July 19, 2014

AND THEY HAVE THE OPPORTUNITY TO LEAPFROG THE SECOND WAY:

Income Inequality Is Not Rising Globally. It's Falling. (TYLER COWEN, 7/19/14, NY Times)

Income inequality has surged as a political and economic issue, but the numbers don't show that inequality is rising from a global perspective. Yes, the problem has become more acute within most individual nations, yet income inequality for the world as a whole has been falling for most of the last 20 years. It's a fact that hasn't been noted often enough.

The finding comes from a recent investigation by Christoph Lakner, a consultant at the World Bank, and Branko Milanovic, senior scholar at the Luxembourg Income Study Center. And while such a framing may sound startling at first, it should be intuitive upon reflection. The economic surges of China, India and some other nations have been among the most egalitarian developments in history. [...]

The evidence also suggests that immigration of low-skilled workers to the United States has a modestly negative effect on the wages of American workers without a high school diploma, as shown, for instance, in research by George Borjas, a Harvard economics professor. Yet that same immigration greatly benefits those who move to wealthy countries like the United States. (It probably also helps top American earners, who can hire household and child-care workers at cheaper prices.) Again, income inequality within the nation may rise but global inequality probably declines, especially if the new arrivals send money back home.

From a narrowly nationalist point of view, these developments may not be auspicious for the United States. But that narrow viewpoint is the main problem. We have evolved a political debate where essentially nationalistic concerns have been hiding behind the gentler cloak of egalitarianism. To clear up this confusion, one recommendation would be to preface all discussions of inequality with a reminder that global inequality has been falling and that, in this regard, the world is headed in a fundamentally better direction.


Our fifteen-year old daughter is waiting tables at a local retirement home--we don't have enough immigrants to do it--and one of the benefits is a 401k.  When we explained the miracle of compound interest and what would happen to that money over the course of a lifetime, she and her brother wre slack-jawed. These emerging nations, particularly given the youth of their populations, have an opportunity to exploit there kind of Third Way welfare structures in ways that will make their succeeding generations wealthy exponentially faster than what we in the West achieved. 
Posted by at July 19, 2014 8:03 AM
  
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