Left unresolved, income inequality may lead to increased populism as "losers" from globalization express discontent through voting. Populists capitalize on this by promising to rollback globalization and scapegoating outsiders. While inequality between countries has declined as developing nations grow, inequality within countries is rising in many nations. Policies like education, inheritance taxes, and labor market regulations can impact inequality but often have mixed results. Both equality of opportunity and outcome are concerns, but inequality is a complex issue with no uniform answers.
Left unresolved, income inequality may lead to increased populism as "losers" from globalization express discontent through voting. Populists capitalize on this by promising to rollback globalization and scapegoating outsiders. While inequality between countries has declined as developing nations grow, inequality within countries is rising in many nations. Policies like education, inheritance taxes, and labor market regulations can impact inequality but often have mixed results. Both equality of opportunity and outcome are concerns, but inequality is a complex issue with no uniform answers.
Left unresolved, income inequality may lead to increased populism as "losers" from globalization express discontent through voting. Populists capitalize on this by promising to rollback globalization and scapegoating outsiders. While inequality between countries has declined as developing nations grow, inequality within countries is rising in many nations. Policies like education, inheritance taxes, and labor market regulations can impact inequality but often have mixed results. Both equality of opportunity and outcome are concerns, but inequality is a complex issue with no uniform answers.
• Left unresolved, income inequality may lead to "losers" from
globalization expressing discontent through the ballot box ○ Economic populism: blame trade for lost jobs (especially in manufacturing), migration for increased competition for low-wage work, MNCs for sending work abroad, conventional politicians for allowing globalization to happen in the first place ○ Populists (Brexiteers, Trump) capitalize on this discontent by promising to roll back globalization's frontiers. (British jobs for british workers, make america great again, build the wall) • Removes complexities of technologies, changing nature of work, demographics, savings, etc. to lay blame on easy targets (foreigners, migrants, etc.)
Inequality between countries
• Higher growth rates in middle income developing countries like China have contributed to significant declines, especially forming the 'elephant's head' • Simultaneous growth in all developing regions has helped improve results at the global level after assorted slowdowns ○ African shocks, Asian financial crisis, transition of Soviet bloc countries, Latin American debt crisis • B: Commodity exporters' fate less certain, especially those in sub-Saharan Africa
Inequality within Countries
• Common especially among larger OECD nations • Generally rising in Asian nations • Milanovic proposes "Kuznets waves" with inverted u-shaped patterns ○ Industrialization's onset increases inequality, backlash causes governments to take action to reduce this inequality • Ravallion believes initial conditions matter (endowment distribution, market competitiveness, etc) patterns ○ Industrialization's onset increases inequality, backlash causes governments to take action to reduce this inequality • Ravallion believes initial conditions matter (endowment distribution, market competitiveness, etc) • Mixed evidence on whether trade openness, financial integration increase inequality
Policies can impact Inequality
• M/B: Reduce endowment differences in human financial capital ○ Education, inheritance taxes, worker equity in firms, financial inclusion • Labor market policies can have mixed results, and outcomes are not uniformly favorable ○ France: lower income inequality from inflexible labor markets but higher unemployment. Reforms may reduce unemployment but increase income inequality, "in-work poverty" ○ Greater international migration would probably reduce global inequality, but there are several restrictions due to political factors • Role of safety nets from downside risks of globalization in wealthy countries can cushion the impact of greater international integration • That said, temporary unemployment benefits and the like have mixed evidence ○ Trade adjustment assistance in the US that provides funding for those who have lost their jobs for retraining in- demand skills • Welfare state is believed to be vulnerable to globalization (reduced tax base due to mobility of skilled workers/capital)
What kind of Inequality matters more?
• Internationalists would say global or between countries ○ Wider perspective than immediate surroundings ("cosmopolitan view") ○ Religions ascribe responsibility to all of "mankind" • Nationalists would say within countries ○ More self aware compare themselves with peers/those they encounter everyday ○ The farther away others are, the less we are aware of their situations (less salient for comparison purposes) • Nationalists would say within countries ○ More self aware compare themselves with peers/those they encounter everyday ○ The farther away others are, the less we are aware of their situations (less salient for comparison purposes) • Inequality is not a welfare judgment but it factors socially into considerations of relative deprivation, social exclusion
Atkinson: What kinds of Inequality are of concern?
• Equality of opportunity can be desired by removing circumstances (matters out of your personal control) from resulting outcome ○ Based solely on individual effort • Yet, inequality of outcome matters as well ○ Bad luck may work against effort on the part of the poor ○ Social construction of competitive activities ○ It affects prospects for the next generation absent intergenerational mobility (lessens incentives to put in effort Economists and Inequality • Until relatively recently, distribution has not ebeen a central concern economists ○ More political scientists ○ Economists: growth before its distribution (otherwise there is nothing to distribute) • Why be concerned? ○ Social cohesion is affected ○ Total production is affected by distribution Inequality needs "unpacking: as a term • Unequal life opportunities tend to be disliked by everyone abstracting from their own position • Material deprivations for the poor are objectionable on similar grounds • However, rising inequality may be tolerated if it brings sufficient benefits to the least advantaged ("trickle down") • Inequality of opportunities may matter less than lack of opportunities
Inequality as a "Gateway" Topic
• Group projects ○ Populism resulting from economic inequality ○ Automation increasing economic inequality opportunities
Inequality as a "Gateway" Topic
• Group projects ○ Populism resulting from economic inequality ○ Automation increasing economic inequality ○ Dominance of US techonology firms employing few workers in shaping the world economy • Previous topics, especially trade liberalization • Forthcoming topics ○ Global supply chains' economic consequences for home, host nations ○ True extent of globalization ○ Controversies over further economic migration