Lecture 6: Economic Inequality and Global Insecurity Flashcards

1
Q

Some argue too much equality is a bad thing

A

– Inhibits risk-taking
– Reduces funds for private investment
– Tax funds lost in leaky bucket

…Probably still some ‘optimal’ level though

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2
Q

Why care about inequality?

• If we think it is bad: two kinds of reasons

A

– Intrinsic: equality as a principle

– Instrumental: bad for other reasons

– Bad for growth, health, politics etc?

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3
Q

Who should we compare ourselves to?

A
  • Our neighbors?
  • Other people in our city?
  • Other people in our country?
  • Other people in the world?
  • To other countries?
  • To the overall global population?
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4
Q

How do we measure inequality?

A

– Shares of the pie?

– Income ratios?

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5
Q

Two examples that can look the same but feel very different

A
  1. Richest decile incomes remain constant; Incomes falling for bottom 90 percent
    • Pie shrinks, income-biased against bottom
  2. Incomes for both top decile and bottom 90 are both growing, but incomes in top 10 growing faster than incomes in the bottom 90
    • Pie grows, income-biased towards the top
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6
Q

Within-country inequality

A

Generally focused on understanding distribution of incomes within a country.

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7
Q

Between-country inequality

A

The world is closely linked through globalization, shaping
– Income levels
– Living costs
– Rules we face (environment, trade etc)
– Migration patterns
Allows us to see how the world is changing
– Are we headed towards a world of greater between-country inequality?

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8
Q

When did international inequality rise dramatically?

A

In the industrial revolution where the ‘western’ countries take off, leaving the rest mostly where they were

In early 1820 most countries are similarly rich (or poor)

Between 1870 and 1990: rich grow 5x as fast as the poorest

Ie pie gets much bigger, but it is highly unequally distributed across countries

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9
Q

But inter-country inequality seems to have peaked ~around new millennium
• Why?

A
– Fast growing Asian economies 
– Parts of Africa growing fast (>4% p.a.) 
– Latin America (3% p.a.) 
– Post-communist countries (6% p.a.) 
– Rich countries stricken with crises
•  What happens next is an open question
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10
Q

Within- and Between-Country Inequality

A

• Profound inequality of opportunity – Where you are born matters enormously!

• By being born here in UK (or moving here)
– Major boost to your expected income
– Not about effort – just luck

• Leads to migration

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11
Q

Take each person as a point in a global pool

A

– Rather than taking each country as a point
– Or even weighting country points by population

• Combines within- and between-country elements
– Global inequality = within-country inequality + between-country inequality

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12
Q

Global Inequality
Why is this useful?
What does it tell us?

A

– We care about people not places

– Illuminates complex patterns of inequality that spans borders

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13
Q

The ‘Global middle class’

A

– 1/5 of global pop between 40th-60th percentile
– in absolute terms, these are still poor people living on ~$15 a day
• Relative to their country they are also middle-class – Mostly China & India, also Thailand Vietnam,
Indonesia
– But income increased by 60-80% between 1988 and 2008

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14
Q

Global Inequality: Winners • Global plutocrats

A

– Global top 1% have seen income growth almost as large (in percentage terms) than global middle class

– Nearly all rich-country residents (half US); others mostly Western European, Japanese, a sprinkling of others (Brazil, Russia etc)

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15
Q

Global Inequality: Losers

• Workers between 80th-90th percentile

A
– Rich in absolute global terms
– Lower middle class in their respective countries

• Bottom 50th percentile of US, UK and Germany, Japan
– Minimal (<4%) or even negative income growth between 1988 and 2008

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16
Q

Inequality is a complex topic

A

– Measurement is tricky, and the scales and approaches matter
– Also a topic fraught with feelings and morality – We can hear what we want to hear
• With major potential implications
– Politics, health, migration, and economic well- being

17
Q

If we define globalization in terms of

A

– Greater trade and FDI
– Market-centric policies (with a retraction of protectionist welfare states)
• Are these to blame for the losers (and winners)?
– Trade and technology replacing rich country losers, with little safety net to help?
• Same forces also spurring winners?