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Arabica Robusta

Inequality As Policy: Selective Trade Protectionism Favors Higher Earners - 0 views

  • Globalization and technology are routinely cited as drivers of inequality over the last four decades. While the relative importance of these causes is disputed, both are often viewed as natural and inevitable products of the working of the economy, rather than as the outcomes of deliberate policy. In fact, both the course of globalization and the distribution of rewards from technological innovation are very much the result of policy. Insofar as they have led to greater inequality, this has been the result of conscious policy choices.
  • As it stands, almost nothing has been done to remove the protectionist barriers that allow highly-educated professionals in the United States to earn far more than their counterparts in other wealthy countries.
  • doctors in the United States earn an average of more than $250,000 a year, more than twice as much as their counterparts in other wealthy countries.
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  • in the last two decades developing countries taken as a whole have been running large trade surpluses with wealthy countries. This implies large trade deficits in rich countries, especially the United States, which in turn has meant a further loss of manufacturing jobs with the resulting negative impact on wage inequality. However, there was nothing inevitable about the policy shifts associated with the bailout from the East Asian financial crisis that led the developing world to become a net exporter of capital.
  • In this context, it would hardly be surprising if the development of “technology” was causing an upward redistribution of income. The people in a position to profit from stronger IP rules are almost exclusively the highly educated and those at the top end of the income distribution. It is almost definitional that stronger IP rules will result in an upward redistribution of income.
  • This upward redistribution could be justified if stronger IP rules led to more rapid productivity growth, thereby benefitting the economy as a whole. However, there is very little evidence to support that claim. Michele Boldrin and David Levine have done considerable research on this topic and generally found the opposite.
  • While tax and transfer policies that reduce poverty and inequality may be desirable, we should also be aware of the ways in which policy has been designed to increase inequality. It is much easier to have an economic system that produces more equality rather than one that needlessly generates inequality, which we then try to address with redistributive policies.
Arabica Robusta

Does The Richness Of The Few Benefit Us All? By Zygmunt Bauman - 0 views

  • In the era of the Enlightenment, during the lifetimes of Francis Bacon, Descartes or even Hegel, in no place of Earth the standard of living was more than twice as high as in its poorest region. Today, the richest country, Qatar, boasts an income per head 428 times higher than the poorest, Zimbabwe. And these are, let’s never forget, comparisons between averages – and so akin to the facetious recipe for the hare-and-horsemeat paté: take one hare and one horse…
  • As the authors of the quoted article warn, the prime victim of deepening inequality will be democracy – as increasingly scarce, rare and inaccessible paraphernalia of survival and acceptable life become the object of a cut-throat rivalry (and perhaps wars) between the provided-for and the left-unaided needy.
  • And he adds: “Growing income inequality, though obviously undesirable from a social perspective, doesn’t necessarily matter if everyone is getting richer together. But when most of the rewards of economic progress are going to a comparatively small number of already high income earners, which is what’s been happening in practice, there’s plainly going to be a problem.” [ii]
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  • According to the Helsinki-based World Institute for Development Economics, people in the richest one percent of the world population are now almost 2000 times richer than the bottom 50 per cent. [v]
  • Ten years later François Bourguignon [viii] found out that while the planetary inequality (between national economies), if measured by the average income per head, continues thus far to shrink, the distance between richest and poorest national economies continues to grow, and internal income differentials inside countries continue to expand.
  • As long ago as in 1979, a Carnegie study [x] vividly demonstrated what an enormous amount of evidence available at that time suggested and common life experience continued daily to confirm: that each child’s future was largely determined by the child’s social circumstances, by the geographical place of its birth and its parents’ place in the society of its birth – and not by its own brains, talents, efforts, dedication.
  • This is how Joseph Stiglitz sums up the revelations brought up by the dramatic aftermath of the two or three arguably most prosperous decades-in-a-row in history of capitalism that preceded the 2007 credit collapse, and of the depression that followed: inequality has always been justified on the grounds that those at the top contributed more to the economy, performing the role of “job creators” – but “then came 2008 and 2009, and you saw these guys who brought the economy to the brink of ruin walking off with hundreds of millions of dollars.”
  • In his latest book The Price of Inequality (WW Norton & Company 2012), Stiglitz concludes that the US has become a country “in which the rich live in gated communities, send their children to expensive schools and have access to first-rate medical care. Meanwhile, the rest live in a world marked by insecurity, at best mediocre education and in effect rationed health care.”
  • Stewart Lansey falls in with Stiglitz’s and Dorling’s verdicts that the power-assisted dogma meriting the rich with rendering society service by getting richer is nothing more than a blend of a purposeful lie with a contrived moral blindness: according to economic orthodoxy, a stiff dose of inequality brings more efficient and faster growing economies. This is because higher rewards and lower taxes at the top – it is claimed – boost entrepreneurialism and deliver a larger economic pie.
Arabica Robusta

Piketty and the Crisis of Neoclassical Economics | John Bellamy Foster | Monthly Review - 0 views

  • But Piketty advances such an argument without breaking completely with the architecture of neoclassical economics. His theory thus suffers from the same kind of internal incoherence and incompleteness as that of Keynes, whose break with neoclassical economics was also partial. Deeply concerned with issues of inequality, just as Keynes was with unemployment, Piketty demonstrates the empirical inapplicability over the course of capitalist development of the main conclusions of neoclassical marginal productivity theory. His work has thus served to highlight the near-complete unraveling of orthodox economics—even while staying analytically within the fold.28
  • This overall incoherence, as we shall see, ultimately overwhelms Piketty’s argument. He is unable to explain why capitalist economies tend to grow so slowly as to generate such a divergence between wealth and income (and between capital and labor). Hence, while his analysis sees slow growth or relative stagnation as endemic to this system, he neither explains this nor is concerned directly with it. Significantly, he replaces more traditional notions of capital as a social and physical phenomenon with one that equates it with all wealth.29
  • Nor does he address the relations of power—principally class power—that lie behind the inequality that he delineates. His analysis is confined largely to distribution rather than production. He neither follows nor (by his own admission) understands Marx, though at times clearly draws inspiration from him.31
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  • But even with these and other deficiencies, Piketty, nevertheless, brings a certain degree of reality—even a sense of “class warfare” (if only implicitly)—back to bourgeois economics. The result is to heighten the crisis of neoclassical theory. Moreover, he argues—even though he dismisses the idea as “utopian”—for the imposition of a tax on wealth.33 Piketty thus represents a partial revolt within the inner chambers of the economics establishment.
  • Edward Wolff has pioneered the study of wealth data in the United States. In his most recent paper, he finds that the average (mean) net worth of the wealthiest 1 percent in 2010 was $16.4 million. By contrast the average for the least wealthy 40 percent was $–10,600 (that is, it was negative!).39
  • Piketty has no notion of capital as an exploitative social relationship.
  • However, beginning in the mid–1970s, capital made a remarkable comeback, and the ratio began to climb, and is now approaching the level that existed at the start of the First World War. Public capital has been privatized and political regimes throughout the world have been very well disposed toward the interests of wealth-holders.43
  • He shows that throughout the eighteenth and nineteenth centuries, and right up until the First World War, wealth in most rich nations equaled six to seven years of national income.
  • If the rate of return on capital r is greater than the growth rate of the economy g, then capital’s share of income will rise. Piketty shows that over very long periods of time, r has in fact been greater than g; in fact, this is the normal state of affairs in capitalist economies.
  • He finds that there is a direct and significant correlation between the size of the endowment and the rate of return on it. Between 1980 and 2010, institutions with endowments of less than $100 million received a return of 6.2 percent, while those with riches of $1 billion and over got 8.8 percent. At the top of the heap were Harvard, Princeton, and Yale, which “earned” an average return of 10.2 percent.49 Needless to say, when those already extraordinarily rich can obtain a higher return on their money than everyone else, their separation from the rest becomes that much greater.
  • Reality could not be more different than what neoclassical theory leads one to expect. In the United States, real weekly earnings for all workers have actually declined since the 1970s and are now more than 10 percent below their level of four decades ago. This reflects both the stagnation of wages and the growth of part-time employment.50 Even when considering real median family income that includes many two-earner households there has been a decrease of around 9 percent from 1999 to 2012.51
  • But how does this relate to issues of class struggle and class power? What are the consequences of these realities in terms of control of corporations, the economy, the state, the culture, and the media? Piketty, though making a few tantalizing allusions, tells us next to nothing about this.
  • “The neglect of power in mainstream economics,” as the heterodox Austrian economist Kurt Rothschild wrote in 2002, “has its main roots…in deliberate strategies to remove power questions to a subordinate position for inner-theoretic reasons,” such as the search for mathematical models with a high degree of mathematical certainty.
  • It goes without saying that Piketty’s acceptability to neoclassical economics is dependent on his avoidance of the question of inequality and power.
  • Just as class power tends to concentrate, so does the power of the increasingly giant, oligopolistic firms which, in economic parlance, reap monopoly power, associated with barriers to entry into their industries and their ability to impose a greater price markup on prime production costs (primarily labor costs).
  • Writing for the Wall Street Journal, Peter Thiel, co-founder of PayPal, declared that “Capitalism is premised on the accumulation of capital, but under perfect competition, all profits get competed away…. Only one thing can allow a business to transcend the daily brute struggle for survival: monopoly profits…. Monopoly is the condition for every successful business.” Indeed, this might even stand as the credo of today’s generalized monopoly capital.64
  • For Piketty himself there is no organic relation between the two main tendencies that he draws in Capital in the Twenty-First Century—the tendency for the rate of return on wealth to exceed the growth of income and the tendency toward slow growth. Nor is his analysis historical in a meaningful sense, which requires scrutiny of the changing nature of social-class relations. Increasing income and wealth inequality are not developments that he relates to mature capitalism and monopoly capital, but are simply treated as endemic to the system during most of its history.
  • Here it is useful to recall that for Keynes the danger was not only one of secular stagnation but also the domination of the rentier. He thus called for the “euthanasia of the rentier, and consequently the euthanasia of the cumulative oppressive power of the capitalist to exploit the [artificial] scarcity-value of capital.”69 In today’s financialized capitalism, we face, as Piketty recognizes, what Keynes most feared: the triumph of the rentier.70 The “euthanasia of the cumulative oppressive power of the capitalist” is needed now more than ever. This cannot be accomplished by minor reforms, however—hence Piketty’s advocacy of what he calls a “useful utopia,” a massive tax on wealth.71
  • It is significant that imperialism plays no role in Piketty’s analysis, neither in explaining the growth of wealth and wealth inequalities, nor even in the analysis of past growth, or prognostication of future growth. On the contrary the book is informed by a perception according to which capitalist growth in one region…is never at the expense of the people of another region, and tends to spread from one region to another, bringing about a general improvement in the human condition.
  • Significant in this respect is that he chose as the epigraph of his book a line from the Declaration of the Rights of Man and Citizen from the French Revolution: “Social Distinctions can be based only on common utility.”75
  • One could hardly pick a statement more opposed to the system in which we live, which seeks not the common but the individual utility.
Arabica Robusta

The Kilburn Manifesto: our challenge to the neoliberal victory | Stuart Hall | Comment ... - 0 views

  • What is new about this phase of capitalism? Its global interconnectedness, driven in part by new technologies, and the dominance of a new kind of finance capitalism mean that, while a crisis of this system has effects everywhere, these effects are uneven. So far the Bric countries seem relatively unscathed, while the impact of economic devastation has spread from Asia and Africa into Europe.
  • The breakdown of old forms of social solidarity is accompanied by the dramatic growth of inequality and a widening gap between those who run the system or are well paid as its agents, and the working poor, unemployed, under-employed or unwell.
  • Neoliberalism's victory has depended on the boldness and ambition of global capital, on its confidence that it can now govern not just the economy but the whole of social life. On the back of a revamped liberal political and economic theory, its champions have constructed a vision and a new common sense that have permeated society. Market forces have begun to model institutional life and press deeply into our private lives, as well as dominating political discourse. They have shaped a popular culture that extols celebrity and success and promotes values of private gain and possessive individualism. They have thoroughly undermined the redistributive egalitarian consensus that underpinned the welfare state, with painful consequences for socially vulnerable groups such as women, old people, the young and ethnic minorities.
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  • Outside party politics new social movements, including environmental, anti-cuts and feminist groups, have not come together sufficiently with the old, defensive organisations of the working class to produce the coalition that might make them an effective political force.
  • This is no time for simple retreat. What is required is a renewed sense of being on the side of the future, not stuck in the dugouts of the past. We must admit that the old forms of the welfare state proved insufficient. But we must stubbornly defend the principles on which it was founded – redistribution, egalitarianism, collective provision, democratic accountability and participation, the right to education and healthcare – and find new ways in which they can be institutionalised and expressed.
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