From researchers Steven A. Altman and Phillip Bastian:
Despite recent trade turbulence, the ratio of gross exports to world GDP is still remarkably close to its all-time high. Even after falling from a peak of 32% in 2008 to 29% in 2019, this measure of global trade integration is still 20% higher than it was in 2000, twice as high as it was in 1970, and almost six times higher than in 1945. ... Globalization can go into reverse—as demonstrated by the trendlines between the 1920s and 1950s—but recent data do not depict a similar reversal. ...
[T]he world is—and will remain—only partially globalized. Globalization can rise or fall significantly without getting anywhere close to either a state where national borders become irrelevant or one where they loom so large that it is best to think of a world of disconnected national economies. All signs point to a future where international flows will remain so large that decision-makers ignore them at their peril, even as borders and cross-country differences continue to make domestic activity the default in most areas.
Economist Timothy Taylor reviews the report and offers other insights: What's Happening with Global Connectedness in the Pandemic?
The chart below is based on maternal mortality rates, the number of women per 100,000 who die from pregnancy-related causes in a year. The first bar shows how many women die each year while the second bar shows how many would die if they had Europe’s living standards. What conclusions would you draw?
The global rate is 216, while the European rate is 8. The global rate is 27 times higher! About 290,000 women die each year because they do not have the living standards of the most affluent countries.
I would hope this would spark a sense of injustice. Something is wrong with a system that creates such a disparity in outcomes. Surely, we must upend this inequitable system and replace it with something just.
Now look at the second chart. What conclusions would you draw?
Prior to 1800, the global maternal mortality rate was 900. Today it is 216! It has dropped by 75%. By historic standards, this borders on miraculous. Something is right about a system that radically improves human well-being. How can we preserve and extend the improvement? (Note: The global rate dropped steadily from 385 in 1990, to 216 in 2015. The trajectory continues rapidly downward.)
A holistic view of human well-being will take into consideration this chart, including all three bars.
Some observations.
First, without the systems that developed over the past two centuries, we would have a more equitable maternal mortality rate. No place on earth would have a rate of 8 deaths OR of 216 deaths. We would still have a very equitable world of 900 deaths. Is that “equality” preferable to the 8 vs 216 inequality of today? I do not think many would agree. The 8 vs 216 differential is a good thing relative to the historic alternative.
Second, that some locales have a rate of 8, points to the possibility of a world where this level of well-being spans the globe. Justice requires that what we pursue this equitable outcome. We must be looking back to understand what brought us to where we are and we must be discerning about obstacles block this objective going forward.
Third, I am using maternal mortality rates as a symbol of broader improvement in human well-being in recent generations, sometimes called the Great Divergence. Appreciating this great divergence from human history neither requires us, in some consequentialist way, to a) embrace all that has developed in the past couple of centuries nor b) to refrain from asking rigorous questions about justice going forward. There have been profound injustices and inequities in the world of the past two centuries. There obviously are today. And yet, the Great Divergence happened and it continues. Lack of historical context and blindness to trajectories, can lead us to snap-shot-in-time views that inspire us to well-intentioned but destructive actions, destroying good in the process. Keep what works and adjust with discernment. Neither revolution nor complacency will do.
Interesting infographic from McKinsey Global Institute. For details read Globalization in transition: The future of trade and value chains.
The following quote comes from Runaway World: How Globalization is Reshaping Our Lives. It was written in 1998, by British sociologist, Anthony Giddens.
What Globalisation is, and whether it is in any way new, are the focus of intense debate. I discuss this debate in Chapter I, since much else hangs upon it. Yet the facts of the matter are actually quite clear. Globalisation is restructuring the ways in which we live, and in a very profound manner. It is led from the west, bears the strong imprint of American political and economic power, and is highly uneven in its consequences. But globalisation is not just the dominance of the West over the rest; it affects the United States as it does other countries.
Globalisation also influences everyday life as much as it does events happening on a world scale. That is why this book includes an extended discussion of sexuality, marriage and the family. In most parts of the world, women are staking claim to greater autonomy than in the past and are entering the labour force in large numbers. Such aspects of globalisation are at least as important as those happening in the global-market place. They contribute to the stresses and strains affecting traditional ways of life and cultures in most regions of the world. The traditional family is under threat, is changing, and will change much further. Other traditions, such as those concerned with religion, are also experiencing major transformations. Fundamentalism originates from a world of crumbling traditions.
The battleground of the twenty-first century will pit fundamentalism against cosmopolitan tolerance. In a globalising world, where information and images are routinely transmitted across the globe, we are all regularly in contact with others who think differently, and live differently, from ourselves. Cosmopolitans welcome and embrace this cultural complexity. Fundamentalists find it disturbing and dangerous. Whether in the areas of religion, ethnic identity or nationalism, they rake refuge in a renewed and purified tradition – and, quite often, violence.
We can legitimately hope that a cosmopolitan outlook will win out. Tolerance of culture diversity and democracy are closely connected, and democracy is currently spreading world-wide. Globalisation lies behind the expansion of democracy. At the same time, paradoxically, it exposes the limits of democratic structures which are most familiar, namely the structures of parliamentary democracy. We need to further democratize existing institutions, and to do so in ways that respond to the demands of the global age. We shall never be able to become the master of our own history, but we can and must find ways of bringing our runaway world to heel. (3-5)
This short collection of essays has stuck with me ever since I first read it years ago. As I have reflected on the American political scene of the past two years, the insights of this book have become ever more prescient. I see the rise of Trump nationalism as a reactionary response to globalization. (This is not conservatism vs progressivism as we have recently understood them.) It is the death throes of the 20th Century world order. It may be short-lived. It may last a generation. But I suspect that it is ultimately doomed. Over the long-haul, globalization is an inescapable dynamic. However, that does not mean that great harm to human well-being and to the planet will not happen during these death throes.
Since at least the 18th Century, we have seen an unprecedented improvement in human well-being, accelerating through the 19th Century down to the present, spreading around the world. But we should not forget that this improvement was punctuated by a retreat from globalization, resulting in two destructive world wars bracketing a global depression. One hundred years from now, I suspect global human well-being will have made substantial strides over our present living standards. I think globalization is virtually inevitable because we have amassed enough information and experience to see that a globalized world, for all its present vagaries and challenges, is the path to mutual common good. What is much less clear is what happens in the short term. I suspect that this is the biggest turning point in world that most of us now living will ever experience.
The world is becoming a better place. It is not utopia. We are not without substantial challenges. But we are becoming (as in movement along a trajectory) better (as in measurably improved according to a standard.)
The Human Development Index is a United Nations measure of well-being combing data about income, literacy, education, and life expectancy. Here is the index for the nations of the world in 1980 and then in 2012. The reality is that we are living through the most astonishing transformation toward human well-being in all of history. You can find the interactive version of the chart at Our Data.
Are you smarter than a chimp? When it comes to knowledge about global socioeconomic trends, there is a good chance you are not. For years, Swedish global health expert, Hans Rosling, has been giving Ted talks and making presentations about global trends. One his favorite teaching tools is to ask people a question like this:
Globally, over the past 20 years, the rate extreme poverty has:
Now chimps will select at random, giving a 33% chance of each answer. Yet when Rosling asks audiences, at least half will say A, a sizable percentage will say B, while a few will say C. Yet C is the correct answer! This is the case on one variable after another. Audiences routinely score worse than chimps, choosing the most negative option.
As an old adage has it, "It isn't what we don't know that gets us in trouble. It's what we know that ain't so." That we routinely pick the wrong answer more often than chimps shows that we clearly we have bias.
In the Ted talk, How not to be ignorant about the world, Hans' son Rosling notes that part of the problem is our education system. Teachers go to college at a particular point in time and learn the state of the world at that time. But they tend not to learn about ongoing developments. The data has often been hard to come by and hard to interpret. So teachers are biased by what they learned years ago. (Reporter have the same problem.) But there are other factors.
During our evolutionary history, our brains became wired to notice threats. Hunters walking through the brush who were attentive to the possibility of tigers lying in wait, likely survived those who went about carelessly enjoying a beautiful day. So when we reflect on broad human trends, we are disposed to fixate on perceived threats. What was useful for us in the wild, is counter-productive for us as we try to interpret socioeconomic trends. If you want to outscore a chimp on an exam about global well-being, Ola Rosling suggests that you must drop your predispositions and adopt these four rules of thumb:
1. Assume most things are improving.
2. Assume most people are in the middle of a distribution, not a binary of rich and poor.
3. Assume social development precedes becoming wealthy. (Don’t assume that a population must be rich before meeting basic social needs.)
4. Assume you are exaggerating the threat if the topic is something about which you personally have great fear.
Additionally, Hans, Ola, and others have been working to build the Gapminder website to provide you with data that can be presented in meaningful ways. But one of the most important contributions the Roslings have made is their collection of entertaining and informative videos. In this post I am including every video I can find with a brief annotation. (I'll add more as I find any.) Many of the videos overlap or cover similar data but they are all well worth viewing. So here is your resource for becoming smarter than a chimp. Don't say I never gave you anything.
(This link also has links to most of these videos including some shorts not listed here: Gapminder Video)
Hans Rosling's 200 Countries, 200 Years, 4 Minutes (2010)
If you are just getting acquainted with Rosling, I'd begin here. This 4 minute presentation gives you a quick sense of what he is talking about.
Hans and Ola Rosling: How not to be ignorant about the world. TED June 2014
This is the second video to watch. The front half is Hans making his case that the world is improving and the back half is Ola explaining, as I recounted above, why are so disinclined to see positive change.
Hans Rosling: The magic washing machine. TED December 2010
This is the third one to watch. This one of my favorites. While fully embracing the concern about environmental impacts of economic growth, Rosling shows the importance of economic growth through the story of the washing machine.
THE REST ARE IN CHRONOLOGICAL ORDER
Hans Rosling: The best stats you've ever seen. TED February 2006
The TED presentation that kicked it all off. He focuses on the positive changes underway in world and points to his efforts to liberate, integrate, and animate data, and to find ways to present data the public finds understandable.
Hans Rosling: New Insights on Poverty. TED March 2007
Rosling shows that social development tends to precede economic development. He addresses the issue that unfortunately to date, economic development has always been based on fossil fuels. Higher yields, technology, and markets are key to ending poverty but there are more dimensions that need our attention like human rights, environment, governance, economic growth, education, health, and culture. The ending has a great surprise!
Human Rights and Democracy Statistics- Gapminder c. 2008
Rosling describes why human rights are so hard describe and evaluate.
Yes they can! - Gapminder c. 2008
Rosling explains that poor nations will one day become prosperous and we should welcome that.
Poor Beats Rich in MDG Race - Gapminder c. 2008
Rosling shows that countries that have developed from poverty to well-being have done so at far faster rates that Western nations did. Poor countries today can make the transition much quicker because of what previous countries have learned.
What stops population growth? - Gapminder c. 2008
The key to ending population is small families, and the key to small families is childhood survival.
Hans Rosling: Insights on HIV, in stunning data visuals. TED February 2009
Uses Gapminder data to show nuances in how AIDS has spread and what it takes to defeat it.
Hans Rosling: Let my dataset change your mindset. TED June 2009
This is the third video should watch. Rosling deconstructs the dichotomy of wealthy and developing nations, and challenges the idea of thinking in sweeping terms like "Africa."
The Joy of Stats with Professor Hans Rosling - Gapminder c. 2010
Rosling shows how making data available and animating is empowering people to make better decisions, sometimes without really realizing they are using statistics.
Hans Rosling: Asia's rise -- how and when. TED Nov 2009
Rosling forecasts when China and India catches up with the USA and UK.
Hans Rosling: Global population growth, box by box. TED June 2010
Rosling says that child survival is the new green. This video explains why.
Hans Rosling: The good news of the decade? We're winning the war against child mortality. TED September 2010
Rosling breaks down the remarkable trends in child mortality. Education of women accounts for at least 50% of the drop.
Hans Rosling: Religions and babies. TED April 2012
Religion is not a factor in family size. No significant difference between Islamic and Christian countries when it comes to births per woman. The defining difference is economic well-being.
DON'T PANIC — Hans Rosling showing the facts about population. BBC November 2013
A one hour investigation into the dynamics of population growth using stories about real live families interspersed with Rosling's entertaining presentation of data.
Don't Panic - How to End Poverty in 15 Years. BBC September 2015
No embed is available.
Here is a link to a series of short videos on how to use development data visually.
An introduction to visualising development data
Conversable Economist: The Rise of Remittances
"Here's a pattern showing the rise in remittances over time compared to some other international financial flows. Back in 1990, international remittances were lower than official development assistance (ODA). Flows of foreign direct investment (FDI) to developing countries were also smaller than ODA, as were flows of private debt and portfolio equity to developing countries. (The FDI flows to developing countries show here exclude China.) Remittances have been larger than development assistance for some years now, and the gap is growing. Perhaps more surprising, remittances also outstripped debt and portfolio equity flows to developing countries in recent years. The flows of remittances also look quite stable compared to other private-sector capital flows."
Conversable Economist: Americans, Led by Democrats, Get Friendlier With Free Trade
" ... I welcome the overall shift toward a more positive view of foreign trade among Americans. As I've argued on this blog before, the next few decades seem likely to be a time when the most rapid economic growth is happening outside the high-income countries of the world, and finding ways for the US economy to connect with and participate in that rapid growth could be an important driver of US economic growth in the decades ahead. In a broad sense, US attitudes over foreign trade mirror the behavior of the US trade deficit: that is, when the US trade deficit was getting worse in the early 2000s, the share of those viewing trade as a "threat" was rising, but at about the same time that the US trade deficit started declining, the share of those viewing trade as an "opportunity" started to rise.
Pew Research Center: Chart of the Week: How two decades of globalization have changed the world
(Source: Milanovic, B., Lead Economist, World Bank Research Department, Global income inequality by the numbers. Annotations by James Plunkett.)
I have seen the unannotated version of this graph several times but the annotations really make things clear. The graph shows that much more is going on here than simplistic narratives of "The are getting richer, and the poor are getting poorer" (the graph discredits the second half of that statement) and the 1% versus everyone else.
Atlantic: Will There Be Any Poor Countries Left in the World in 20 Years?
Bill and Melinda Gates Foundation:
We hear these myths raised at international conferences and at social gatherings. We get asked about them by politicians, reporters, students, and CEOs. All three reflect a dim view of the future, one that says the world isn’t improving but staying poor and sick, and getting overcrowded.
We’re going to make the opposite case, that the world is getting better, and that in two decades it will be better still. ...
... By 2035, there will be almost no poor countries left in the world. Almost all countries will be what we now call lower-middle income or richer. Countries will learn from their most productive neighbors and benefit from innovations like new vaccines, better seeds, and the digital revolution. Their labor forces, buoyed by expanded education, will attract new investments.
Washington Post: 40 charts that explain the world
Our friend and colleague Max Fisher over at Worldviews has posted another 40 maps that explain the world, building on his original classic of the genre. But this is Wonkblog. We're about charts. And one of the great things about charts is that they show not just how things are -- but how they're changing.
So we searched for charts that would tell not just the story of how the world is -- but where it's going. Some of these charts are optimistic, like the ones showing huge gains in life expectancy in poorer nations. Some are more worryisome -- wait till you see the one on endangered species. But together they tell a story of a world that's changing faster than at arguably any other time in human history. ...
As the author notes, we have challenges but we hardly descending into some global dystopia. I think these charts give a pretty holistic view. Here are a three examples.
It was commonly believed that primitive societies were more peaceful and that modern civilization gave rise to unprecedented violence. This chart compares death rates by war in primitive societies as calculated by anthropologists to the death rates for Europe/USA in the 20th century.
And then there is this:
The graphs point to environmental protection and adaptation as the biggest problems in the days ahead. Those challenges are not insurmountable. Energy sources like natural gas and nuclear power can be used in the interim on the way to practical renewable technologies. Genetically modified crops can help to reduce water consumption, increase yield, and improve hardiness. Innovations in fields like biotechnology, nanotechnology, and 3-D printing hold the promise of revolutionizing the world economy into a less wasteful and more affordable human existence for everyone. There is work to do but there is also much reason for hope of a better world.
There articles caught my eye this week. First, in the Atlantic: Bash Brothers: How Globalization and Technology Teamed Up to Crush Middle-Class Workers
Globalizationandtechnology is often referred to like a monolithic thing. A new study shows they're very separate. Globalization increases joblessness. Computers increase inequality.
The article is reporting on a recent economic study: Untangling Trade and Technology: Evidence from Local Labor Markets
... Here's the bumper sticker version of their conclusion: Globalization increases unemployment; technology increases inequality.
Globalization: The authors found that metros with more exposure to Chinese trade -- mostly concentrated in the swoosh of states extending from Indiana down to the Gulf of Mexico and up through North Carolina -- saw significant job losses, both in manufacturing and overall. For every $1,000 increase in imports per worker, the share of people with jobs declined by 0.7 percentage points -- and more for non-college grads. As manufacturing jobs declined, demand for local services would decline, and thus job losses could extend into areas like retail and hotels.
Technology: The computerization of certain tasks hasn't reduced employment, the authors find. But it has reduced the availability of decent-paying, routine-heavy jobs. Middle-class jobs, like clerks and sales people and administration support, have disappeared as computers gradually learned to perform their routines more efficiently. But as those jobs disappeared, cities saw an increase in both high-skill work and lower-paid service sector work, leading to little overall change in employment. ...
CNBC has an article (published at Huff Post) Where The 1 Percent Really Get Their Money:
Much of the debate over taxing the wealthy focuses on taxing giant salaries.
But a new study from the nonpartisan Tax Policy Center found that the real money for the wealthy is made from investments and business income—not compensation. ...
And Mark Perry recaps this article in the Journal of Economic Perspecitives: Stunning new study dismantles Obama’s “1% vs. 99%” inequality argument.
The JEP article is here: It's the Market: The Broad-Based Rise in the Return to Top Talent
Perry summarizes:
In their paper, Kaplan and Rauh conclude “it’s the market” rather than some class-wafaresque malfeasance at play. Here’s why:
1.The increase in pay at the highest income levels is broad-based: Public company executives, private company executives, hedge fund and private equity investors, Wall Street bankers, lawyers, and pro athletes have all experienced big jumps in pay over the past few decades. ...
2. Typical measures of high-end income inequality are incomplete. Inequality alarmists typically point to data from Thomas Piketty and Emmanel Saez which show the share of taxable income accruing to the top 1% up markedly since 1980 and at levels not seen since the Roaring ’20s. Yet once you add back transfer and taxes, as the Congressional Budget Office does in its analysis, you find that government policy — including the tax code — has already been restraining the rise inequality. Kaplan and Rauh: “In the most recent data from 2009, the aftertax, after-transfer income share of the top 1 percent was around the same level as in 1987–1988, 1996, and 2001.”
3. The superrich are getting that way through effort and
education — particularly in industries where tech and globalization play
a big role — rather than through inheritance: ...
It has long been my suspicion that at central player in the rise of inequality is due to the ongoing race between technological innovation and development of human capital. During times of rapid increase in productivity through technological changes, owner of the technology race ahead. Worker education and formation human capital is slower to adapt. But technology can only go so far before it must have plentiful workers who have adapted. As this the gain from technology runs its course the demand for new workers increases labor begins to race ahead. I'm no expert on these matters but it seems to that something like that is happening today. It isn't just the U.S. that experiences this, but the whole industrialized world. Something more systemic seems to be afoot.
Quartz: The world’s middle class will number 5 billion by 2030
Millions of newly affluent people in emerging economies are reshaping and resizing the global middle class. The world’s middle class will swell from 2 billion to almost 5 billion by 2030, with most of that growth coming from developing countries, according to the Organisation for Economic Co-operation and Development. The world population in 2030 is expected to be about 8 billion.
The OECD defines “middle class” as making $10 to $100 a day, adjusted for the purchasing power of each currency. Today, people in developing countries make up almost 30% of the world’s consumer spending, up from 18% a decade ago as they become middle class. This change, what the US National Intelligence Council called a ”tectonic shift,” is one the most important trends for the next several decades. ...
Atlantic: Showing the American Manufacturing Worker Is Suddenly an Incredible Bargain
This month's Atlantic magazine predicts that we are on the verge of a U.S.-based manufacturing renaissance, as companies see the advantages to making more goods at home, such as more control over the final product, lower energy costs from moving goods across an ocean, and a falling "wage gap."
Simply put, U.S. factory workers are a much better deal than they were just ten years ago. ...
Atlantic Cities: In the Global Economy, All Job Creation Is Local
But these are fairly predictable answers. So here's something weirder and more colorful: As economics went global, job creation went local. That sounds totally backward. But it's true. ...
Here is his graph showing job creation by year:
Here is his conclusion:
About half of the jobs created between 1990 and 2008 (before our current downturn) were created in education, health care, and government. What do those sectors have in common? They're all local. You can't send them to Korea. As Michael Spence has explained, corporations have gotten so good at "creating and managing global supply chains" that large companies no longer grow much in the United States. They expand abroad. As a result, the vast majority (more than 97 percent, Spence says!) of job creation now happens in so-called non-tradable sectors -- those that exist outside of the global supply chain -- that are often low-profit-margin businesses, like a hospital, or else not even businesses at all, like a school or mayor's office.
It is both ironic and unavoidably true that the era of globalized profits has dovetailed with the era of localized job creation in low value-added industries, and that the upshot of this has been massive gains at the top and slow overall income growth for the rest of us.
National Geographic has a fascinating interactive map at their website that gives some valuable socio-economic perspective. The World of Seven Billion
Federal Reserve Bank of San Francisco: The U.S. Content of “Made in China”
Abstract
Goods and services from China accounted for only 2.7% of U.S. personal consumption expenditures in 2010, of which less than half reflected the actual costs of Chinese imports. The rest went to U.S. businesses and workers transporting, selling, and marketing goods carrying the "Made in China" label. Although the fraction is higher when the imported content of goods made in the United States is considered, Chinese imports still make up only a small share of total U.S. consumer spending. This suggests that Chinese inflation will have little direct effect on U.S. consumer prices.
Article
The United States is running a record trade deficit with China. This is no surprise, given the wide array of items in stores labeled “Made in China.” This Economic Letter examines what fraction of U.S. consumer spending goes for Chinese goods and what part of that fraction reflects the actual cost of imports from China. We perform a similar exercise to determine the foreign and domestic content of all U.S. imports.
In our analysis, we combine data from several sources: Census Bureau 2011 U.S. International Trade Data; the Bureau of Labor Statistics 2010 input-output matrix; and personal consumption expenditures (PCE) by category from the U.S. national accounts of the Commerce Department’s Bureau of Economic Analysis. We use the combined data to answer three questions:
• What fraction of U.S. consumer spending goes for goods labeled “Made in China” and what fraction is spent on goods “Made in the USA”?
• What part of the cost of goods “Made in China” is actually due to the cost of these imports and what part reflects the value added by U.S. transportation, wholesale, and retail activities? That is, what is the U.S. content of “Made in China”?
• What part of U.S. consumer spending can be traced to the cost of goods imported from China, taking into account not only goods sold directly to consumers, but also goods used as inputs in intermediate stages of production in the United States?
Answers?
Although globalization is widely recognized these days, the U.S. economy actually remains relatively closed. The vast majority of goods and services sold in the United States is produced here. In 2010, imports were about 16% of U.S. GDP. Imports from China amounted to 2.5% of GDP. ...
... Obviously, if a pair of sneakers made in China costs $70 in the United States, not all of that retail price goes to the Chinese manufacturer. In fact, the bulk of the retail price pays for transportation of the sneakers in the United States, rent for the store where they are sold, profits for shareholders of the U.S. retailer, and the cost of marketing the sneakers. These costs include the salaries, wages, and benefits paid to the U.S. workers and managers who staff these operations. ...
... This U.S. fraction is much higher for imports from China. Whereas goods labeled “Made in China” make up 2.7% of U.S. consumer spending, only 1.2% actually reflects the cost of the imported goods. Thus, on average, of every dollar spent on an item labeled “Made in China,” 55 cents go for services produced in the United States. In other words, the U.S. content of “Made in China” is about 55%. The fact that the U.S. content of Chinese goods is much higher than for imports as a whole is mainly due to higher retail and wholesale margins on consumer electronics and clothing than on most other goods and services. ...
Conclusion
Figure 2 shows the share of U.S. PCE [personal consumption expenditures] based on where goods were produced, taking into account intermediate goods production, and the domestic and foreign content of imports. Of the 2.7% of U.S. consumer purchases going to goods labeled “Made in China,” only 1.2% actually represents China-produced content. If we take into account imported intermediate goods, about 13.9% of U.S. consumer spending is attributable to imports, including 1.9% imported from China.
Since the share of PCE attributable to imports from China is less than 2% and some of this can be traced to production in other countries, it is unlikely that recent increases in labor costs and inflation in China will generate broad-based inflationary pressures in the United States.
The Economist: Rich and poor, growing apart
The Economist: The rich and the rest
What to do (and not do) about inequality.
... In fact, much of the recent hand-wringing about widening inequality is based on sloppy thinking. The old Davos consensus of boosting growth and combating poverty is still a better guide to good policy. Rather than a sweeping assault on inequality itself, policymakers would do better to take on the market distortions that often lie behind the most galling income gaps, and which also impede economic growth.
Begin with the facts about inequality. Globally, the gap between the rich and the poor has actually been narrowing, as poorer countries are growing faster. Nor is there a monolithic trend within countries (see article). In Latin America, long home to the world’s most unequal societies, many countries—including the biggest, Brazil—have become a bit more equal, as governments have boosted the incomes of the poor with fast growth and an overhaul of public spending to improve the social safety-net (but not by raising tax rates for the rich).
The gap between rich and poor has risen in other emerging economies (notably China and India) as well as in many rich countries (especially America, but also in places with a reputation for being more egalitarian, such as Germany). But the reasons for this differ. In China inequality has a lot to do with the hukou system of residency permits, which limits internal migration to the towns; by some measures inequality has peaked as rural labour becomes more scarce. In America income inequality began to widen in the 1980s largely because the poor fell behind those in the middle. More recently, the shift has been overwhelmingly due to a rise in the share of income going to the very top—the highest 1% of earners and above—particularly those working in the financial sector. Many Americans are seeing their living standards stagnate, but the gap between most of them has not changed all that much.
The links between inequality and the ills attributed to it are often weak. ...
...Viewed from this perspective, the right way to combat inequality and increase mobility is clear. First, governments need to keep their focus on pushing up the bottom and middle rather than dragging down the top: investing in (and removing barriers to) education, abolishing rules that prevent the able from getting ahead and refocusing government spending on those that need it most. Oddly, the urgency of these kinds of reform is greatest in rich countries, where prospects for the less-skilled are stagnant or falling. Second, governments should get rid of rigged rules and subsidies that favour specific industries or insiders. Forcing banks to hold more capital and pay for their implicit government safety-net is the best way to slim Wall Street’s chubbier felines. In the emerging world there should be a far more vigorous assault on monopolies and a renewed commitment to reducing global trade barriers—for nothing boosts competition and loosens social barriers better than freer commerce.
Such reforms would not narrow all income disparities: in a freer world skill and intellect would still be rewarded, in some cases magnificently well. But the reforms would strike at the most pernicious, unfair sorts of income disparity and allow more people to move upwards. They would also boost growth and leave the world economy more stable. If the Davos elites are worried about the gap between the rich and the rest, this is the route they should follow.
I will also reprise this graph from Parametric estimations of the world distribution of income. The Gini Coefficient is a measure of inequality where 1.00 equals perfect inequality and 0.00 equals perfect equality.
Newsweek: The New World Order
Tribal ties—race, ethnicity, and religion—are becoming more important than borders.
... Although tribal connections are as old as history, political upheaval and globalization are magnifying their impact. The world’s new contours began to emerge with the end of the Cold War. Maps designating separate blocs aligned to the United States or the Soviet Union were suddenly irrelevant. More recently, the notion of a united Third World has been supplanted by the rise of China and India. And newer concepts like the BRIC nations (Brazil, Russia, India, and China) are undermined by the fact that these countries have vastly different histories and cultures.
The borders of this new world will remain protean, subject to change over time. Some places do not fit easily into wide categories—take that peculiar place called France—so we’ve defined them as Stand-Alones. And there are the successors to the great city-states of the Renaissance—places like London and Singapore. What unites them all are ties defined by affinity, not geography. ...
The Economist: Global targets, local ingenuity
In ten years, the living conditions of the poor have been improving—but not necessarily because of the UN’s goals. ...
... The United Nations reckons that in 2008 over a quarter of children in the developing world were underweight, a sixth of people lacked access to safe drinking water, and just under half used insanitary toilets or none at all. But while these figures are disquieting, a smaller fraction of people were affected than was the case two decades ago. So such data also indicate the world’s progress towards meeting the Millennium Development Goals (MDGs), a set of targets adopted by world leaders at the UN ten years ago. ...
... But few go as far as Ban Ki-Moon, the UN secretary-general, who recently called the goals “a milestone in international co-operation” that had helped “hundreds of millions of people around the world.” Talking up the MDGs is, of course, part of Mr Ban’s job. And there has indeed been progress on many fronts (see table 2). But it is hard to assign much credit to the exercise itself.
Take the goal of halving the poverty rate from its 1990 level by 2015. The World Bank reckons that in 1990 46% of the developing world’s population fell below the internationally accepted poverty line of $1.25 a day at purchasing-power parity. By 2005 the rate had fallen to 27% and, despite a slowdown in progress in the past couple of years, it is now probably lower still. A global halving by 2015 seems well within reach. Yet this “victory” is mainly due to a drop in China’s poverty rate from 60% in 1990 to 16% in 2005. Because China and India accounted for over 62% of the planet’s poor in 1990, changes to the world’s poverty rate depend heavily on their performance. A global goal is therefore a poor way to give the governments of smaller countries an incentive to tackle poverty....
... Too often, the goals are reduced to working out how much money is needed to meet a particular target and then berating governments for not spending enough. Yet the countries that have made most progress in cutting poverty have largely done so not by spending public money, but by encouraging faster economic growth. China is the most obvious example. The best performers in Africa, too, are those that have managed to speed up growth. As Shanta Devarajan, the World Bank’s chief economist for Africa, points out, growth does not just make more money available for social spending. It also increases the demand for such things as schooling, and thus helps meet other development goals. Yet the goals, as drawn up, made no mention of economic growth. ...
