gradual to pose a real threat to markets for the next five years or longer?

A: That’s certainly possible.

Q: Do you think inequality will continue to widen in the next decade, or could it top out?

A: The trend will only change if politicians change policies. That’s because globalization, technology, and education polarization are things that are happening in the background that politicians really can’t do anything about.

Q: But the appetite for raising taxes, even on the rich, is low among politicians in this country. Are there other steps that politicians can take to reverse or slow down inequality?

A: Well, there are things you can do with subsidies in different forms. But essentially, reorganization of the tax system is important; if it doesn’t happen, this trend will continue. We are not predicting a revolution or any dramatic changes in societies anywhere in the U.S. or Europe. But what we are saying is that if these trends continue, politicians will probably be more and more under pressure to try to address these trends because the median voter won’t be benefiting.

Q: You mentioned subsides. What about the universal basic income, where the government provides a sizable stipend to citizens? It’s an idea that many corporate leaders, including Elon Musk and Mark Zuckerberg, have championed.

A: I’m reluctant to come with specific policy proposals because I don’t want it to get into a political discussion.

Q:I get your concern. Thanks for your time today.

Email: editors@barrons.com