Two decades earlier, in 1982, the ratio was just 42 to 1. The gap between boss and worker had ballooned ten-fold. You can hardly find a more stunning illustration of a widening income gap than these numbers.

However, the accuracy of these figures is in some dispute. Clearly how one values stock options granted to CEOs can make a lot of difference. How one defines "average production worker" will have a big impact too.

The exact figures notwithstanding, the trend is not in doubt. I'm sure the trend in Singapore is similar.

From what I've read, a number of factors have contributed to this, two of them coming under the rubric of "globalisation".

The biggest factor may well be China's opening up. Since the 1980s, an enormous pool of cheap labour has been made available to the global economy, dampening low-end salaries in the US (and everywhere else). Only now is the cost of a production worker in China rising significantly, a result of a tightening labour market at least in the industrialised coastal regions, and a rising Yuan relative to the US Dollar.

During the same period, the reduction of protectionism allowed companies to grow out of their home countries into new markets, sometimes through mergers and acquisitions. The leading companies transformed from being just American companies into global ones, with CEOs able to justify their compensation on the basis of much larger sales and profits.

Profits too increased through this period for another reason. As base employee salaries stagnated, a lower proportion of companies' revenue were redistributed as pay, a higher proportion retained as corporate profits. CEOs took the credit for these rosy results.

Some observers have also pointed to technology as the reason why more revenue is retained as corporate earnings rather than redistributed as employee pay. Technology has been improving efficiency steadily through these decades

All this is before taking into account a separate trend where hitherto progressive income tax has been made much less so by both the Ronald Reagan and George W Bush administrations. The effect was that as CEOs got more pay, they kept more of it.

The deflationary effect of China may be coming to an end, but already we are seeing Vietnam and very likely India stepping into Chinese shoes, as these two countries open up. So the world will continue to be awash with cheap labour for another generation at least.

How far can this trend go? I won't be able to make any guess, but neither will I be the least surprised if the CEO:worker pay ratio goes past 1000 to 1. Surely, in China, the ratio is well beyond that.

It may very well be that the 1982 ratio was an abnormality in terms of the world's economic history, and that obscene inequality is the natural state of affairs. The logic of wealth conferring power, which then is used to extract more wealth, may be one of these spirals that cannot self-correct.

Looking at recent history, it appears that it is politics that is needed to counteract it. For example, the last time there were such inequalities in America and Europe was the late 19th and early decades of the 20th century. Then too, the major economies had convertible currencies, relatively open markets, free flow of labour and galloping technological innovation. Then too, as huge numbers of farm workers came into the industrial economy there seemed a bottomless supply of cheap production workers.

But it ended. What presaged its end was the rise of trade unionism and socialist political ideology, forces that began to influence politics from the turn of the century onwards, e.g. the introduction of the progressive income tax in UK in 1909 and in the US in 1913. However, it took a major economic depression during which the already poorly-paid workers were left unemployed and destitute and the erstwhile middle class nearly as precarious, to tip the political balance against the economic system that then prevailed.

Socialist parties came to power in Europe, introducing even more progressive taxation, nationalising companies and passing laws that gave more job security to workers. They also beefed up other social welfare provisions like free healthcare and guaranteed pensions. In America, President Roosevelt might not have belonged to any socialist party, but in the face of the all the pain he saw around him, he had to adopt many similar policies, including the Social Security Act in 1935 and a federal statutory minimum wage law in 1938.

One consequence of having to adopt such interventionist policies was protectionism. No government is global; it only controls a certain patch of territory. If it needs to mandate wealth transfer, then it also needs to do something about leakage. When migrants come in freely, should the benefits go to them too? When imports can come in freely, how can your own factories survive if they have to pay higher wages? When your rich can take their money out of the country easily, how can you tax them?

So border controls on people, money and goods were erected and the first global economy came to an end.

Some people think that history moves in cycles; others say such an idea is way too simplistic. Is an economic upheaval on the horizon that will upend all the current rules and assumptions of the globalised economy game? It's difficult to say. There is no foreseeable US recession as bad as what happened in the 1930s.

But China bears watching. Already, this country reports 80,000 demonstrations a year, most of them derived from issues like unpaid wages, seizure of land, official corruption and abuse of powers. Already the income gap is enormously wide but as labour markets tighten and workers get more politicised, this can be source of conflict. Already the public healthcare system is creaking and as the population ages, the totally inadequate pension system will be another flashpoint.

And now inflation is rising to the point where the central government is worried enough to be taking more and more steps to combat it. Not too successfully so far.

If, at some point, revolt becomes all too possible and the Chinese government feels it must address social and economic inequality, even if new policies go against the grain of open markets and free trade, it's a big enough, self-sufficient enough country to do so. Once China breaks ranks with the mantra of globalisation, its example will tempt others.

I find it hard to believe that capitalism has won a final victory. There is a certain moral power in socialism that, while tarnished by the excesses of the mid 20th century and communism, remains alive still.

© Yawning Bread