Gini coefficient

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The Great Leveler: Violence and the History of Inequality From the Stone Age to the Twenty-First Century by Walter Scheidel

agricultural Revolution, assortative mating, basic income, Berlin Wall, Bernie Sanders, Branko Milanovic, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, colonial rule, Columbian Exchange, conceptual framework, corporate governance, cosmological principle, crony capitalism, dark matter, declining real wages, demographic transition, Dissolution of the Soviet Union, Downton Abbey, Edward Glaeser, failed state, Fall of the Berlin Wall, financial deregulation, fixed income, Francisco Pizarro, full employment, Gini coefficient, hiring and firing, income inequality, John Markoff, knowledge worker, land reform, land tenure, low skilled workers, means of production, mega-rich, Network effects, nuclear winter, offshore financial centre, Plutocrats, plutocrats, race to the bottom, recommendation engine, rent control, rent-seeking, road to serfdom, Robert Gordon, Ronald Reagan, Second Machine Age, Simon Kuznets, The Future of Employment, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, transatlantic slave trade, universal basic income, very high income, working-age population, zero-sum game

424 Appendix: The Limits of Inequality 445 Bibliography 457 Index 495 FIGURES AND TABLES FIGURES I.1Top 1 percent income share in the United States (per year) and references to “income inequality” (three-year moving averages), 1970–2008 1.1General form of the social structure of agrarian societies 3.1Inequality trends in Europe in the long run 3.2Gini coefficients of wealth distribution in Italy and the Low Countries, 1500–1800 3.3Ratio of mean per capita GDP to wages and real wages in Spain, 1277–1850 3.4Inequality trends in Latin America in the long run 3.5Inequality trends in the United States in the long run 4.1Top income shares in Japan, 1910–2010 5.1Top 1 percent income shares in four countries, 1935–1975 5.2Top 0.1 percent income shares in Germany and the United Kingdom 5.3Top 1 percent wealth shares in ten countries, 1740–2011 5.4Ratios of private wealth to national income in France, Germany, the United Kingdom, and the world, 1870–2010 5.5Capital income share in total gross income for top 1 percent of incomes in France, Sweden, and the United States, 1920–2010 5.6The share of government spending in national income in seven countries, 1913–1918 5.7Top marginal tax rates in nine countries, 1900–2006 5.8Average top rates of income and inheritance taxation in twenty countries, 1800–2013 5.9World War I and average top rates of income taxation in seventeen countries 5.10Top 1 percent income share in Germany, 1891–1975 5.11Top 1 percent income share in Sweden, 1903–1975 5.12State marginal income tax rates in Sweden, 1862–2013 5.13Trade union density in ten OECD countries, 1880–2008 6.1Military size and mobilization rates in years of war in great power states, 1650–2000 6.2Gini coefficients of income and top 0.01 percent income share in Spain, 1929–2014 9.1Median house sizes in Britain from the Iron Age to the Early Middle Ages 9.2House size quartiles in Britain from the Iron Age to the Early Middle Ages 9.3Gini coefficients of house sizes in Britain from the Iron Age to the Early Middle Ages 10.1Real wages of urban unskilled workers in Europe and the Levant, 1300–1800 10.2Real wages of urban skilled workers in Europe and the Levant, 1300–1800 10.3Rural real wages measured in terms of grain in England, 1200–1869 10.4Top 5 percent wealth shares and Gini coefficients of wealth distribution in the cities of Piedmont, 1300–1800 10.5Gini coefficients of wealth in Poggibonsi, 1338–1779 10.6Top 5 percent wealth shares in Tuscany, 1283–1792 10.7Top 5 percent wealth shares and Gini coefficients of wealth distribution in Lucca, 1331–1561 11.1Real wages expressed in multiples of bare-bones consumption baskets in central Mexico, 1520–1820 11.2Daily wheat wages of unskilled rural and urban workers in Egypt, third century BCE to fifteenth century CE 11.3Changes in real prices and rents between 100–160s and 190s–260s CE in Roman Egypt 11.4Wealth inequality in Augsburg: number of taxpayers, average tax payments, and Gini coefficients of tax payments, 1498–1702 13.1Gross National Income and Gini coefficients in different countries, 2010 13.2Estimated and conjectured income Gini coefficients for Latin America, 1870–1990 (population-weighted averages for four, six, and sixteen countries) 14.1Counterfactual inequality trends in the twentieth century 15.1Top 1 percent income shares in twenty OECD countries, 1980–2013 A.1Inequality possibility frontier A.2Estimated income Gini coefficients and the inequality possibility frontier in preindustrial societies A.3Extraction rates for preindustrial societies and their counterpart modern societies A.4Inequality possibility frontier for different values of the social minimum A.5Different types of inequality possibility frontiers TABLES 2.1The development of the largest reported fortunes in Roman society and the population under Roman control, second century BCE to fifth century CE 5.1The development of top income shares during the world wars 5.2Variation in the rate of reduction of top 1 percent income shares, by period 6.1Property in 1870 relative to 1860 (1860 = 100), for Southern whites 6.2Inequality of Southern household incomes 8.1Income shares in France, 1780–1866 11.1Share and number of taxable households in Augsburg by tax bracket, 1618 and 1646 15.1Trends in top income shares and income inequality in select countries, 1980–2010 ACKNOWLEDGMENTS The gap between the haves and the have-nots has alternately grown and shrunk throughout the course of human civilization.

It may never be feasible to produce a plausible account that fully endogenizes observable change in the distribution of income and wealth over time. Even so, possible feedback loops between inequality and violent shocks are certainly worth exploring in greater depth. My study can be no more than a building block for this larger project.8 HOW IS IT DONE? There are many ways of measuring inequality. In the following chapters, I generally use only the two most basic metrics, the Gini coefficient and percentage shares of total income or wealth. The Gini coefficient measures the extent to which the distribution of income or material assets deviates from perfect equality. If each member of a given population receives or holds exactly the same amount of resources, the Gini coefficient is 0; if one member controls everything and everybody else has nothing, it approximates 1. Thus the more unequal the distribution, the higher the Gini value.

UNDER PRESSURE Before we address this question, it is worth recapitulating that across the globe, economic inequality is greater than it may seem if we simply rely on standard metrics. First of all, Gini coefficients, the most widely used means of measuring income inequality, are of limited value in capturing the contribution of the very highest incomes. Adjustments for this deficit point to significantly higher actual levels of inequality overall. Second, if unreported offshore funds could be incorporated into statistics of private household wealth, inequality would turn out to be higher in that category as well. Third, I have followed common practice in focusing on relative indices of income and wealth distribution. However, in terms of absolute inequality—the width of the gap between high and low incomes—even the fairly constant or only gently rising Gini coefficients and top income shares observed in some western European countries translate to growing imbalances in actual incomes (in Euros or other national currencies) when economic growth is taken into account.


pages: 221 words: 55,901

The Globalization of Inequality by François Bourguignon

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Berlin Wall, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, Credit Default Swap, deglobalization, deindustrialization, Doha Development Round, Edward Glaeser, European colonialism, Fall of the Berlin Wall, financial deregulation, financial intermediation, gender pay gap, Gini coefficient, income inequality, income per capita, labor-force participation, liberal capitalism, minimum wage unemployment, offshore financial centre, open economy, Pareto efficiency, purchasing power parity, race to the bottom, Robert Gordon, Simon Kuznets, structural adjustment programs, The Spirit Level, too big to fail, very high income, Washington Consensus

Various synthetic methods of measuring inequality do this in different ways. In this book, I will use basically four measures of inequality: the share that goes to the richest (1%, 5%, or 10%), the relative gap between standards of living in the extreme deciles (the richest 10% and the poorest 10%), the Gini coefficient, and the Theil coefficient. The Gini coefficient is probably the most frequently employed measure of inequality. It takes into account the entirety of the distribution rather than just the extremes and can be defined as (half ) the average absolute difference between two individuals chosen at random in the population, in relation to the average standard of living of the population as a whole. For example, in a society where the average standard of living is $40,000, a Gini coefficient of 0.4 would mean that the average gap between two individuals chosen at random Global Inequality19 in the population would be $32,000.9 The Theil coefficient also takes into account the full range of the distribution.

See also emerging economies development aid, 148–53, 157 development gap, 34–35, 83 Di Bao program, 166 discrimination: ghettos and, 66– 67; immigrants and, 64, 66, 127; labor and, 64–66, 69, 132, 142, 180–81; non-­material inequalites and, 64–66, 69; racial, 65; women and, 64–65, 103 disinflation, 95, 102, 110 distribution, 10n1, 186; capital-­ labor split and, 55–58, 60; efficiency and, 142–45; evolution of inequality and, 41, 42t, 44t, 45, 46t, 48–59, 64, 71–72; fairer globalization and, 148, 153, 156–73, 175, 178; geographical disequilibria and, 83; Gini coefficient and, 18 (see also Gini coefficient); global, 18–19, 25, 29, 39, 41, 46t, 121, 124–38, 141– 45, 156; growth and, 49–50, 188; international, 17–18, 30, 148; median of, 31; OECD countries and, 10–11, 12n3; policy and, 26, 72, 135, 188; range of, 16; real earnings loss and, 78; redistribution and, 4, 7, 37 (see also redistribution); rise in inequality and, 74, 77–79, 82, 85, 90–92, 94–96, 99, 103–4, 106–7, 112, 114–15; Southern perspective on, 82–85; standard of living and, 16, 18 (see also standard of living); taxes and, 37, 92–94 (see also taxes); Theil coefficient and, 18–19, 37–38, 194 distribution (cont.) 52; transfers and, 4, 14, 48, 105, 110, 130, 135–36, 142, 148, 153, 158–67, 170, 175, 181, 183, 187; wage, 3, 78–79, 107 Divided We Stand report, 52 Doha negotiations, 154 drugs, 66, 133 Dubai, 127 Economic Partnership Agreements (EPAs), 156 education, 34, 187; college, 132; evolution of inequality and, 61, 65–68; fairer globalization and, 149, 152, 167–73, 180–81; globalization and, 132, 140, 143; labor and, 168, 180; Millennium Development Goals and, 149– 50; national inequality and, 167–73; poverty and, 24; preschool, 169–70; redistribution and, 149, 152, 167–73; rise in inequality and, 111; taxes and, 167–73; tuition and, 170 efficiency: data transfer technology and, 78; deregulation and, 94, 96, 105, 108; economic, 1, 4, 6, 111, 116, 119, 129–33, 135, 140–45, 158, 164, 167, 171, 181; emerging economies and, 78; equality and, 116, 129–31; fairness and, 8, 129– 31; globalization and, 1, 4, 6, 8, 36, 78, 94, 96, 105, 108, 111, 116, 118–19, 129–35, 140–45, 157–58, 164, 167, 170–71, 175, 180–81, 188; human capital and, 175; import substitution and, 34, 180; inefficiency and, 105, 129–30, 132–33, 135, 140, 170–71, 180, 188; labor Index and, 175; loss of, 142, 164; opportunity and, 142–45; Pareto, 130n5; privatization and, 94, 96, 105, 108; redistribution and, 142–45; rents and, 180; social tensions and, 188; spontaneous redistribution and, 133; taxes and, 170; technology and, 78; weak institutions and, 36; wealth of nations and, 1 elitism, 182; fairer globalization and, 151, 165; globalization and, 127n4, 136, 138; rise in inequality and, 4, 6–7 emerging economies: Africa and, 122–23 (see also Africa); competition and, 178, 187–88; conditional cash transfers and, 165– 66; credit cards and, 165; domestic markets and, 120, 125; efficient data transfer and, 78; evolution of inequality and, 57; fairer globalization and, 147, 154, 158, 165–66, 177–78, 182; global inequality and, 40, 77– 80, 82, 109, 113, 115, 188–89; globalization and, 117, 119–22, 125–27; institutions and, 109– 12; Kuznets curve and, 113; labor and, 77; natural resources and, 127; profits and, 117; rise in inequality and, 109–12; structural adjustment and, 109– 12; taxes and, 165; trends in, 57; Washington consensus and, 109–10, 153 entrepreneurs, 83, 92, 96, 131–32, 135, 143, 170–71, 188 equality: efficiency and, 116, 129– 31; policy for, 184–89; relative gap and, 18, 28, 30, 31–32, 36 Ethiopia, 21–22, 46t, 155 Index195 European Union (EU), 24, 156, 174, 177 Everything But Arms (EBA) initiative, 155 evolution of inequality: Africa and, 46t, 54–55; Brazil and, 46t, 55, 59, 70; capital and, 55–58, 60, 73; China and, 47, 53, 57–60; consumption and, 42t, 44t; convergence and, 65, 69; credit and, 61; crises and, 48, 50, 54, 57, 73–74; developed countries and, 47, 52–53, 56, 59–64, 66; developing countries and, 47, 53–55, 57, 63, 68; distribution and, 41, 42t, 44t, 45, 46t, 48–59, 64, 71– 72; education and, 61, 65–68; elitism and, 4, 6–7, 46t; emerging economies and, 57; exceptions and, 52–53; France and, 46t, 51f, 52–53, 55, 58, 59n8, 62–63, 66, 70–71; ghettos and, 66–67; Gini coefficient and, 39, 42t, 44t, 48, 50, 51f, 53, 58–59; Great Depression and, 48; growth and, 33, 49–50, 54; India and, 54, 57, 59–60; institutions and, 55, 69; investment and, 56; labor and, 55–58, 60; markets and, 48–50, 53–54, 64, 69; national income inequality and, 48–52; non-­monetary inequalities and, 49, 60–70; normalization and, 41, 43–44; opportunity and, 61–62, 68, 70–71; perceptions of inequality and, 69–73; policy and, 55, 72; primary income and, 48–50, 58; production and, 57; productivity and, 63; profit and, 56; reform and, 54, 72; rise in inequality in, 48–52, 73, 77–80, 91–95, 97–98, 102–8; risk and, 63, 66; standard of living and, 41, 43– 45, 46t, 53–55, 58, 60–62, 67, 69, 73; surveys and, 42t, 43–45, 56, 68n17, 69–71; taxes and, 12–14, 37, 48, 50, 56n5; Theil coefficient and, 42; United Kingdom and, 46t, 50, 51f, 59, 67, 68n17; United States and, 2, 4–6, 9, 11, 21, 33, 46t, 47–50, 51f, 58, 59n9, 66–70, 73; wealth and, 58–60 executives, 73, 88–89, 97, 174 expenditure per capita, 13, 15, 42t, 44t exports: deindustrialization and, 76, 82; fairer globalization and, 147, 154–55, 176, 178; globalization and, 124, 128; rise in inequality and, 76, 82–84 fairer globalization: Africa and, 147, 151, 154–56, 179, 183; African Growth Opportunity Act (AGOA) and, 155; Bolsa Familia and, 166; Brazil and, 150, 154, 166–68, 173; capital and, 158–62, 167, 171, 175, 182; China and, 150, 154, 165–66, 172, 178; competition and, 155, 169, 173, 176–79, 182; consumers and, 177–78; consumption and, 159, 177; convergence and, 146–47, 157; correcting national inequalities and, 158–80; credit and, 164–65, 172, 180; crises and, 163, 176; deregulation and, 173; developed countries and, 150, 154–57, 160, 162, 164, 168–72, 176, 178–79, 181; developing countries and, 154, 166; development aid and, 196 fairer globalization (cont.) 148–53, 157; Di Bao program and, 166; distribution and, 148, 153, 156–73, 175, 178; Economic Partnership Agreements (EPAs) and, 156; education and, 149, 152, 167–73; 180–81; elitism and, 151, 165; emerging economies and, 147, 154, 158, 165–66, 177–78, 182; Everything But Arms (EBA) initiative and, 155; exports and, 147, 154–55, 176, 178; France and, 147, 159–61, 164, 169, 175, 177; Gini coefficient and, 156, 166; goods and services sector and, 180; growth and, 147–52, 155, 162, 167–68, 171, 177, 180, 183; health issues and, 152, 166; imports and, 154, 177–78, 180; India and, 150, 154, 165– 66, 172; inheritance and, 170– 73; institutions and, 151, 168, 174–75; international trade and, 176–77; investment and, 150, 155, 157, 160, 170, 174, 179; liberalization and, 156, 179; markets and, 147–48, 154–58, 168, 173–75, 178–81; Millennium Development Goals and, 149–50; national inequality and, 147, 158; opportunity and, 155, 167, 170, 172; policy and, 147–53, 157, 167–73, 175, 177, 179–83; poverty and, 147–52, 164, 166, 175; prices and, 147– 48, 176, 178, 182; primary income and, 158, 163n10, 167, 173; production and, 155–57, 167, 176, 178–79; productivity and, 155, 177–78; profit and, 173, 176; Progresa program and, Index 166; protectionism and, 7, 147, 154, 157, 176–79; redistribution and, 148, 153, 156–73, 175, 178; reform and, 151, 161, 163, 168–69; regulation and, 152, 173–76, 181–82; risk and, 148, 154, 156, 159, 164, 171, 174–75, 178; standard of living and, 146–48, 154, 156–58, 160, 165, 168–69; surveys and, 169; taxes and, 148, 158–73, 175, 181–83; technology and, 156, 173; TRIPS and, 156; United Kingdom and, 163, 169; United States and, 155, 159–61, 163– 64, 169, 174–75, 182; wealth and, 162, 164, 167, 170–73 Fitoussi, Jean-­Paul, 14 France: evolution of inequality and, 46t, 51f, 52–53, 55, 58, 59n8, 62–63, 66, 70–71; fairer globalization and, 147, 159–61, 164, 169, 175, 177; Gini coefficient of, 20; global inequality and, 2, 9, 11, 20–21; offshoring and, 81; rise in inequality and, 80, 88, 92–93, 95, 97, 99, 103; soccer and, 87; wage deductions and, 159 G7 countries, 56 G20 countries, 182 Garcia-­Panalosa, Cecilia, 107 Gates, Bill, 5–6, 70, 150 Germany, 2, 21, 46t, 50, 51f, 80, 88, 92 Ghana, 46t, 54 ghettos, 66–67 Giertz, Seth, 160–61 Gini coefficient: Brazil and, 22; Current Population Survey and, 21; evolution of inequality and, Index197 39, 42t, 44t, 48, 50, 51f, 53, 58– 59; fairer globalization and, 156, 166; France and, 20; historical perspective on, 27–28; meaning of, 18–19; purchasing power parity and, 28; rise in inequality and, 110; United States and, 21; wealth inequality and, 58–60 Glass-­Steagall Act, 174n15 global distribution, 18–19, 25, 29, 39, 41, 46t, 121, 156 global inequality: Africa and, 16, 21, 23, 30–31, 34, 36; between countries, 2–3, 5, 7, 9, 16–19, 23, 33, 36, 38–39, 42–45, 47, 53, 58, 68, 90–91, 107, 117–19, 123, 128, 153; Brazil and, 21– 23; crises and, 20, 38–41; cross-­ country heterogeneity and, 13; definition of, 3–4, 9–10, 25–26, 30–32, 39; developed countries and, 10–11, 21, 34–39; developing countries and, 10–11, 13, 21, 32, 34–39; effects of, 38–40; emerging economies and, 40, 77–80, 82, 109, 113, 115, 188– 89; at the end of the 2000s, 20– 25; evolution of inequality and, 41 (see also evolution of inequality); expenditure per capita and, 13, 15, 42t, 44t; France and, 2, 9, 11, 20–21; globalization and, 117–18, 121–23, 128; great gap and, 33–36; historic turning point for, 25–32; Human Development Report and, 25; institutions and, 36; measuring, 10– 20; Millennium Development Goals and, 149–50, 185; normalization and, 13, 15, 22–23, 26, 29; OECD Database on Household Income Distribution and Poverty and, 11–12; policy and, 185–89; Povcal database and, 10, 12, 42t, 43, 44t; prices and, 27–28, 74, 80, 84, 91–92, 94, 97, 110; profit and, 13; reduction of, 2, 185–86; relative gap and, 18, 28, 30–32, 36; rise of, 2–4, 7; risk and, 20; standard of living and, 10–26, 29, 31–33, 36, 39; surveys on, 10, 12–15, 20n10, 21–22, 29, 42t, 43–45; technology and, 3–4, 34–35; trend reversal in, 37–38; within countries, 2, 5–7, 9, 16, 30, 33, 35–45, 47, 113–14, 118, 124– 29, 184–85, 189 globalization: Africa and, 122–23, 126–27; Asian dragons and, 34, 82; Brazil and, 127, 133; capital and, 117, 125–26, 132, 137; China and, 120–22, 128; competition and, 117–18, 130, 186 (see also competition); as complex historical phenomenon, 1–2; consumption and, 137–39; convergence and, 120–22, 125; credit and, 131–32, 137–40; crises and, 119–22, 125, 135–39, 142; debate over, 1; deindustrialization in developed countries and, 75–82; democratic societies and, 135–36; deregulation and, 95–99; developed countries and, 117, 119, 121, 127n4, 128, 133, 143; developing countries and, 121, 127n4, 128, 132, 143; education and, 132, 140, 143; efficiency and, 1, 4, 6, 8, 36, 78, 94, 96, 105, 108, 111, 116, 118–19, 129–35, 140–45, 157–58, 164, 167, 170–71, 175, 180–81, 188; elitism and, 127n4, 136, 138; 198 globalization (cont.) emerging economies and, 117, 119–22, 125–27; exports and, 124, 128; fairer, 146–83 (see also fairer globalization); future of inequality between countries and, 119–22; global inequality and, 117–18, 121–23, 128; goods and services sector and, 127, 130; growth and, 118–29, 134–39; health issues and, 140– 41, 144; Heckscher-­Ohlin model and, 76; imports and, 119, 124; inequality within countries and, 124–29; inheritance and, 144–45; institutions and, 124; as instrument for modernization, 1; international trade and, 3, 75–76, 78–79, 83, 112, 114, 176–77; investment and, 119, 130, 134–35, 143; laissez-­faire approach and, 118, 129; markets and, 118, 120–21, 124–37, 140, 143–44; as moral threat, 1; national inequality and, 119; negative consequences of inequality and, 131–42; opportunity and, 133–34, 139, 142–44; as panacea, 1; policy and, 118–19, 124, 126, 128–31, 139, 143–44; poverty and, 117, 123, 126–27, 134, 144; prices and, 118, 122, 126, 136–38; primary income and, 135, 143–44; production and, 119, 124, 126, 129, 131, 133, 137; productivity and, 120, 125, 127, 144; profit and, 117; redistribution and, 121, 124–38, 141–45; reform and, 124, 126–27, 138; regulation and, 136; rise in inequality and, 117–18; risk and, 127–28, Index 137–39, 144; shocks and, 38, 55, 91–92, 175; Southern perspective on, 82–85; standard of living and, 120–23, 126, 138, 143; surveys and, 127n4, 141n15; taxes and, 74, 89n10, 91–94, 104, 114–15, 129–30, 135–36, 142–45; technology and, 86–91, 118–20, 125; trends and, 118; United States and, 135–39; wealth and, 74, 95, 98, 125, 127, 129, 131–32, 139, 143–45 Great Depression, 48 Greece, 46t, 135 gross domestic product (GDP) measurement: Current Population Survey and, 21; evolution of inequality and, 41–45, 56–57; fairer globalization and, 123, 127, 165–66, 176; global inequality and, 13–15, 20–21, 23, 26, 27f, 29–30, 39; normalization and, 29, 41, 43–45; rise in inequality and, 94; Sen-­Stiglitz-­ Fitoussi report and, 14 Gross National Income (GNI), 148–49 Growing Unequal report, 52 growth, 4; African Growth Opportunity Act (AGOA) and, 155; constraints and, 35; consumption and, 13–15, 42t, 44t, 80, 137–39, 159, 177; convergence and, 16; determinants of, 34; distribution and, 49–50, 188; emerging economies and, 125 (see also emerging economies); evolution of inequality and, 33, 49–50, 54; fairer globalization and, 147–52, 155, 162, 167–68, 171, 177, 180, 183; GDP mea- Index199 surement of, 30, 39 (see also gross domestic product (GDP) measurement); globalization and, 118–29, 134–39; great gap in, 33–36; import substitution and, 34, 180; inflation and, 50, 95, 102, 110; negative, 31; political reversals and, 36; poverty and, 28–29; production and, 3, 34–35, 57, 74, 76–81, 84–86, 119, 124, 126, 129, 131, 133, 137, 155–57, 167, 176, 178–79; rate of, 15, 29–35, 79, 125, 185; recession and, 6, 31, 99, 120; relative gap and, 18, 20, 30–32, 36; rise in inequality and, 75, 79, 82, 84, 109–12; trends in, 40, 121 health issues, 24, 187; fairer globalization and, 152, 166; globalization and, 140–41, 144; public healthcare and, 37, 111, 140 Heckscher-­Ohlin model, 76 Hong Kong, 34, 82, 174 housing, 12, 61, 137 human capital, 74, 167, 175 Human Development Report, 25 Ibrahimovich, Zlata, 87 IKEA, 172 immigrants, 64, 66, 127 imports: fairer globalization and, 154, 177–78, 180; globalization and, 119, 124; import substitution and, 34, 180; rise in inequality and, 80 income: average, 9, 18, 21, 29–30, 43, 72; bonuses and, 87, 174; convergence and, 16; currency conversion and, 11; definition of, 45; deindustrialization and, 75–82; developed/developing countries and, 5, 36; disposable, 20, 22, 24, 48, 50, 51f, 74, 91, 163; distribution of, 3 (see also distribution); executives and, 73, 88–89, 97, 174; family, 10; financial operators and, 87–88, 90–91; gap in, 3, 5–6, 27f, 33– 36, 42t, 44t, 149; GDP measurement and, 13–15, 20–21, 23, 26, 27f, 29–30, 39, 41–45, 56–57, 94, 123, 127, 165–66, 176; high, 50, 52, 56, 85–93, 97–99, 140, 143, 158–62, 164, 189; household, 10–12, 43, 45, 50, 58, 105, 107, 137, 163, 177; inequality in, 2, 4, 41, 48–50, 56–64, 68, 70, 72–73, 83, 98, 102–3, 107–8, 114, 125, 132– 34, 137, 140–41, 143–44, 163; inflation and, 50, 95, 102, 110; international scale for, 17–18, 23, 30; lawyers and, 89–90; mean, 17, 20n10, 27f, 42t, 44t; median, 6, 49, 71, 102–3, 106; minimum wage and, 52–53, 100, 102–8, 175, 177; national, 7, 16–19, 30, 43, 48–52, 60, 73, 84n6, 125, 149, 153, 172; OECD Database on Household Income Distribution and Poverty and, 11; opportunity and, 5; payroll and, 53, 93, 100, 104, 107, 175; pension systems and, 167; per capita, 20, 25, 29–30, 42t, 45, 48, 55–56, 120; portfolios and, 88; poverty and, 1, 11, 15n6, 19–20, 22–25, 28–29, 32, 44t, 109, 117, 123, 126–27, 134, 144, 147–52, 164, 166, 175; primary, 48–50, 58, 135, 143–44, 158, 163n10, 167, 173; 200 income (cont.) purchasing power and, 11, 13, 19–24, 27f, 28, 50, 80, 144, 158, 178; real earnings loss and, 78; relative gap and, 18, 28, 30, 31– 32, 36; superstars and, 85–87, 89–90; taxes and, 37, 89n10, 92–93, 145, 159, 161–65, 170 (see also taxes); technology and, 34, 180; virtual, 12; wage inequality and, 51–53, 79, 101–3, 106, 108; wage ladder effects and, 78–79; wealth inequality and, 58–60; women and, 64– 65, 103 India: evolution of inequality and, 54, 57, 59–60; fairer globalization and, 150, 154, 165– 66, 172; household consumption and, 15; international trade and, 75; Kuznets hypothesis and, 113; rise in inequality and, 2, 15–16, 19, 30, 34, 46t, 75, 83, 90, 112–13; taxes and, 165 Indonesia, 30, 46t, 54, 111, 127 industrialization: deindustrialization and, 1, 75–82, 102, 120, 188; labor and, 1, 26, 29, 33, 35, 54, 82, 84, 102, 113, 120, 127, 179, 188 Industrial Revolution, 26, 29, 33, 35 inequality: between countries, 2–3, 5, 7, 9, 16–19, 23, 33, 36, 38– 39, 42–45, 47, 53, 58, 68, 90– 91, 107, 117–19, 123, 128, 153; efficiency and, 1, 4, 6, 8, 36, 78, 94, 96, 105, 108, 111, 116, 118– 19, 129–35, 140–45, 157–58, 164, 167, 170–71, 175, 180–81, 188; Gini coefficient and, 18 (see Index also Gini coefficient); income, 2, 4, 41, 48–50, 56–64, 68, 70, 72–73, 83, 98, 102–3, 107–8, 114, 125, 132–34, 137, 140–41, 143–44, 163; international, 17; inverted U curve and, 54, 113; measurement of, 18; negative consequences of, 131–42; non-­ monetary, 49, 60–70; perceptions of, 69–73; social tensions and, 188; standard of living and, 18 (see also standard of living); Theil coefficient and, 18–19, 37–38, 42; wealth, 58–60; within countries, 2, 5–7, 9, 16, 30, 33, 37–45, 47, 113–14, 118, 124–29, 184–85, 189 infant mortality, 150 inflation, 50, 95, 102, 110 inheritance: fairer globalization and, 170–73; globalization and, 144–45; rise in inequality and, 93 institutions: deregulation and, 91– 112 (see also deregulation); disinflation and, 95, 102, 110; emerging economies and, 109– 12; evolution of inequality and, 55, 69; fairer globalization and, 151, 168, 174–75; global inequality and, 36; globalization and, 124; markets and, 91–92; privatization and, 94–109; reform and, 91–112; rise in inequality and, 91–112, 114; structural adjustment and, 109– 12; taxes and, 92–94; “too big to fail” concept and, 174–75; Washington consensus and, 109–10, 153 International Development Association, 149 Index201 international income scale, 17–18, 23, 30 International Labor Organization, 51 International Monetary Fund (IMF), 54, 57, 84, 90, 109–10 international trade: capital mobility and, 74; China and, 75; de­ industrialization and, 75–76, 78–79; effect of new players, 75–76; Heckscher-­Ohlin model and, 76; India and, 75; offshoring and, 81–82; rise in inequality and, 75–76, 78–79, 83, 112, 114; Soviet Union and, 75; theory of, 76; wage ladder effects and, 78–79 inverted U curve, 54, 113 investment: direct, 76, 79; evolution of inequality and, 56; fairer globalization and, 150, 155, 157, 160, 170, 174, 179; foreign, 83, 85, 112, 155, 157, 160, 179; globalization and, 119, 130, 134– 35, 143; production and, 119; public services and, 143; re-­ investment and, 56; rise in inequality and, 76, 79, 82–83, 85, 92, 97–98, 112; taxes and, 92 Ivory Coast, 54 Japan, 34, 46t, 51f, 103 job training, 34, 181, 187 Kenya, 46t, 54 kidnapping, 133 Kuznets, Simon, 113, 126 labor: agriculture and, 12, 82, 84, 122–23, 127–28, 132, 155; artists and, 86–87; bonuses and, 87, 174; capital and, 3–4, 55– 58, 60, 158, 161n7, 185; capital mobility and, 3; cheap, 77, 117; costs of, 81, 100, 104–5, 117, 176, 187; decline in share of national income and, 73; deindustrialization and, 75–82; demand for, 168; deregulation and, 99– 109; discrimination and, 64–66, 69, 132, 142, 180–81; distribution of income and, 175 (see also distribution); education and, 168, 180; efficiency and, 96–97, 175; emerging economies and, 77; entrepreneurs and, 83, 92, 96, 131–32, 135, 143, 170–71, 188; evolution of inequality and, 55–58, 60; excess, 81, 83; executives and, 73, 88–89, 97, 174; goods and services sector and, 13, 73, 80, 85, 91, 102, 127, 130, 180; growth and, 154, 179; immigrant, 64, 66, 127; increased mobility and, 90–91; industrialization and, 1, 26, 29, 33, 35, 54, 80, 82, 84, 102, 113, 120, 127, 179, 188; inflation and, 50, 95, 102, 110; International Labor Organization and, 51; job training and, 34, 181, 187; manufacturing and, 57, 80–82, 84, 123, 154–55, 157; median wage and, 49, 71, 102– 3, 106; minimum wage and, 52– 53, 100, 102–8, 175, 177; mobility of, 185; offshoring and, 81–82; payroll and, 53, 93, 100, 104, 107, 175; pension systems and, 167; portfolios and, 88; poverty and, 1, 11, 15n6, 19– 20, 22–25, 28–29, 32, 44t, 109, 117, 123, 126–27, 134, 144, 147–52, 164, 166, 175; 202 labor (cont.) privatization and, 99–109; productivity and, 63, 79, 81–82, 89, 100, 102, 104, 114, 120, 125, 127, 144, 155, 177–78; protectionism and, 7, 147, 154, 157, 176–79; real earnings loss and, 78; reserve, 84; security and, 133; skilled, 76–78, 82–83, 86, 90, 114, 117, 126, 176; standard of living and, 69 (see also standard of living); superstars and, 85, 87, 89–90; supply of, 130– 31, 164; taxes and, 159–60, 171; technology and, 85–91 (see also technology); unemployment and, 37, 39, 53, 62–63, 66, 69, 77, 94, 100–108, 164, 175–76; unions and, 100–106, 108, 156, 179; unskilled, 3, 76–77, 79, 83, 105, 117, 154; wage inequality and, 51–53, 79, 101–3, 106, 108; wage ladder effects and, 78–79; women and, 64–65, 103, 114; writers and, 86–87 Lady Gaga, 5–6 laissez-­faire approach, 118, 129 Latin America, 9, 34, 36, 54–55, 58, 109–11, 155, 165–66, 168, 180 lawyers, 89–90 liberalization: capital and, 96; customs, 156; deregulation and, 96–99, 108–9, 112 (see also deregulation); fairer globalization and, 156, 179; mobility of capital and, 115; policy effects of, 97–99; Reagan administration and, 91; recession and, 6, 31, 99, 120; rise in inequality and, 76, 91, 93, 96–99, 108–9, 112, 115; tax rates and, 93 Luxembourg, 16, 19 Index Madonna, 71 Malaysia, 127 manufacturing: deindustrialization and, 75–82, 84, 123; emerging economies and, 57, 84; fairer globalization and, 154–55, 157; France and, 81; offshoring and, 81–82; United Kingdom and, 80; United States and, 80 markets: competition and, 76–77, 79–82, 84, 86, 94–98, 102, 104, 115–18, 130, 155, 169, 173, 176–79, 182, 186–88; credit, 131; deindustrialization and, 1, 75–82, 102, 120, 188; deregulation and, 91–92, 99–109 (see also deregulation); development gap and, 34–35, 83; Economic Partnership Agreements (EPAs) and, 156; effect of new players, 75–76; emerging economies and, 120 (see also emerging economies); entrepreneurs and, 83, 92, 96, 131–32, 135, 143, 170–71, 188; evolution of inequality and, 48–50, 53–54, 64, 69; exports and, 76, 82–84, 124, 128, 147, 154–55, 176, 178; fairer globalization and, 147–48, 154–58, 168, 173–75, 178–81; GDP measurement and, 13–15, 20–21, 23, 26, 27f, 29–30, 39, 41–45, 56–57, 94, 123, 127, 165–66, 176; globalization and, 35, 118, 120–21, 124–37, 140, 143–44; Heckscher-­Ohlin model and, 76; housing, 12, 61, 137; imports and, 1, 34, 80, 119, 124, 154, 177–78, 180; institutions and, 91–112; international trade and, 3, 75–76, 78–79, 83, 112, 114, 176–77; labor and, Index203 144 (see also labor); liberalization and, 112 (see also liberalization); monopolies and, 94, 111, 127, 136; offshoring and, 81– 82; protectionism and, 7, 147, 154, 157, 176–79; purchasing power and, 11, 13, 19–24, 27f, 28, 50, 80, 144, 158, 178; reform and, 54 (see also reform); regulation and, 74 (see also regulation); rise in inequality and, 74, 76– 79, 83, 86, 90–112, 114; shocks and, 38, 55, 91–92, 175; single market and, 76; South-­South exchange and, 35; TRIPS and, 156 median wage, 49, 71, 102–3, 106 Mexico, 46t, 57, 59, 109–10, 133, 166, 172 middle class, 51, 71, 93, 109, 133– 34, 136, 140 Milanovic, Branko, 4–5, 17n8, 29n16 Millennium Development Goals, 149–50, 185 minerals, 84, 127 minimum wage, 52–53, 100, 102– 8, 175, 177 monopolies, 94, 111, 127, 136 Morocco, 173 Morrisson, Christian, 28 movies, 87 Murtin, Fabrice, 28 national inequality, 2–4; correcting, 158–80; education and, 167–73; fairer globalization and, 147, 158; Gini coefficient and, 27 (see also Gini coefficient); globalization and, 119; market regulation and, 173–75; protectionism and, 147, 157, 176–79; redistribution and, 158–73, 175, 178; rise in, 6, 48– 52, 115, 204; taxes and, 158–73, 175, 181–83 natural resources, 84–85, 92, 122, 126–28, 127, 151 Netherlands, 46t, 50, 66, 70, 102 Nigeria, 9, 46t, 54, 127, 151 non-­monetary inequalities: access and, 61, 67–68; capability and, 61; differences in environment and, 66–68; discrimination and, 64–66, 69; employment precariousness and, 63–64; evolution of inequality and, 49, 60–70; intergenerational mobility and, 68; opportunities and, 49, 60– 70; social justice and, 60, 70; unemployment and, 62–63 normalization: evolution of inequality and, 41, 43–44; GDP measurement and, 29, 41, 43– 45; global inequality and, 13, 15, 22–23, 26, 29 Occupy Wall Street movement, 6, 135 OECD countries, 27t; evolution of inequality and, 42t, 43, 44t, 50– 52, 64, 65n13; fairer globalization and, 149, 159, 162, 164– 65; Gini coefficient and, 51; income distribution and, 51; relaxation of regulation and, 99; restrictive, 64; rise in inequality and, 50–51, 94, 99, 102, 106n18, 107; social programs and, 94; standard of living and, 11–12, 43, 50–52, 64, 94, 99, 102, 107, 120, 149, 159, 162, 164–65; U-­shaped curve on income and, 50 OECD Database on Household 204 Income Distribution and Poverty, 11–12 offshoring, 81–82 oil, 92, 127 opportunity, 5; African Growth Opportunity Act (AGOA) and, 155; as capability, 61; efficiency and, 142–45; evolution of inequality and, 61–62, 68, 70–71; fairer globalization and, 155, 167, 170, 172; globalization and, 133–34, 139, 142–44; redistribution and, 142–45; rise in inequality and, 102 Pakistan, 46t, 111 Pareto efficiency, 130n5 Pavarotti, Luciano, 86–87 payroll, 53, 93, 100, 104, 107, 175 Pearson Commission, 149 pension systems, 167 Perotti, Roberto, 134 Philippines, 46t, 111 Pickett, Kate, 140 Piketty, Thomas, 4, 48, 59n8, 60, 89n10, 125, 160n4 PISA survey, 169–70 policy, 4; adjustment, 109, 153; Cold War and, 149, 153; convergence and, 147–48; development aid and, 148–53; distributive, 26, 72, 135, 188; educational, 149, 152, 167–73; evolution of inequality and, 55, 72; fairer globalization and, 147–53, 157–58, 167–73, 175–83; Glass-­Steagall Act and, 174n15; global inequality and, 185–89; globalization and, 118–19, 124, 126, 128–31, 139, 143–44; globalizing equality and, 184–89; import substi- Index tution and, 34; Millennium Development Goals and, 149– 50, 185; poverty reduction and, 147–48; protectionist, 7, 99– 100, 107–8, 147, 154, 157, 176–79; reform and, 74 (see also reform); rise in inequality and, 34, 74–75, 85, 94, 97, 99– 100, 104, 106–11, 114–16; social, 7; standard of living and, 147–48 population growth, 28–29, 110, 183 portfolios, 88 Povcal database, 10, 12, 42t, 43, 44t poverty, 1, 44t, 109; Collier on, 23; convergence and, 147–48; criminal activity and, 133–34; definition of, 24; development aid and, 147–52; fairer globalization and, 147–52, 164, 166, 175; ghettos and, 66–67; global inequality and, 11, 15n6, 19–20, 22–25, 28–29, 32; globalization and, 117, 123, 126–27, 134, 144; growth and, 28–29; measurement of, 23–24; Millennium Development Goals and, 149– 50, 185; OECD Database on Household Income Distribution and Poverty and, 11–12; reduction policies for, 147–48; traps of, 144, 150, 164 prices: commodity, 84, 182; exports and, 178; factor, 74, 126; fairer globalization and, 147–48, 176, 178, 182; global inequality and, 27–28, 74, 80, 84, 91–92, 94, 97, 110; globalization and, 118, 122, 126, 136–38; imports and, 80; international compari- Index205 sons of, 11; lower, 94, 137; oil, 92; rise in inequality and, 74, 80, 84, 91–92, 94, 97, 110; rising, 110, 122, 178; shocks and, 38, 55, 91–92, 175; statistics on, 11, 27; subsidies and, 109–10, 175 primary income: evolution of inequality and, 48–50, 58; fairer globalization and, 158, 163n10, 167, 173; globalization and, 135, 143–44 privatization: deregulation and, 94–112; efficiency and, 94, 96, 105, 108; globalization of finance and, 95–99; institutions and, 94–109; labor market and, 99–109; reform and, 94–109; telecommunications and, 111 production: deindustrialization and, 75–82; evolution of inequality and, 57; fairer globalization and, 155–57, 167, 176, 178–79; globalization and, 119, 124, 126, 129, 131, 133, 137; growth and, 3, 34–35, 57, 74, 76–81, 84–86, 119, 124, 126, 129, 131, 133, 137, 155–57, 167, 176, 178–79; material investment and, 119; North vs.

It first focuses on several dimensions of income and wealth inequality and then moves to non-­monetary aspects of economic inequality which, at the national level, may be equally important in 48 Chapter 2 the public perception of changes in the social fairness or unfairness of the economy they live in. The Rise in National Income Inequality It would be difficult to begin a discussion of national inequality with any country other than the United States, given how spectacular the rise in inequalities has been in that country. Figure 2, which extends Thomas Piketty and Emmanuel Saez’s estimates, illustrates this quite well.1 By 2008, just before the recent crisis, the level of income inequality, as measured by the share of the top 10% tax units in total household market income, had returned to levels that had not been seen in a century. The Gini coefficient of gross income per person shows a similar evolution. After forty years of stable inequality, American society seems to be purely and simply erasing the drop in inequality that took place in the wake of the Great Depression and World War II.

The Haves and the Have-Nots by Branko Milanovic

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Berlin Wall, Branko Milanovic, colonial rule, crony capitalism, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, endogenous growth, Fall of the Berlin Wall, financial deregulation, full employment, Gini coefficient, high net worth, illegal immigration, income inequality, income per capita, Joseph Schumpeter, means of production, open borders, Pareto efficiency, Plutocrats, plutocrats, purchasing power parity, Simon Kuznets, very high income, Vilfredo Pareto, Washington Consensus, zero-sum game

See Internal Revenue Service Italy Ivory Coast Japan GDP per capita in Gini coefficient for intercountry inequality and price level in Jerusalem, University of Jiangsu, China Julian, Roman Emperor Justice distributive global inequality and interpersonal inequality and redistribution and of social arrangements Karenin, Alexei Aleksandrovich Karenina, Anna Kenya Keynes, John Maynard Khodorovsky, Mikhail Kirchner, Nestor Korea Kosovo Kuznets, Simon Kuznets’ hypothesis Kynaston, David Labor government employment and migration of Lampedusa detention camp Landlords Laos Latin America Asia as mirror image of GDP per capita in Gini coefficient in global inequality and global middle class and income divergence in intercountry inequality and Lausanne, University of The Law of Peoples (Rawls) Levski soccer club Libya Liguria, Italy Lithuania Liverpool Football Club Location Lombardy, Italy Lucas, Robert Lucas paradox Luxembourg Macao, China Macedonia Maddison, Angus Maghrebi migrants Maine Malaysia Manchester United soccer club Mao Zedong Marginalist revolution Marshall, Alfred Marx, Karl Measurement between-component of inequality and consumption and fiscal data and GDP and Gini coefficient and of global inequality household surveys and of intercountry inequality of interpersonal inequality tax data and within-component of inequality and Mechanization Mercantilism Messi, Lionel Mexican flu Mexico GDP per capita in migration and wealth, history of in Microsoft Middle class global global financial crisis and redistribution and Roman Empire and Migration assimilation and “deterrence” strategy and global inequality and globalization and income divergence and intercountry inequality and of labor Maghrebi Rawls, John and standard of living and Mill, John Stuart Mittel, Lakshmi Montesquieu, Charles de Morales, Evo Morocco Morrisson, Christian Mozambique Nagel, Thomas Napoléon III, Napoleonic Wars National Bureau of Economic Research National Socialism Nationalism Nationalization NATO.

One such, and by far the most popular, measure of inequality is called the Gini coefficient, named after Corrado Gini, the Italian statistician and economist who defined it in 1914 and whose life partly overlapped with Pareto’s.26 The Gini coefficient compares the income of each person with the incomes of all other people individually, and the sum of all such bilateral income differences is divided in turn by the number of people who are included in this calculation and the average income of the group. The ultimate result is such that the Gini coefficient ranges from 0 (where all individuals have the same income and there is no inequality) to 1 (where the entire income of a community is received by one individual). This is a very convenient feature: The coefficient is “bounded from above”; 1 is the maximum possible inequality. Thus, we now have a reliable and useful way of comparing different levels of inequality.

How was this achieved? Was it worth it? And what type of inequalities existed under socialism? The value of the Gini coefficient for socialist countries was in the upper 20s or lower 30s (see Essay I for the empirical values of the Gini coefficient). These are some of the lowest values registered after the end of World War II when measurement of inequality became standard in most countries in the world. Approximately speaking, socialism was some 6-7 Gini points more equal than capitalism, with European capitalist countries such as West Germany, France, Italy, and Denmark having at the time (1970s and 1980s) Gini coefficients in the low- to mid-30s range. If we want to put a percentage number on this, we could say that socialism reduced inequality by approximately one-quarter (compared to what it would have been under capitalism).


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A Pelican Introduction Economics: A User's Guide by Ha-Joon Chang

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Affordable Care Act / Obamacare, Albert Einstein, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collateralized debt obligation, colonial rule, Corn Laws, corporate governance, corporate raider, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, discovery of the americas, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Akerlof, Gini coefficient, global value chain, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Gunnar Myrdal, Haber-Bosch Process, happiness index / gross national happiness, high net worth, income inequality, income per capita, information asymmetry, intangible asset, interchangeable parts, interest rate swap, inventory management, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, laissez-faire capitalism, land reform, liberation theology, manufacturing employment, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, Northern Rock, obamacare, offshore financial centre, oil shock, open borders, Pareto efficiency, Paul Samuelson, post-industrial society, precariat, principal–agent problem, profit maximization, profit motive, purchasing power parity, quantitative easing, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, Scramble for Africa, shareholder value, Silicon Valley, Simon Kuznets, sovereign wealth fund, spinning jenny, structural adjustment programs, The Great Moderation, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Vilfredo Pareto, Washington Consensus, working-age population, World Values Survey

Roughly speaking, Gini of 0.35 is the dividing line between relatively equal countries and ones that are not.11 Wealth inequality is much higher than income inequality The data on wealth inequality are much less readily available and less reliable than those on income inequality. But it is clear that wealth inequality is much higher than income inequality in all countries for the main reason that accumulating wealth is much more difficult than earning income. According to the UNCTAD (United Nations Conference on Trade and Development), the wealth Gini coefficient for the fifteen countries studied, including poor countries like India and Indonesia as well as rich countries like the US and Norway, ranged between 0.5 and 0.8.12 The gap between a country’s income inequality and wealth inequality was particularly large for European countries with low income inequality, such as Norway and Germany.13 Income inequality has risen in the majority of countries since the 1980s Since the 1980s, income inequality has risen in the majority of countries.14 The most marked increase was seen in the UK and especially the US, which led the world in pro-rich policies.

., ownership of assets, such as real estates or shares) or of human capital (that’s the fancy – and controversial – word for skills that individuals acquire through education and training). There are also inequalities in terms of non-economic factors. In many societies, people with a ‘wrong’ caste, ethnicity, religion, gender, sexuality or ideology have been denied access to things like political office, university places or high-status jobs. Measuring inequality: the Gini coefficient and the Palma ratio Of all these inequalities, only income and wealth inequalities are readily measurable. Of these two, the data on wealth are much poorer, so most of the information on inequality we see is in terms of income. Income inequality data are sometimes derived from surveys on consumption, rather than actual incomes, which are harder to capture. There are number of different ways of measuring the extent to which income is unequally distributed.5 The most commonly used measure is known as the Gini coefficient, named after the early twentieth-century Italian statistician Corrado Gini.

More recently, my Cambridge colleague Gabriel Palma has proposed the use of the ratio between the income share of the top 10 per cent and that of the bottom 40 per cent as a more accurate – and easier to calculate – measure of a country’s income inequality.7 Noting that the share taken by the middle 50 per cent of income distribution is remarkably similar across countries regardless of the policies they use, Palma argues that looking at the shares at the extremes that differ more across countries gives us a quicker and better idea of inequalities in different countries. Known as the Palma ratio, this number overcomes the Gini coefficient’s over-sensitivity to the changes in the middle of the income distribution, where it is more difficult to make a difference through policy intervention anyway.8 Inequality among whom? Most inequality figures, like the Gini coefficient, are calculated for individual countries. However, with increasing integration of national economies through globalization, people have become more interested in the changes in the income distribution for the world as a whole.


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Rethinking the Economics of Land and Housing by Josh Ryan-Collins, Toby Lloyd, Laurie Macfarlane, John Muellbauer

agricultural Revolution, asset-backed security, balance sheet recession, bank run, banking crisis, barriers to entry, basic income, Bretton Woods, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, debt deflation, deindustrialization, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, garden city movement, George Akerlof, ghettoisation, Gini coefficient, Hernando de Soto, housing crisis, Hyman Minsky, income inequality, information asymmetry, knowledge worker, labour market flexibility, labour mobility, land reform, land tenure, land value tax, Landlord’s Game, low skilled workers, market bubble, market clearing, Martin Wolf, means of production, money market fund, mortgage debt, negative equity, Network effects, new economy, New Urbanism, Northern Rock, offshore financial centre, Pareto efficiency, place-making, price stability, profit maximization, quantitative easing, rent control, rent-seeking, Richard Florida, Right to Buy, rising living standards, risk tolerance, Second Machine Age, secular stagnation, shareholder value, the built environment, The Great Moderation, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, universal basic income, urban planning, urban sprawl, working poor, working-age population

Table 6.2 Net property wealth between 1995 and 2005, selected percentiles (Great Britain) Source: Bastagli and Hills (2012) Note: Figures in 2005 prices. In all of these studies housing wealth inequality as measured by the Gini coefficient is found to have declined slightly over the relevant time periods, largely driven by the increase in the proportion of housing assets held by households in the middle part of the distribution.3 However, measuring the effect of these trends on inequality using conventional measures of inequality such as the Gini coefficient is problematic. As noted previously, the Gini coefficient indicates the spread of the wealth distribution or deviation from the mean, and is therefore very sensitive to changes in the middle of the distribution and less sensitive to changes at the very top and the very bottom of the distribution. Measures of inequality such as the Gini coefficient are therefore not well suited to describe the distribution of housing wealth due to the large proportion of households whose wealth is zero or negative (Durand and Murtin, 2015).

These trends have been driven by a surge in incomes among high earners alongside much more modest income growth elsewhere. Another common way to measure income inequality is the Gini coefficient. The Gini coefficient is a measure of statistical dispersion intended to represent the income distribution of a nation’s residents. It is represented as a number between 0 and 1, where 0 corresponds with perfect equality (where everyone has the same income) and 1 corresponds with perfect inequality (where one person has all the income and everyone else has zero income). On this measure the UK is currently the fifth most unequal country in the OECD (2016). However, because the Gini coefficient indicates the spread of the income distribution or deviation from the mean, it is particularly sensitive to income changes in the middle of the income distribution and less sensitive to changes at the very top and the very bottom of the income distribution.

Act (1919) (the Addison Act), 78 housing quality, 97 housing supply, effect of residual valuation methodology, 98 housing tenure: European regulations, 32; housing costs by tenure, 179; leasehold-freehold, 213; reform proposals, 212–15; restricted sale tenures, 213–14; reversionary tenures, 214; trends, 82, 83, 106–7, 107; see also private rented sector housing wealth: age distribution, 181–2, 181; consumption-to-income ratio trends, 143–4, 144; increase, 158–9, 170; and increase in wealth-to-income ratio, 172–3; net property wealth distribution, 174–5, 174, 175, 176; and wealth inequality, 174–9 Howard, Sir Ebenezer, 75–6 human rights, 23 imputed rental income: Switzerland, 157; UK tax-exemption, 85, 104–5 income: consumption-to-income ratio trends, 143–4, 144; disposable income to house price ratio, 112–14, 114; effects of increased income, 9, 64 income inequality, 162–3 income tax, 69, 168–9 Industrial Revolution, 68–9 inequality: causes and consequences, 165–9; and excessive economic rent, 43; and financial instability, 185–7; Gini coefficient measures, 163, 177, 178; health and social problems, 185; and homeownership, 92; and house prices, 177–8; and housing costs, 179–80; income inequality, 162–3; and inheritance, 182; and land value, 46, 173, 190; and landownership, 26–7; and mortgage debt, 116; property and the state, 17–18; regional inequality, 165, 182–3; and taxation, 168–9; wealth inequality, 163–4, 174–9 infrastructure projects: compulsory land purchase, 31, 73, 196–7, 222; and land value, 6, 42, 194–5 inheritance, 19, 127, 182 inheritance tax (IHT), 104–5, 169, 202 Institute of New Economic Thinking, 218n11 iron and steel industry, 69 James II, King, 66, 80 Japan: credit window guidance, 207; credit-driven bubbles, 111; financial crash, 151–3; house price to income ratio, 112, 114; land prices, 32; mortgage market structure, 157; size of new-builds, 97 Jefferson, Thomas, 22, 26 Jubilee Line, 194–5 Keynes, John Maynard, 84 Keynesianism, 83, 84, 152 King, Mervyn, 154 Korean Land Corporation, 196 labour markets, and homeownership, 27–8 labour productivity, 165–7 land: changing economic role, 190; as collateral, 7, 20–1, 55, 127–8, 160; conflated with capital, 48–52; definition, 38; differences between land and capital, 52–7; and economic rent, 39–44, 56–7; factor of production, 37–8; financialisation, 14, 110–12; historical uses, 3–4; immobile and fixed nature, 55; limited supply, 4, 63; permanent and timeless space, 52–4; state acquisition, 30–1 Land Bank of Britain proposal, 196 land development taxes, 35 land pooling, 197–8 land prices: agricultural, 122–3; effect of financial crisis, 101; land banks (current and strategic), 96–7, 101; and planning regulations, 32; volatility, 8, 8; see also land value Land Registry, 63 land rights, US native population, 26 land taxes: and economic rent, 34–5, 45–8, 76–7, 199, 222; opposition, 57–8, 60, 77; political barriers, 35; theoretical advantages, 34–5; see also land value tax (LVT) land title, 21, 31, 36 land value: asset for the future, 6–7; determined by current use, 6; effect on capital of rising costs, 56; factors outside owner’s control, 55–6; increase over time, 53–4; and inequality, 46, 173, 190; lack of reliable public dataset, 63–4, 219; location and infrastructure, 6; residual valuation methodology, 98–9; site value vs market value, 202; state interventions, 30; uplift created by planning permission, 79–80, 216; use value vs market value, 110; see also land prices land value tax (LVT): Australia, 204–5; Denmark, 204; economic case for reform, 199–201; Henry George’s single tax movement, 46–8, 57–8; Mirlees Review recommendation, 199–200; People’s Budget proposal (1909), 48n9, 76–7; practical and political challenges, 201–5; split rate taxation, 204–5 land-credit feedback cycle, 8, 114–19, 190–1, 222 landlords: taxation, 85; see also buy-to-let (BTL); private rented sector ‘The Landlord’s Game’, 47 landownership: benefits of public ownership, 193–6; and economic rent, 10–13; ‘high income-elasticity of demand’, 9; and inequality, 26–7; land pooling, 197–8; modern economic theories, 16–18; moral qualities, 22; multiple forms, 18–20; and political power, 22–3; and social status, 20; as theft, 22–5, 43, 189; see also property ownership Lassalle, Ferdinand, 43 leasehold-freehold tenure, 213 leases, lifetime leases, 74 legacy landowners, 197–8 Lenin, Vladimir, 43 Letchworth Garden City, 75 Letchworth Heritage Foundation, 75 leverage, 184 liberal economics see classical economics lifecycle model, 124–8, 159 living conditions, 70–1 Lloyd George, David, 48, 76, 78 Lloyds TSB, 139 loan-to-value (LTV) ratios, 139, 156, 157 location, 6, 40–3 Locke, John, 16–18, 26 London: Bishops’ Avenue, 109; Boundary Estate, 73; Jubilee Line, 194–5; Old Nichol, 73; private rented sector, 223; St Clements Community Land Trust, 214 mainstream economics see neoclassical economics Malthus, Thomas, 40 manufacturing industry, 168 marginal productivity theory, 49–50, 51, 56, 57–9, 165–7 Marshall, Alfred, 55 Marx, Karl, 18, 43, 59, 61 mercantilism, 38, 70 microeconomics, 34, 51, 53 Mill, John Stuart, 25, 45, 199 Milton Keynes, 88 Minsky, Hyman, 152–3, 155 MIRAS (mortgage interest relief at source), 86 Mirrlees Review, 199–200 monetarism, 86, 87 Monopoly, 47 mortgage lending: affordability pressures, 100; bad debt, 140; bank funding arrangements, 131; as credit creation, 114; debt-to-income ratio, 115–16, 116, 139, 159, 186; default rates, 141; deregulation, 88, 132–5, 178; financial crisis collapse, 139–40; full recourse vs non-recourse loans, 141–2; house price-credit feedback cycle, 119–24; importance in banks’ lending portfolios, 61, 119; interest rates for landlords, 77; lifecycle model, 124–8, 159; loan-to-income limits, 155; loan-to-value (LTV) ratios, 139, 156, 157; mortgage debt-to-GDP ratio, 156–8, 156; mortgage interest relief at source (MIRAS), 86; reform proposals, 211–12; residential mortgage-backed securities (RMBS), 137–9, 140, 160; tax relief, 133; trends, 107; see also buy-to-let (BTL) Muellbauer, John, 110 mutual co-ownership, 86 Napoleonic Wars, 69 national accounts, lack of land value information, 63–4, 219 national income: wealth to national income ratio, 171–4, 171, 172; see also GDP nationalisation, 43 natural law, 25–6 natural property rights theory, 16–18 negative equity, 123, 133–4 neoclassical economics, 5, 17, 27, 48–9, 50, 52, 57, 111, 192 Netherlands, land pooling, 198 New Keynesianism, 125n6 New Towns programme, 66, 71, 80–1, 88, 184, 197 new-build homes, 97 NIMBYism, 24 Northern Rock, 136–7 Nozick, Robert, 26 OECD, 64, 219, 220 Office for National Statistics, Blue Book, 219 oil sector, 44 OPEC (Organization of the Petroleum Exporting Countries), 44 orthodox economics see neoclassical economics Oswald, Andrew J., 27 overseas investment, 100, 122, 149, 160, 183 Owen, Robert, 71 Paine, Thomas, 25 Pareto efficiency, 166n1 patents, 44 Peabody, George, 71 Peel, Robert, 43 Pennsylvania, split rate taxation, 205 Phillips, Elizabeth J.


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Humans Need Not Apply: A Guide to Wealth and Work in the Age of Artificial Intelligence by Jerry Kaplan

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Affordable Care Act / Obamacare, Amazon Web Services, asset allocation, autonomous vehicles, bank run, bitcoin, Bob Noyce, Brian Krebs, buy low sell high, Capital in the Twenty-First Century by Thomas Piketty, combinatorial explosion, computer vision, corporate governance, crowdsourcing, en.wikipedia.org, Erik Brynjolfsson, estate planning, Flash crash, Gini coefficient, Goldman Sachs: Vampire Squid, haute couture, hiring and firing, income inequality, index card, industrial robot, information asymmetry, invention of agriculture, Jaron Lanier, Jeff Bezos, job automation, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Loebner Prize, Mark Zuckerberg, mortgage debt, natural language processing, Own Your Own Home, pattern recognition, Satoshi Nakamoto, school choice, Schrödinger's Cat, Second Machine Age, self-driving car, sentiment analysis, Silicon Valley, Silicon Valley startup, Skype, software as a service, The Chicago School, The Future of Employment, Turing test, Watson beat the top human players on Jeopardy!, winner-take-all economy, women in the workforce, working poor, Works Progress Administration

Census Bureau uses it to measure income inequality.41 In 1970, the Gini coefficient for income stood at .394. By 2011, it had climbed to .477. That doesn’t have an intuitive ring to it, but it’s pretty bad. The same objective measure can be applied to the beneficial ownership of any asset. Suppose you and three friends decide to go in together on a rental property. If you each have one-quarter ownership, that’s a Gini coefficient of 0. On the other hand, suppose you put up all the money but decide to cut in your friends for 1 percent each because you’re a nice person. That’s a Gini coefficient close to 1. But suppose that the arrangement doesn’t work out because your friends act like they own the place, when for all practical purposes you do. So you buy out their interests. The Gini coefficient goes back to 0, because all the owners (that is, just you) have equal shares.

Institutional Shareholder Services (ISS) issues a widely used measure of corporate governance covering board structure, shareholder rights, compensation practices, and audit quality. What we need to lay the groundwork for addressing income inequality is a new government measure of just how broadly assets are owned. Luckily, we can take one off the shelf, dust it off, and polish it up a bit. In 1912, an Italian statistician named Corrado Gini published a paper titled “Variabilità e mutabilità” or, in English, “Variability and Mutability.”40 In it, he proposed a clever measure of dispersion which has come to be known as the Gini coefficient. Basically, you feed in a bunch of data, and the Gini coefficient will tell you just how “even” the series is, expressed as 0 for smooth and equal, and 1 for incredibly skewed. It can be applied to lots of different situations, but its most common current use is to measure economic data of just the sort we are concerned with here.

, 36, 52, 54, 57, 73–75, 106, 200, 208–9 Hutchinson Cancer Research Center, 113 Hwang, Tim, 148 IBM: artificial intelligence development, 19–20, 30 Watson computer program, 31, 36, 150, 198–99, 206 “imitation game” (Turing Test), 197–98 income: farmworker historical average, 164, 222n3 median average household, 126, 171, 172. See also assets ownership salaries income inequality, 3, 12, 164–87 Gini coefficient measurement of, 179–80 redistribution approaches to, 169–70, 174, 176–87. See also wealth Industrial Perception, Inc., 144 Industrial Revolution, 12, 15 inflation rate, 173, 175 information technology, 42, 48, 53, 54, 99–103 fast-paced advances in, 12, 25–26, 45, 46 professions using, 145–51 Ingram Book Group, 96, 97, 98 innovation, 158, 186–87 different reactions to, 161–64 Institutional Shareholder Services, 78 Intel, 26 intelligence: shift in meaning of, 198.


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The Inequality Puzzle: European and US Leaders Discuss Rising Income Inequality by Roland Berger, David Grusky, Tobias Raffel, Geoffrey Samuels, Chris Wimer

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Branko Milanovic, Celtic Tiger, collective bargaining, corporate governance, corporate social responsibility, double entry bookkeeping, equal pay for equal work, fear of failure, financial innovation, full employment, Gini coefficient, hiring and firing, illegal immigration, income inequality, invisible hand, labour market flexibility, labour mobility, Long Term Capital Management, microcredit, offshore financial centre, principal–agent problem, profit maximization, rent-seeking, shareholder value, Silicon Valley, Silicon Valley startup, time value of money, very high income

The Gini coefficient, a commonly used indicator of inequality, has been applied in Figure 1,3 but much the same conclusions would be reached with other measures. 0.50 0.45 0.40 0.35 0.30 0.20 Denmark Sweden Luxembourg Austria Czech Republic Slovakia Finland Belgium Netherlands Switzerland Norway Iceland France Hungary Germany Australia OECD-30 Korea Canada Spain Japan Greece Ireland New Zeeland Great Britain Italy Poland USA Portugal Turkey Mexico 0.25 Figure 1: Gini coefficients of income inequality in OECD countries, mid-2000s (Source: OECD income distribution questionnaire) What about trends in income inequality? In the same report, the OECD observed that income inequality rose at a “moderate but significant” pace, with the data suggesting an average increase across countries of approximately two Gini points in the last 20 years (see Figure 2). Likewise, data from the Luxembourg Income Study,4 perhaps the best comparative resource on income and inequality in rich countries, show that most countries have experienced at least a modest rise in income inequality at some 3 The Gini coefficient for income measures the dispersion or spread of income across a society. It equals one if a single person holds all of a society’s income and equals zero if everyone holds exactly the same amount of income. 4 The Luxembourg Income Study is a cross-national data archive including income and wealth microdata from a large number of countries at multiple points in time.

We encourage our readers to mine these transcripts as a fascinating commentary on this very special moment in the history of inequality. Part 4: Commentary Five Principles for Moving Forward Roland Berger, Roland Berger Foundation 1. Inequality: General Observations I would like to present first a few general observations about inequality before turning to some recommendations. Statistics The introduction gives a statistical overview of inequality and some related aspects in Europe and the United States over the past couple decades. As might be expected in dynamic economies, inequality levels have fluctuated and these changes are primarily the result of long and short-term trends within a country. Furthermore, the Gini coefficient and the P90/P10 index are measures, not diagnostic tools, and while they are useful indicators of a country’s inequality level, they of course cannot reveal underlying causes which are complex and vary across countries and time.

A few examples will suggest the complexities underlying statistical snapshots of inequality. The Nordic countries are well known for their more egalitarian societies and their Gini scores are indeed correspondingly below the OECD Gini average. However, since the mid-1980s, with the exception of Denmark, they have recorded among the highest increases in Gini coefficients among all OECD countries. Until the financial crisis, Ireland’s rapid growth, more akin to a developing country, earned it the Celtic Tiger moniker. Rapidly developing countries typically experience rising inequality, yet over the same period when all Scandinavian countries saw increasing inequality, Ireland experienced decreasing inequality despite high growth. However, we should be quite cautious when comparing country performances in areas such as inequality because we need more consistent information to make appropriate comparisons.


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The Great Divergence: America's Growing Inequality Crisis and What We Can Do About It by Timothy Noah

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assortative mating, autonomous vehicles, blue-collar work, Bonfire of the Vanities, Branko Milanovic, call centre, collective bargaining, computer age, corporate governance, Credit Default Swap, David Ricardo: comparative advantage, Deng Xiaoping, Erik Brynjolfsson, feminist movement, Frank Levy and Richard Murnane: The New Division of Labor, Gini coefficient, Gunnar Myrdal, income inequality, industrial robot, invisible hand, job automation, Joseph Schumpeter, low skilled workers, lump of labour, manufacturing employment, moral hazard, oil shock, pattern recognition, Paul Samuelson, performance metric, positional goods, post-industrial society, postindustrial economy, Powell Memorandum, purchasing power parity, refrigerator car, rent control, Richard Feynman, Richard Feynman, Ronald Reagan, shareholder value, Silicon Valley, Simon Kuznets, Stephen Hawking, Steve Jobs, The Spirit Level, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, union organizing, upwardly mobile, very high income, Vilfredo Pareto, War on Poverty, We are the 99%, women in the workforce, Works Progress Administration, Yom Kippur War

Let’s imagine, for instance, that we had fifty marbles to distribute among fifty children. Perfect equality of distribution would be if each child got one marble. The Gini coefficient would then be 0. Perfect inequality of distribution would be if one especially pushy child ended up with all fifty marbles. The Gini coefficient would then be 1.4 As of 2005, the United States’ Gini coefficient was 0.38, which on the income-equality scale ranked this country twenty-seventh of the thirty OECD nations for which data were available. The only countries with more unequal income distribution were Portugal (0.42), Turkey (0.43), and Mexico (0.47). The same relative rankings were achieved when you calculated the ratio of the highest income below the threshold for the top 10 percent to the highest income below the threshold for the bottom 10 percent.

We already know from census data that in 2010 income share for the bottom 40 percent fell and that the poverty rate climbed to its highest point in nearly two decades.7 In addition to having an unusually high level of income inequality, the United States has seen income inequality increase at a much faster rate than most other countries. Among the twenty-four OECD countries for which Gini-coefficient change can be measured from the mid-1980s to the mid-aughts, only Finland, Portugal, and New Zealand experienced a faster growth rate in income inequality. Of these, only Portugal ended up with a Gini rating worse than the United States’. Another important point of comparison is that some OECD countries saw income inequality decline during this period. France, Greece, Ireland, Spain, and Turkey all saw their Gini ratings go down (though the OECD report’s data for Ireland and Spain didn’t extend beyond 2000).

Atkinson, Thomas Piketty, and Emmanuel Saez, “Top Incomes in the Long Run of History,” Journal of Economic Literature 49, no. 1 (Mar. 2011), 3–71. 33. Thomas Byrne Edsall, The New Politics of Inequality (New York: W. W. Norton, 1984), 13. 34. Milanovic, Haves and the Have-Nots, 84–85. 35. CIA World Factbook, “Distributions of Family Income—Gini Index,” https://www.cia.gov/library/publications/the-world-factbook/fields/2172.html. 36. Luis Felipe López-Calva and Nora Claudia Lustig, eds., Declining Inequality in Latin America: A Decade of Progress? (Washington: Brookings Institution Press, 2010), 1. In the first chapter, the editors write: “After rising in the 1990s, inequality in Latin America declined between 2000 and 2007. Of the seventeen countries for which comparable data are available, twelve experienced a decline in their Gini coefficient. The average decline for the twelve countries was 1.1 percent a year.” 2: Going Up General Sources James Truslow Adams, The Epic of America (Garden City, NY: Garden City Books, 1933; first published by Little Brown, 1931).

Exploring Everyday Things with R and Ruby by Sau Sheong Chang

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Alfred Russel Wallace, bioinformatics, business process, butterfly effect, cloud computing, Craig Reynolds: boids flock, Debian, Edward Lorenz: Chaos theory, Gini coefficient, income inequality, invisible hand, p-value, price stability, Ruby on Rails, Skype, statistical model, stem cell, Stephen Hawking, text mining, The Wealth of Nations by Adam Smith, We are the 99%, web application, wikimedia commons

Given that all roids are the same, our Utopia simulation simply shows that over time, the rich get richer and the poor get poorer (in this case, the poor die), and the gap of inequality widens. Isn’t this simply guessing? Let’s do a second analysis. Inequality is frequently measured using the Gini coefficient, so we’ll analyze the distribution of energy levels with the Gini coefficient and Lorenz curves (for more information, see the sidebar ). Gini Coefficient and Lorenz Curve The Gini coefficient is a measure of statistical dispersion developed by the Italian statistician and sociologist Corrado Gini and published in his 1912 paper “Variability and Mutability.” It is a measure of the inequality of a distribution, a value of 0 expressing perfect equality and a value of 1 expressing perfect inequality. Although commonly used as a measure of inequality of income or wealth, the Gini coefficient has also been applied in many other fields, including ecology, health science, and chemistry.

Although commonly used as a measure of inequality of income or wealth, the Gini coefficient has also been applied in many other fields, including ecology, health science, and chemistry. Associated with the Gini coefficient is the Lorenz curve, a graphical representation of the cumulative distribution function of a probability distribution. It was developed by Max O. Lorenz in 1905 to represent inequality of the wealth distribution. If there is perfect equality, the curve will be a line y = x. If there is perfect inequality, it will be a line y = 0 (i.e., a horizontal line). The Gini coefficient is the area between the line of perfect equality and the Lorenz curve, as a percentage of the area between the line of perfect equality and the line of perfect inequality. For this analysis, we’ll use the ineq library, which conveniently provides all the necessary functions for us to do this analysis. Let’s apply the same data points we used for graphing to some new R code that calculates the coefficience of inequality (Example 8-13).

Let’s apply the same data points we used for graphing to some new R code that calculates the coefficience of inequality (Example 8-13). Example 8-13. Analyzing inequality over time library(ineq) data <- read.table("money.csv", header=F, sep=",") points = c(1,5,15,30,50,75,100,125,150,200,300,500) pdf("inequality.pdf") par(mfcol=c(4,3)) for (i in 1:12) { p <- Lc(as.vector(as.matrix(data[points[i],]))) ie <- ineq(data[points[i],]) plot(p, main=paste("t =", points[i], "/ Gini = ", round(ie, 3)), font.main=1) } dev.off() Although we use the same data as before (of course) and the same sample points, instead of generating histograms, this time we generate Lorenz curves and print out the Gini coefficient in the title of the chart as well (Figure 8-4). Figure 8-4. Lorenz curves showing inequality over time As expected, inequality increases over time—that is, the rich get richer and the poor get poorer.


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Think Complexity by Allen B. Downey

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Benoit Mandelbrot, cellular automata, Conway's Game of Life, Craig Reynolds: boids flock, discrete time, en.wikipedia.org, Frank Gehry, Gini coefficient, Guggenheim Bilbao, mandelbrot fractal, Occupy movement, Paul Erdős, peer-to-peer, Pierre-Simon Laplace, sorting algorithm, stochastic process, strong AI, Thomas Kuhn: the structure of scientific revolutions, Turing complete, Turing machine, Vilfredo Pareto, We are the 99%

Agents who own a large proportion of the total wealth leave behind larger amounts of sugar, making an investment into the sugarscape and increasing the total wealth. The Gini Coefficient To compare the effect of taxation on wealth distribution, we need a metric that measures how distributed or flat a certain wealth distribution is. We use the Gini coefficient, which is often used in economics to measure the wealth gap (see http://en.wikipedia.org/wiki/Gini_coefficient). The Gini coefficient is between 0 and 1, with 0 the measurement of a perfectly uniform distribution and 1 the measurement of a distribution with complete inequality. Figure 11-1 shows a histogram describing the wealth distribution when there is no tax system in place. For most initial conditions without taxation, the sugarscape quickly develops a long-tailed distribution of wealth, skewed to the right.

The agents have a similar amount of sugar, and the economy has a low Gini coefficient, 0.02. Figure 11-3 shows that higher taxes in general result in lower Gini coefficients. This makes sense, since the point of our tax system is to redistribute wealth. In this model, perfect equality comes at a price. With no taxation, the mean wealth was 358; with a 20% tax rate, it drops to 157. Figure 11-4 shows the effect of tax rate on wealth; mean wealth gets smaller as taxes get higher. Figure 11-2. Histogram of wealth with tax system Figure 11-3. The Gini coefficient versus the tax rate Figure 11-4. Mean wealth versus tax rate Conclusion It’s up to a society to determine its ideal wealth distribution. In our model, there is a conflict between the goals of maximizing total wealth and minimizing inequality. One way to reconcile this conflict is to maximize the wealth of the bottom quartile.

Self-Organized Criticality Sand Piles Spectral Density Fast Fourier Transform Pink Noise Reductionism and Holism SOC, Causation, and Prediction 10. Agent-Based Models Thomas Schelling Agent-Based Models Traffic Jams Boids Prisoner’s Dilemma Emergence Free Will 11. Case Study: Sugarscape The Original Sugarscape The Occupy Movement A New Take on Sugarscape Pygame Taxation and the Leave Behind The Gini Coefficient Results with Taxation Conclusion 12. Case Study: Ant Trails Introduction Model Overview API Design Sparse Matrices wx Applications 13. Case Study: Directed Graphs and Knots Directed Graphs Implementation Detecting Knots Knots in Wikipedia 14. Case Study: The Volunteer’s Dilemma The Prairie Dog’s Dilemma Analysis The Norms Game Results Improving the Chances A.


pages: 268 words: 89,761

Unhealthy societies: the afflictions of inequality by Richard G. Wilkinson

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attribution theory, clean water, correlation coefficient, experimental subject, full employment, fundamental attribution error, Gini coefficient, income inequality, income per capita, Indoor air pollution, invisible hand, land reform, means of production, purchasing power parity, rising living standards, upwardly mobile

The measure of income distribution used in figure 5.6 is the Gini coefficient, which measures inequality across the whole population rather than by just comparing the rich and poor. Its value varies between 0, which would mean everyone had the same income, and 1, which would mean all income went to one individual and no one else would have any. This means that a value of 0.4 (to the right on the Figure 5.6: Life expectancy (M&F) and Gini coefficients of post-tax income inequality (standardised for household size) Sources: Data from M. Sawyer, Income distribution in OECD countries, OECD Economic Outlook, Occasional Studies, 1976, 3–36, Table 11; and World Bank Income distribution and health 85 horizontal axis) represents greater inequality than 0.3. Japan appears in the middle of the field with income distribution and life expectancy much like Britain’s at that date.

Both the Gini coefficient and the ratio of incomes of the bottom and top 20 per cent of the population shown in the figure record a slow widening of income differences until the mid-1980s and then, from about 1985 onwards, a more rapid widening. The rate at which inequality increased during this period is almost unprecedented. Among the OECD countries only New Zealand saw a faster Income distribution and health 95 Figure 5.9: Widening income differences: distribution of disposable income adjusted for household size, UK Note: The Gini coefficient measures the degree of income inequality—not just between rich and poor, but across the whole population. The larger the coefficient, the greater the inequality. If everyone had the same income, the coefficient would be 0%. If all income went to one person and everyone else went without, the coefficient would be 100%. Source: Central Statistical Office, Economic Trends 475:129. 1993.

Ben Shlomo working on data covering small areas in Britain also found a statistically significant tendency for areas with more equality to have Figure 5.5: The relationship between income distribution and mortality among fifty states of the USA in 1990 Sources: Data calculated from US Census and National Centre for Health Statistics by Kaplan, Pamuk, Lynch, Cohen and Balfour (1996), who kindly provided it for publication here 80 Health inequalities within societies lower mortality rates, even after controlling for average deprivation levels in each area (Ben Shlomo et al. 1996). As well as the work on mortality rates, Steckel reported a relationship between average height (which is closely related to health) and income distribution (Steckel 1983, 1994). Comparing the relative power of the relationships of income distribution and per capita economic growth to height, Steckel says that the effect on adult height of a doubling of per capita income could be offset by a modest rise of 0.066 in the Gini coefficient of income inequality. Given that the relationship between health and income distribution exists, how confident can we be of its meaning?


pages: 580 words: 168,476

The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz

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affirmative action, Affordable Care Act / Obamacare, airline deregulation, Andrei Shleifer, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collapse of Lehman Brothers, collective bargaining, colonial rule, corporate governance, Credit Default Swap, Daniel Kahneman / Amos Tversky, Dava Sobel, declining real wages, deskilling, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, framing effect, full employment, George Akerlof, Gini coefficient, income inequality, income per capita, indoor plumbing, inflation targeting, information asymmetry, invisible hand, jobless men, John Harrison: Longitude, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, labour market flexibility, London Interbank Offered Rate, lone genius, low skilled workers, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, mass incarceration, medical bankruptcy, microcredit, moral hazard, mortgage tax deduction, negative equity, obamacare, offshore financial centre, paper trading, Pareto efficiency, patent troll, Paul Samuelson, payday loans, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, shareholder value, short selling, Silicon Valley, Simon Kuznets, spectrum auction, Steve Jobs, technology bubble, The Chicago School, The Fortune at the Bottom of the Pyramid, The Myth of the Rational Market, The Spirit Level, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, trickle-down economics, ultimatum game, uranium enrichment, very high income, We are the 99%, wealth creators, women in the workforce, zero-sum game

Of course, what he meant was not that the taxes themselves led to higher growth but that the taxes financed public expenditures—investments in education, technology, and infrastructure—and the public expenditures were what had sustained the high growth—more than offsetting any adverse effects from the higher taxation. Gini coefficient One standard measure of inequality is the Gini coefficient. If income were shared in proportion to the population—the bottom 10 percent getting roughly 10 percent of the income, the bottom 20 percent getting 20 percent, and so forth—then the Gini coefficient would be zero. There would be no inequality. On the other hand, if all the income went to the top person, the Gini coefficient would be one, in some sense “perfect” inequality. More-equal societies have Gini coefficients of .3 or below. These include Sweden, Norway, and Germany.96 The most unequal societies have Gini coefficients of .5 or above. These include some countries in Africa (notably South Africa with its history of grotesque racial inequality) and Latin America—long recognized for their divided (and often dysfunctional) societies and polities.97 America hasn’t made it yet into this “elite” company, but it’s well on the way.

Among OECD countries, Turkey and Mexico both have substantially greater inequality as measured by the Gini coefficient. See the discussion of this measure below. 93. These comparisons are based on Gini coefficient data provided by the United Nations International Human Development Indicators, but are also supported by other databases. The Gini coefficient is an imperfect measure of inequality, but is useful for general international comparisons such as this one. I discuss some of the difficulties of comparing Gini data in subsequent footnotes in this chapter. 94. See United Nations Human Development Report statistics, available online at http://hdr.undp.org/en/statistics/ (accessed March 6, 2012). The only country where inequality had a larger negative effect on ranking was Colombia. 95. See World Bank Indicators, available at http://data.worldbank.org/indicator. 96.

United Nations Human Development Indicators database, available at http://hdrstats.undp.org/en/tables/ (accessed March 6, 2012). 97. Some caution must be used in making comparisons across countries. Data necessary for calculating the Gini coefficient are difficult to collect, especially in poor countries. Moreover, inequality in income may not adequately capture inequality in “well-being,” especially in comparing governments that provide strong safety nets and systems of social protection. Moreover, some of the inequality in larger countries (like China) may be related to geography. There are various sources for data comparing Gini coefficients across countries, including the World Bank, the United Nations, the CIA, and the Global Peace Index. See respectively http://data.worldbank.org/indicator/SI.POV.GINI?page=2&order=wbapi_data_value_2009%20wbapi_data_value%20wbapi_data_value-last&sort=asc, http://hdrstats.undp.org/en/indicators/67106.html, https://www.cia.gov/library/publications/the-world-factbook/rankorder/2172rank.html, and http://www.visionofhumanity.org/. 98.


pages: 261 words: 57,595

China's Future by David Shambaugh

Berlin Wall, capital controls, demographic dividend, demographic transition, Deng Xiaoping, facts on the ground, financial intermediation, financial repression, Gini coefficient, high net worth, knowledge economy, labour mobility, low skilled workers, market bubble, megacity, Mikhail Gorbachev, New Urbanism, offshore financial centre, open economy, Pearl River Delta, rent-seeking, secular stagnation, short selling, South China Sea, special drawing rights, too big to fail, urban planning, Washington Consensus, working-age population, young professional

As scholars Jane Duckett and Guohui Wang point out, inequality involves access by individuals and households to public services such as housing, healthcare, and education; it biases people in their search for employment, and it involves discrimination and unequal opportunities for women and minorities.14 Figure 3.1 China’s Gini Coefficient Source: China National Bureau of Statistics. Figure 3.2 China’s Gini Coefficient in Comparison Sources: China National Bureau of Statistics; OECD; World Bank. As the work of sociologist Martin King Whyte of Harvard illustrates, inequality is also profoundly perceptual—how people perceive themselves and their social status and opportunities in relation to others. Do they perceive injustice and discrimination? Whyte’s extensive survey research leads him to this counterintuitive conclusion: “We find little evidence of the claimed high and rising levels of popular anger about inequality issues, and we see few signs that China is heading towards a ‘social volcano’ due to widespread discontent over inequality and distributive injustice issues.”15 While I respect Professor Whyte enormously and I recognize the importance of his empirical data, I am very skeptical about his conclusions.

A particularly acute social problem in China, now and into the future, is inequality. China is now among the top ten countries of the world’s highest Gini Coefficient rankings, the main measure of social inequality in societies worldwide, although the official estimates are not in agreement. The World Bank’s most recent estimate was .37 in 2011, and is the lowest, while the Chinese government’s own calculation (Figure 3.1) puts it higher, at .47 for the same year, while others put it in between at .42.13 While high, China’s Gini ranking peaked around 2009 and has fallen since (paralleling a global pattern). While not as high and acute as South Africa, Brazil, or Nigeria, China’s Gini rating ranks it fourth in the world (Figure 3.2). Inequality is not simply a statistical measure of income. As scholars Jane Duckett and Guohui Wang point out, inequality involves access by individuals and households to public services such as housing, healthcare, and education; it biases people in their search for employment, and it involves discrimination and unequal opportunities for women and minorities.14 Figure 3.1 China’s Gini Coefficient Source: China National Bureau of Statistics.

China’s Growing Military Capabilities China’s Future Impact on the World Notes Index End User License Agreement List of Figures 1.1 Possible Pathways for China’s Future 1.2 Pathways and Likely Results for China’s Future 1.3 The J-Curve 2.1 China’s Development Strategy 2.2 China’s GDP Growth Rates 2.3 China’s Alternative GDP Projections 3.1 China’s Gini Coefficient 3.2 China’s Gini Coefficient in Comparison 3.3 China’s Reported Incidents of Mass Unrest 3.4 Xinjiang and Tibet 3.5 Hong Kong’s “Umbrella Revolution” 3.6 Taiwan’s Sunflower Movement 3.7 China’s Urbanization Growth 3.8 China’s Demographic Projections 4.1 China’s Political Orientation 1985–2015 4.2 Zeng Qinghong 4.3 Xi Jinping 5.1 China’s Trade in Asia 5.2 Asian Perceptions of China’s Territorial Disputes 5.3 Perceptions of China as a Global Power 5.4 American Views of China 2005–2015 5.5 Presidents Xi Jinping and Vladimir Putin 5.6 China’s Soft Power Appeal in the Developing World 5.7 China’s Military Spending 2000-2014 Dedicated to Harry Harding China’s Future David Shambaugh polity Copyright © David Shambaugh 2016 The right of David Shambaugh to be identified as Author of this Work has been asserted in accordance with the UK Copyright, Designs and Patents Act 1988.


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Two Nations, Indivisible: A History of Inequality in America: A History of Inequality in America by Jamie Bronstein

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Affordable Care Act / Obamacare, back-to-the-land, barriers to entry, basic income, Bernie Sanders, big-box store, blue-collar work, Branko Milanovic, British Empire, Capital in the Twenty-First Century by Thomas Piketty, clean water, cognitive dissonance, collateralized debt obligation, collective bargaining, Community Supported Agriculture, corporate personhood, crony capitalism, deindustrialization, desegregation, Donald Trump, ending welfare as we know it, Frederick Winslow Taylor, full employment, Gini coefficient, income inequality, interchangeable parts, invisible hand, job automation, John Maynard Keynes: technological unemployment, labor-force participation, land reform, land tenure, low skilled workers, low-wage service sector, mandatory minimum, mass incarceration, minimum wage unemployment, moral hazard, moral panic, mortgage debt, New Urbanism, non-tariff barriers, obamacare, occupational segregation, Occupy movement, oil shock, Plutocrats, plutocrats, price discrimination, race to the bottom, rent control, road to serfdom, Ronald Reagan, Scientific racism, Simon Kuznets, single-payer health, strikebreaker, too big to fail, trade route, transcontinental railway, Triangle Shirtwaist Factory, trickle-down economics, universal basic income, Upton Sinclair, upwardly mobile, urban renewal, wage slave, War on Poverty, women in the workforce, working poor, Works Progress Administration

The United States supplied 99 percent of all of the raw cotton used by Great Britain’s massive textile industry in 1851, and cotton represented 60 percent of American exports.9 The Gini coefficient of wealth inequality, which had been 0.694 in 1774, increased to 0.832 in 1860. Even incremental changes in the economy were producing significant inequality.10 The inequality of the antebellum period is even more acute when we consider the plight of enslaved people, who are excluded from the above Gini coefficient calculation. The inequality of the antebellum period had physical effects. Over the period between 1780 and 1850, life expectancies at age 10 declined in the United States from a high of almost 56 years to a low of 48, and mean heights dropped from 5 feet 7 inches for white men to 5 feet 6 inches. These factors suggest that in the short run, market revolution changes could be detrimental. Historians have suggested that inequality of distribution, variable trade cycles, urbanization, and the ease with which diseases could travel along new trade routes may have been to blame.11 In his book Democracy in America, written after an 1831 tour of the United States, the Frenchman Alexis de Tocqueville praised American social and economic mobility.12 Of course the second quarter of the nineteenth century saw the making of many fortunes in diverse industries.

In the twentieth century, any advantage the United States had disappeared, but crucially, Americans continued to buy into the opportunity myth, and it restricted the scope of palatable social welfare initiatives.15 Even statistical arguments about American inequality have tended to miss the important point that most historical calculations of economic welfare leave out some groups. Economists and economic historians use a measure of inequality called the Gini coefficient, derived by plotting the percentage of American households on the X axis of a graph and the proportion of their national income or their wealth on the Y axis, as shown in Figure I.2. Then one measures the way the actual curve compares with both a “perfect equality” scenario (one in which all households have the same income or wealth) and a “perfect inequality” scenario (one in which one household has 100 percent of the income or wealth and the other households have 0). A Gini coefficient of zero represents perfect equality; a coefficient of 1 represents perfect inequality.16 Peter Lindert and Jeffrey Williamson, the most-cited economic historians to write about American inequality, claim that inequality followed this trajectory: a period of relative equality during the American Revolution was followed by growing inequality before the Civil War, high levels of inequality at the turn of the century, and then finally a leveling off of inequality in the middle decades of the twentieth century.

While this is the dominant view, economic historian Carole Shammas showed that Williamson and Lindert omitted from their calculations married women (subject to laws that excluded them from ownership of most property, so without a claim to income in most cases) and African Americans (the vast majority of them slaves, and thus without income at all). Whatever “equality” means, it cannot mean a nation in which over half the population has no claim to income or to wealth.17 Shammas argued that historians of inequality should focus on wealth rather than income, since in her estimation wealth is even more likely to be lopsided than income, and more likely to confer political power. She recalculated Gini coefficients for the period from 1774 to 1986 and showed that throughout that entire period, the Gini coefficient was at least 0.72, rising to 0.83 during the 1850s and 1860s. For the purposes of comparison, the Gini coefficient of wealth for the United States in 2015 was 80.56, making it the most unequal country in the developed world.18 Moreover, consistently, the wealth of the first, second, and third quintiles of the population combined—that is, the poorest 60 percent of the population—never exceeded 11 percent of the nation’s total wealth.


pages: 561 words: 87,892

Losing Control: The Emerging Threats to Western Prosperity by Stephen D. King

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Admiral Zheng, asset-backed security, barriers to entry, Berlin Wall, Bernie Madoff, Bretton Woods, BRICs, British Empire, capital controls, Celtic Tiger, central bank independence, collateralized debt obligation, corporate governance, credit crunch, crony capitalism, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, demographic dividend, demographic transition, Deng Xiaoping, Diane Coyle, Fall of the Berlin Wall, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, full employment, George Akerlof, German hyperinflation, Gini coefficient, hiring and firing, income inequality, income per capita, inflation targeting, invisible hand, Isaac Newton, knowledge economy, labour market flexibility, labour mobility, liberal capitalism, low skilled workers, market clearing, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, Naomi Klein, new economy, old age dependency ratio, Paul Samuelson, Ponzi scheme, price mechanism, price stability, purchasing power parity, rent-seeking, reserve currency, rising living standards, Ronald Reagan, savings glut, Silicon Valley, Simon Kuznets, sovereign wealth fund, spice trade, statistical model, technology bubble, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Market for Lemons, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, transaction costs, Washington Consensus, women in the workforce, working-age population, Y2K, Yom Kippur War

EMERGING NATIONS AND THE RISE OF INCOME INEQUALITY IN THE DEVELOPED WORLD According to the World Bank’s World Development Indicators, the US and China have roughly equivalent income distributions, as measured by Gini coefficients. (The Gini coefficient is typically expressed as a ratio between 0 and 1, where 0 represents a precisely equal income distribution and a figure of 1 implies that one person has made off with all the income. It’s no great surprise that countries ruled by despots tend to have very high Gini coefficients.) By Western European or Japanese standards, both the US and China are very unequal societies. This is an intriguing result given that the US is regarded as the arch-capitalist economy whereas China still, publicly, hangs on to its communist credentials. Figure 6.1: Gini coefficients Source: World Development Indicators 2009, World Bank There are three key problems with this data, at least for the purposes of my argument.

First, there may be no statistical consistency across countries, leading to an apples and pears problem. Second, the source years for the data vary enormously, from 1993 in Japan to 2007 in Brazil. Third, because the World Bank offers no consistent time series, it’s difficult to work out how globalization may have affected income inequality over time. Nevertheless, other sources are very much consistent with the idea that both the US and China have seen big increases in income inequality in recent decades. The US Census Bureau calculates that, between 1967 and 2007, the Gini coefficient for American household income rose from 0.397 to 0.463. The share of household income delivered to the highest quintile rose over the same period from around 43 per cent to 50 per cent. Meanwhile, the ratio between the richest 5 per cent of households and the poorest 10 per cent jumped from 11.7 to 14.6.

(i) Gama, Vasco da (i) gas (i), (ii), (iii), (iv), (v) Gazprom (i), (ii), (iii), (iv) General Agreement on Tariffs and Trade (GATT) (i) General Motors (i) General Strike (i) General Theory of Employment, Interest and Money (Keynes) (i) genetically modified crops (i) Georgia (i), (ii) German marks (i), (ii), (iii) Germany anarchy in capital markets (i), (ii) monetary union (i) political economy and inequalities (i), (ii), (iii) population demographics (i), (ii), (iii), (iv), (v), (vi), (vii) price stability and economic instability (i), (ii), (iii) reserve currency (i) reunification (i), (ii), (iii) secrets of Western success (i), (ii), (iii) state capitalism (i), (ii), (iii) trade (i), (ii), (iii), (iv), (v), (vi) Gini coefficients (i), (ii) globalization anarchy in capital markets (i) economic integration, political proliferation (i), (ii) globalization opens up the world (i), (ii) great power games (i), (ii) indulging the US no more (i), (ii) political economy and inequalities (i), (ii), (iii), (iv), (v) price stability and economic instability (i) scarcity (i), (ii), (iii), (iv), (v) state capitalism (i) trade (i), (ii), (iii) the West’s diminished status (i), (ii), (iii), (iv) global savings glut (i), (ii), (iii) Gohkale, Jagedeesh (i) gold rush (i), (ii), (iii) Gold Standard (i) golf courses (i) Goodson, Margaret (i), (ii) Google (i) government debt (i), (ii), (iii), (iv) Government Investment Corporation (i) governments (i), (ii), (iii), (iv), (v) government spending (i), (ii), (iii), (iv), (v) graduates (i), (ii), (iii), (iv), (v), (vi) Graham, Lindsay (i) Great Depression (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) Great Leap Forward (i), (ii) ‘Great Moderation’ (i), (ii), (iii), (iv) Greece (i) greenhouse gases (i) green revolution (i), (ii) Greenspan, Alan (i), (ii) Grenada (i) Haiti (i) Halliburton (i), (ii), (iii) Haltmaier, Jane (i) hard knowledge (i) Hart, Philip (i) headline inflation (i) Headrick, D.


pages: 232

Planet of Slums by Mike Davis

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barriers to entry, Branko Milanovic, Bretton Woods, British Empire, Brownian motion, centre right, clean water, conceptual framework, crony capitalism, declining real wages, deindustrialization, Deng Xiaoping, edge city, European colonialism, failed state, Gini coefficient, Hernando de Soto, housing crisis, illegal immigration, income inequality, informal economy, Intergovernmental Panel on Climate Change (IPCC), Internet Archive, jitney, jobless men, Kibera, labor-force participation, land reform, land tenure, liberation theology, low-wage service sector, mandelbrot fractal, market bubble, megacity, microcredit, New Urbanism, Pearl River Delta, Ponzi scheme, RAND corporation, rent control, structural adjustment programs, surplus humans, upwardly mobile, urban planning, urban renewal, War on Poverty, Washington Consensus, working poor

Conspicuous consumption reached hallucinatory levels in Latin America and Africa during the 1980s as the nouveaux riches went on spending sprees in Miami and Paris while their shantytown compatriots starved. Indices of inequality reached record heights in the 1980s. In Buenos Aires the richest decile's share of income increased from 10 times that of the poorest in 1984 to 23 times in 1989. In Rio de Janeiro, inequality as measured in classical GINI coefficients climbed from 0.58 in 1981 to 0.67 in 1989 26 Indeed, throughout Latin America, the 1980s deepened the canyons and elevated the peaks of the world's most extreme social topography. According to a 2003 World Bank report, GINI coefficients are 10 points higher in Latin America than Asia; 17.5 points higher than the OECD; and 20.4 points higher than Eastern Europe. Even the most egalitarian country in Latin America, 22 Alberto Minujin, "Squeezed: The Middle Class in Latin America," Environment and Urbanisation 7:2 (October 1995), p. 155. 23 Agustin Escobar and Mercedes Gonzalez de la Rocha, "Crisis, Restructuring and Urban Poverty in Mexico," Environment and Urbanisation!

percent in 1992 to 28 percent in 1999, despite the much-hyped "success stories" of the border maquiladoras and NAFTA.47 Likewise in Colombia, where urban wages declined, but coca acreage tripled during the regime of Cesar Gaviria (elected in 1990), the drug cartels, according to an OECD report, "were among the most consistently favorable to his neoliberal policies."48 Global inequality, as measured by World Bank economists across the entire world population, reached an incredible GINI coefficient level of 0.67 by the end of the century — this is mathematically equivalent to a situation where the poorest twothirds of the world receive zero income, and the top third receives everything.49 Global turmoil at the the end of the decade, moreover, could be mapped with uncanny accuracy to cities and regions that experienced the sharpest increases in inequality. Throughout the Middle East and Muslim South Asia, a widening gulf between urban rich and poor corroborated the arguments of Islamists and even more radical Salafists about the irreformable corruption of ruling regimes.

., 2000, p. 18. 50 Laabas Belkacem, "Poverty Dynamics in Algeria," Arab Planning Institute, working paper, Kuwait (June 2001), pp. 3, 9. 51 Djavad Salehi-Isfahani, "Mobility and the Dynamics of Poverty in Iran: What Can We Learn from the 1992-95 Panel Data?," World Bank working paper (November 2003), p. 17. 52 Soliman, Possible Way Out, p. 9. chronic underinvestment in irrigation. As a result, the wages of casual and informal labor fell, poverty soared at a pace which the National Human Development Report characterized as "unprecedented in Pakistan's history," and urban income inequality, as measured by the GINI coefficient, increased from 31.7 percent in 1992 to 36 percent in 1998.53 The biggest event of the 1990s, however, was the conversion of much of the former "Second World" - European and Asian state socialism — into a new Third World. In the early 1990s those considered to be living in extreme poverty in the former "transitional countries," as the UN calls them, rocketed from 14 million to 168 million: an almost instantaneous mass pauperization without precedent in history.54 Poverty, of course, did exist in the former USSR in an unacknowledged form, but according to World Bank researchers, the rate did not exceed 6 to 10 percent.55 Now, according to Alexey Krasheninnokov; in his report to UN-HABITAT, 60 percent of Russian families live in poverty, and the rest of the population "can only be categorized as middle class by a considerable stretch."


pages: 353 words: 81,436

Buying Time: The Delayed Crisis of Democratic Capitalism by Wolfgang Streeck

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activist fund / activist shareholder / activist investor, banking crisis, basic income, Bretton Woods, capital controls, Carmen Reinhart, central bank independence, collective bargaining, corporate governance, creative destruction, David Graeber, deindustrialization, Deng Xiaoping, Eugene Fama: efficient market hypothesis, financial deregulation, financial repression, fixed income, full employment, Gini coefficient, Growth in a Time of Debt, income inequality, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour market flexibility, labour mobility, late capitalism, liberal capitalism, means of production, moral hazard, Myron Scholes, Occupy movement, open borders, open economy, Plutonomy: Buying Luxury, Explaining Global Imbalances, profit maximization, risk tolerance, shareholder value, too big to fail, union organizing, winner-take-all economy, Wolfgang Streeck

Emmenegger et al., The Age of Dualization: The Changing Face of Inequality in Deindustrializing Countries, Oxford: Oxford University Press, 2012; J. Goldthorpe (ed.), Order and Conflict in Contemporary Capitalism, Oxford: Clarendon Press, 1984; B. Palier and K. Thelen, ‘Institutionalizing Dualism: Complementarities and Change in France and Germany’, Politics and Society, vol. 38/1, 2010, pp. 119–48. 54 See Martin Höpner, Wer beherrscht die Unternehmen? Shareholder Value, Managerherrschaft und Mitbestimmung in Deutschland, Frankfurt/Main: Campus, 2003. 55 Fig. 1.3 shows the evolution of the Gini coefficient, the most commonly used measure of income inequality, in the seven countries used as examples (see fn. 15 in this chapter). The Gini coefficient measures the deviation of the actual distribution from equal distribution.

While governments hoped that this would bring faster growth and in any case relieve them of political responsibilities, employers invoked the expansion of markets and sharper competition to justify the degrading of wages and work conditions or the widening of wage differentials.53 At the same time, capital markets were transformed into markets for corporate control, which made of ‘shareholder value’ the supreme maxim of good management.54 In many places, even in Scandinavia, citizens were referred to private education and insurance markets as a supplement or even alternative to public providers, with the option of taking up credit to pay the bills. Economic inequality grew everywhere by leaps and bounds (Fig. 1.3).55 In this way and others, responding in more or less the same way to the pressure coming from the owners and managers of their ‘economy’, the developed capitalist countries shed the responsibility they had taken on in mid-century for growth, full employment, social security and social cohesion, handing the welfare of their citizens more than ever over to the market. FIGURE 1.3. Evolution of income inequality: Gini coefficients, seven countries Sources: OECD Database on Household Income Distribution and Poverty, OECD Factbook 2008; Economic, Environmental and Social Statistics 2008; OECD Factbook 2010: Country Indicators, OECD Factbook Statistics In the rich countries of the West, the long turn to neoliberalism encountered remarkably weak resistance.

The Gini coefficient measures the deviation of the actual distribution from equal distribution. Another measure of inequality is the share of wages – as opposed to profits – in national income. Here the picture for the sixteen main OECD countries between 1960 and 2005 is as devastating as for the Gini coefficient: ‘Labour’s share increased when capital’s relative bargaining power was threatened by the ascendancy of social democratic projects in the aftermath of World War II. The last two decades have seen a new swing of the pendulum toward a restoration of bargaining power to the capitalist class … Neo-liberalism is … an attempt to restore the capitalist class’s share of income to its pre-World War II levels’ (T. Kristal, ‘Good Times, Bad Times: Postwar Labor’s Share’, American Sociological Review, vol. 75/5, 2010, pp. 758f). 56 Streeck, ‘Citizens as Customers’. 57 Boltanski and Chiapello, The New Spirit of Capitalism. 58 Polanyi, The Great Transformation. 59 Attempts to get by with without inflation by means of ‘incomes policy’ had mixed fortunes.


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Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth by Michael Jacobs, Mariana Mazzucato

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3D printing, balance sheet recession, banking crisis, basic income, Bernie Sanders, Bretton Woods, business climate, Carmen Reinhart, central bank independence, collaborative economy, complexity theory, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, decarbonisation, deindustrialization, dematerialisation, Detroit bankruptcy, double entry bookkeeping, Elon Musk, endogenous growth, energy security, eurozone crisis, factory automation, facts on the ground, fiat currency, Financial Instability Hypothesis, financial intermediation, forward guidance, full employment, G4S, Gini coefficient, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Internet of things, investor state dispute settlement, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour market flexibility, low skilled workers, Martin Wolf, mass incarceration, Mont Pelerin Society, neoliberal agenda, Network effects, new economy, non-tariff barriers, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, quantitative easing, QWERTY keyboard, railway mania, rent-seeking, road to serfdom, savings glut, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Steve Jobs, the built environment, The Great Moderation, The Spirit Level, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, trickle-down economics, universal basic income, very high income

For instance, in the UK the income share of the top 1 per cent went up from 5.7 per cent in 1978 to 14.7 per cent in 2010, while the share of wealth owned by the top 1 per cent surged from 22.6 per cent in 1970 to 28 per cent in 2010 and the top 10 per cent’s wealth share increased from 64.1 per cent to 70.5 per cent over the same period.17 Figure 3: Income share of the richest 1 per cent in some major industrialised countries Source: The World Wealth and Income Database (latest data available at http://www.wid.world/ (accessed 12 May 2016)) Also disturbing are the patterns that have emerged in transition economies, which at the beginning of their movement to a market economy had low levels of inequality in income and wealth (at least according to available measurements). Today, China’s inequality of income, as measured by its Gini coefficient, is roughly comparable to that of the United States and Russia.18 Across the OECD, since 1985 the Gini coefficient has increased in seventeen of twenty-two countries for which data is available, often dramatically (Figure 2). Moreover, recent research by Piketty and his co-authors has found that the importance of inherited wealth has increased in recent decades, at least in the rich countries for which we have data. After displaying a decreasing trend in the first postwar period, the share of inheritance flows in disposable income has been increasing in the past decades.19 Explaining inequality How can we explain these worrying trends?

Across the OECD, unemployment in the 16–25 age group averaged 15 per cent in 2014, with rates of over a third in Spain, Portugal, Italy and Greece.27 ‘Non-standard’ work (covering part-time, temporary and self-employed work, though not all of this is insecure) now accounts for around a third of total employment in the OECD, including half the jobs created since the 1990s and 60 per cent since the 2008 crisis. In 2013 almost three in ten part-time workers across the OECD were ‘involuntary’, meaning that they wanted to work full-time but could only find part-time jobs.28 The result of these trends has been a rise in inequality across the developed world. Between 1985 and 2013, the Gini coefficient measuring income inequality increased in seventeen OECD countries, was little changed in four and decreased in only one (Turkey).29 Wealth inequality has grown even more than that of income, a result both of the shift in the distribution of earnings away from wages and towards profits and of the huge increase in land and property values. In the UK the share of national wealth owned by the top 1 per cent rose from 23 per cent in 1970 to 28 per cent in 2010.

In the past twenty-five to thirty years the Gini index—the widely used measure of income inequality—has increased by roughly 29 per cent in the United States, 17 per cent in Germany, 9 per cent in Canada, 14 per cent in UK, 12 per cent in Italy and 11 per cent in Japan (Figure 2).16 The more countries follow the American economic model, the more the results seem to be consistent with what has occurred in the United States. The UK has now achieved the second highest level of inequality among the countries of Western Europe and North America, a marked change from its position before the Thatcher era (Figures 2 and 3). Germany, which had been among the most equal countries within the OECD, now ranks in the middle. Figure 2: Gini coefficient of income inequality in OECD countries (after-tax and transfer) Note: income refers to disposable income adjusted for household size.


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Capital in the Twenty-First Century by Thomas Piketty

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accounting loophole / creative accounting, Asian financial crisis, banking crisis, banks create money, Berlin Wall, Branko Milanovic, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, central bank independence, centre right, circulation of elites, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation coefficient, David Ricardo: comparative advantage, demographic transition, distributed generation, diversification, diversified portfolio, European colonialism, eurozone crisis, Fall of the Berlin Wall, financial intermediation, full employment, German hyperinflation, Gini coefficient, high net worth, Honoré de Balzac, immigration reform, income inequality, income per capita, index card, inflation targeting, informal economy, invention of the steam engine, invisible hand, joint-stock company, Joseph Schumpeter, Kenneth Arrow, market bubble, means of production, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, open economy, Paul Samuelson, pension reform, purchasing power parity, race to the bottom, randomized controlled trial, refrigerator car, regulatory arbitrage, rent control, rent-seeking, Robert Gordon, Ronald Reagan, Simon Kuznets, sovereign wealth fund, Steve Jobs, The Nature of the Firm, the payments system, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade liberalization, very high income, Vilfredo Pareto, We are the 99%, zero-sum game

If this happens, the future could hold in store a new world of inequality more extreme than any that preceded it.21 Problems of Synthetic Indices Before turning to a country-by-country examination of the historical evolution of inequality in order to answer the questions posed above, several methodological issues remain to be discussed. In particular, Tables 7.1–3 include indications of the Gini coefficients of the various distributions considered. The Gini coefficient—named for the Italian statistician Corrado Gini (1884–1965)—is one of the more commonly used synthetic indices of inequality, frequently found in official reports and public debate. By construction, it ranges from 0 to 1: it is equal to 0 in case of complete equality and to 1 when inequality is absolute, that is, when a very tiny group owns all available resources. In practice, the Gini coefficient varies from roughly 0.2 to 0.4 in the distributions of labor income observed in actual societies, from 0.6 to 0.9 for observed distributions of capital ownership, and from 0.3 to 0.5 for total income inequality.

Indeed, it is impossible to summarize a multidimensional reality with a unidimensional index without unduly simplifying matters and mixing up things that should not be treated together. The social reality and economic and political significance of inequality are very different at different levels of the distribution, and it is important to analyze these separately. In addition, Gini coefficients and other synthetic indices tend to confuse inequality in regard to labor with inequality in regard to capital, even though the economic mechanisms at work, as well as the normative justifications of inequality, are very different in the two cases. For all these reasons, it seemed to me far better to analyze inequalities in terms of distribution tables indicating the shares of various deciles and centiles in total income and total wealth rather than using synthetic indices such as the Gini coefficient. Distribution tables are also valuable because they force everyone to take note of the income and wealth levels of the various social groups that make up the existing hierarchy.

In the case of unequal incomes from capital, the most important processes involve savings and investment behavior, laws governing gift-giving and inheritance, and the operation of real estate and financial markets. The statistical measures of income inequality that one finds in the writings of economists as well as in public debate are all too often synthetic indices, such as the Gini coefficient, which mix very different things, such as inequality with respect to labor and capital, so that it is impossible to distinguish clearly among the multiple dimensions of inequality and the various mechanisms at work. By contrast, I will try to distinguish these things as precisely as possible. Capital: Always More Unequally Distributed Than Labor The first regularity we observe when we try to measure income inequality in practice is that inequality with respect to capital is always greater than inequality with respect to labor. The distribution of capital ownership (and of income from capital) is always more concentrated than the distribution of income from labor.


pages: 356 words: 91,157

The New Urban Crisis: How Our Cities Are Increasing Inequality, Deepening Segregation, and Failing the Middle Class?and What We Can Do About It by Richard Florida

affirmative action, Airbnb, basic income, Bernie Sanders, blue-collar work, business climate, Capital in the Twenty-First Century by Thomas Piketty, clean water, Columbine, congestion charging, creative destruction, David Ricardo: comparative advantage, declining real wages, deindustrialization, Donald Trump, East Village, edge city, Edward Glaeser, failed state, Ferguson, Missouri, Gini coefficient, Google bus, high net worth, income inequality, income per capita, industrial cluster, informal economy, Jane Jacobs, jitney, Kitchen Debate, knowledge economy, knowledge worker, land value tax, low skilled workers, Lyft, megacity, Menlo Park, mortgage tax deduction, Nate Silver, New Economic Geography, new economy, New Urbanism, occupational segregation, Paul Graham, Plutocrats, plutocrats, RAND corporation, rent control, rent-seeking, Richard Florida, rising living standards, Ronald Reagan, secular stagnation, self-driving car, Silicon Valley, sovereign wealth fund, superstar cities, the built environment, The Chicago School, The Death and Life of Great American Cities, the High Line, The Wealth of Nations by Adam Smith, Thorstein Veblen, trickle-down economics, Uber and Lyft, universal basic income, upwardly mobile, urban decay, urban planning, urban renewal, urban sprawl, white flight, young professional

In New York City, for example, the 1 percent hauls in more than forty times the average income of the bottom 99 percent; in Los Angeles, San Francisco, and San Jose, they make about thirty times as much.8 The overall level of income inequality in the United States as a whole is bad enough—it is 0.450 on the Gini coefficient index, the standard for measuring income inequality. (Gini coefficient values range from 0 to 1, with 0 indicating zero inequality and 1 indicating the most extreme inequality.) The US value is about the same as Iran’s, and worse than Russia’s, India’s, or Nicaragua’s. But within many US cities and metro areas, the Gini coefficient is even worse, rivaling some of the most unequal countries on earth. New York City’s inequality is similar to that of Swaziland. Los Angeles’s matches up with Sri Lanka’s. Boston’s and San Francisco’s levels of inequality are similar to those of El Salvador and Rwanda, respectively. Miami’s is about the same as Zimbabwe’s.

Service class: The service class consists of workers in routine service jobs, including food preparation and other food-service-related occupations; building and grounds cleaning and maintenance; personal care and service; low-end sales; office and administrative support; and community and social services and protective services. The data for the three major classes are from the US Department of Labor, Bureau of Labor Statistics (BLS), 2010. Inequality Income inequality: Income inequality is based on the conventional measure of the Gini coefficient and is from the US Census Bureau’s American Community Survey (ACS) for 2010. Wage inequality: This measure concerns the wage gap between creative-, working-, and service-class workers and is calculated based on the Theil index, which is a commonly used metric for measuring wage inequality.1 The data are from the BLS’s information for 2010. Composite Inequality Index: This index combines the above measures of income and wage inequality weighted equally into a single index. Economic Segregation Chapter 6 employs two types of measures for economic segregation.

Data on metro areas, as well as the more recent data on national trends, are from Estelle Sommeiller, Mark Price, and Ellis Wazeter, Income Inequality in the U.S. by State, Metropolitan Area, and County (Washington, DC: Economic Policy Institute, 2016), www.epi.org/publication/income-inequality-in-the-us/#epi-toc-8. 9. The Gini coefficient for nations is from the Central Intelligence Agency, The World Factbook (Washington, DC: US Government Publishing Office, 2015), www.cia.gov/library/publications/the-world-factbook; for metros it is from the US Census Bureau, “American Community Survey,” www.census.gov/programs-surveys/acs. 10. On the worsening trend in inequality across metros, see Richard Florida, “Where the Great Recession Made Inequality Worse,” CityLab, August 4, 2014, www.citylab.com/politics/2014/08/where-the-great-recession-made-inequality-worse/375480/T; US Conference of Mayors, U.S.


India's Long Road by Vijay Joshi

Affordable Care Act / Obamacare, barriers to entry, Basel III, basic income, blue-collar work, Bretton Woods, business climate, capital controls, central bank independence, clean water, collapse of Lehman Brothers, collective bargaining, colonial rule, congestion charging, corporate governance, creative destruction, crony capitalism, decarbonisation, deindustrialization, demographic dividend, demographic transition, Doha Development Round, eurozone crisis, facts on the ground, failed state, financial intermediation, financial repression, first-past-the-post, floating exchange rates, full employment, germ theory of disease, Gini coefficient, global supply chain, global value chain, hiring and firing, income inequality, Indoor air pollution, Induced demand, inflation targeting, invisible hand, land reform, Mahatma Gandhi, manufacturing employment, Martin Wolf, means of production, microcredit, moral hazard, obamacare, Pareto efficiency, price mechanism, price stability, principal–agent problem, profit maximization, profit motive, purchasing power parity, quantitative easing, race to the bottom, randomized controlled trial, rent-seeking, reserve currency, rising living standards, school choice, school vouchers, secular stagnation, Silicon Valley, smart cities, South China Sea, special drawing rights, The Future of Employment, The Market for Lemons, too big to fail, total factor productivity, trade liberalization, transaction costs, universal basic income, urban sprawl, working-age population

Note also that many of the figures quoted above are overall averages; the figures are considerably worse for backward states, for poor people, and for socially-​disadvantaged groups, including women.20 How about inequality in India? Inequality is not related to the goals of policy in any simple way but a rising trend of inequality would surely be a matter of concern.21 India has the reputation of having a low level of inter-​personal inequality of income by international standards. But this is an illusion created by the fact that it uses inequality of per capita consumption expenditure (calculated from National Sample Survey data) as a surrogate for inequality of income. For various reasons, including severe under-​reporting of and by the rich, measured consumption inequality systematically underestimates true income inequality. Some attempts have been made to measure inequality of incomes in India directly. These turn up with calculated Gini coefficients above 50 per cent, which puts India in the same ball-​park as high-​inequality Latin American countries like Brazil.22 Measures of interpersonal inequality of consumption are good enough to indicate what is happening to the trend of inequality.

These turn up with calculated Gini coefficients above 50 per cent, which puts India in the same ball-​park as high-​inequality Latin American countries like Brazil.22 Measures of interpersonal inequality of consumption are good enough to indicate what is happening to the trend of inequality. On this measure, from the early 1960s to the early 1990s, inequality in India was roughly flat, with a broadly stable Gini coefficient in the low thirties.23 But in the last two decades there has been a rise: the all-​India Gini coefficient has gone up by about six percentage points from 1993 to 2011, from around 30 to 36 per cent (see Table 2.4).24 This is mostly due to a rise in intra-​urban inequality, and the urban-​rural income differential; intra-​rural inequality has not increased by much.25 Other pieces of evidence are also suggestive of rising inequality, particularly in urban areas.

n.a. 31.3 (RG: 30.1; UG: 34.1) 36.0 45.3 (320 million) (404 million) 27.5 37.2 (302 million) (407 million) n.a. 32.1 (RG: 30.9; UG: 34.7) (323 million) 1993/​94 29.2 (RG: 28.5; UG: 30.8) (329 million) 1983 31.5 (RG: 30.3; UG: 35.3) (321 million) 1977/​78 35.0 (RG: 33.7; UG: 38.2) (262 million) 1973/​74 Inequality: Gini Coefficient (%) n.a. 30.7 (RG: 28.5; UG: 34.4) n.a. 34.7 (RG: 28.1; UG: 36.4) 21.9 29.5 35.9 (269 million) (363 million) (RG:28.7; UG:37.7) Notes: In the “Headcount Poverty Ratio” part of the table, the figures in brackets show the absolute number of poor people in millions. In the “Inequality: Gini Coefficient” part of the Table, RG means Rural Gini and UG means Urban Gini. Sources: Poverty, 1950s and 1960s: Datt (1997); poverty, 1973/​74 to 2011/​12 (except Rangarajan poverty in 2011/​12): Planning Commission (2014a) and Planning Commission (2014c); poverty, 2011/​ 12 (Rangarajan definition): Planning Commission (2014a); inequality, 1950s to 1993/​94: Datt (1997); inequality, 2004/​5 and 2011/​12: Himanshu (2015). 1 9 4 7 –​2 0 1 6 : A T O U R D ’ H O R I Z O N [ 21 ] 22 PARTIAL REFORM SINCE 1980: THE POLITICAL BACKDROP Congress (I) and Mrs. Gandhi returned to power in January 1980 in the middle of a drought, an oil price shock, and a macroeconomic crisis.


pages: 523 words: 111,615

The Economics of Enough: How to Run the Economy as if the Future Matters by Diane Coyle

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

accounting loophole / creative accounting, affirmative action, bank run, banking crisis, Berlin Wall, bonus culture, Branko Milanovic, BRICs, call centre, Cass Sunstein, central bank independence, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation does not imply causation, Credit Default Swap, deindustrialization, demographic transition, Diane Coyle, disintermediation, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Financial Instability Hypothesis, Francis Fukuyama: the end of history, George Akerlof, Gini coefficient, global supply chain, Gordon Gekko, greed is good, happiness index / gross national happiness, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, illegal immigration, income inequality, income per capita, industrial cluster, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jane Jacobs, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour market flexibility, light touch regulation, low skilled workers, market bubble, market design, market fundamentalism, megacity, Network effects, new economy, night-watchman state, Northern Rock, oil shock, Pareto efficiency, principal–agent problem, profit motive, purchasing power parity, railway mania, rising living standards, Ronald Reagan, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, South Sea Bubble, Steven Pinker, The Design of Experiments, The Fortune at the Bottom of the Pyramid, The Market for Lemons, The Myth of the Rational Market, The Spirit Level, transaction costs, transfer pricing, tulip mania, ultimatum game, University of East Anglia, web application, web of trust, winner-take-all economy, World Values Survey, zero-sum game

The northern European countries and Japan have the most equal distributions of income, and have seen the least increase in inequality over time. Just four though—Denmark, France, Germany, and Switzerland—have experienced a decline in inequality since 1990.21 The United States is at the other extreme. It has the most unequal distribution and has seen the biggest increase in inequality in recent times. The United States, closely shadowed by the United Kingdom and Korea, is so unequal that it bears comparison with developing countries. Other European countries are in between these two in the extent of the inequality in incomes and in the recent trend. There are several ways to measure inequality numerically. The most thorough is using a measure such as the Gini coefficient, an index running from zero (fully equal) to one (all the income goes to the top people), which is calculated in a way that takes account of the middle sections of the income distribution.

It is therefore a good measure of the kinds of change in income taking place in India and China where, as discussed above, there has been a big increase in incomes in the middle. The Gini coefficient has two drawbacks: the calculations have not been done for all countries and all time periods of interest; and it is not intuitively easy to understand. So I will discuss here a much simpler measure, the ratio of incomes of the top and bottom tenth in the income distribution. In the rich countries, most of the action has been at the two extremes, so this will not misrepresent the trends in inequality.22 The OECD nations differ from each other a great deal in the extent of income inequality using this measure. Japan and the Scandinavian countries stand out as the most equal. The best-off tenth of households have earnings from work just two or three times those of the worst off.

See distribution Inconvenient Truth, An (Gore), 60 Index of Sustainable Economic Welfare (ISEW), 36 India, 212; emerging middle class of, 125; fairness and, 122–26, 133; inequality and, 125–26; nature and, 63, 65, 81; posterity and, 108; purchasing power parity (PPP) and, 306n19; Satyam and, 146; trust and, 146, 149, 163, 172; wage penalties and, 133; World Bank influence and, 163 Industrial Revolution, 27, 149, 290, 297 inequality, 4–5, 11, 17, 84, 306n19, 308n34; Bush and, 127–28; consequences for growth, 135–36; decline in trust and, 139–44; dramatic increase in, 126–27, 131; extraction ratio for, 124; fairness and, 114–16, 122–43; fractal character of, 134; Gini coefficient and, 126; globalization and, 122–24, 127, 131, 155; happiness and, 25, 36, 42, 44, 53; high salaries and, 130, 143–44, 193, 223, 277–78, 286, 296; historical perspective on, 126–27; institutions and, 116, 127–31, 141; measurement of, 126; policy recommendations for, 267, 276, 295–97; poverty and, 43, 55–56, 100, 125, 128, 138, 142, 168–69, 261, 267; reduction of, 276–77; Republican administrations and, 127–28; social corrosiveness of, 139–44; structural causes of, 131–35; superstar effect and, 134; taxes and, 115–16, 123, 127–28, 131, 135–36; trends in, 125–30; unequal countries and, 124–30; United Kingdom and, 125–30; United States and, 122, 125–31, 135, 276; values and, 223–24, 234–36; well-being and, 137–43; within/between countries, 123–24 inflation, 37, 43, 61, 89, 102–5, 110–11, 189, 281, 305n17 information and communication technology (ICT), 6–7, 15, 17; data explosion and, 205, 291; decreased cost of, 254; fairness and, 133; happiness and, 24–25; institutional impacts of, 252–53; structural effects of, 194–98; trust and, 156–60, 165–67, 174 innovation, 6–7, 12; consumer electronics and, 36–37; fairness and, 121, 134; growth and, 271–73, 281, 290–92; happiness and, 37; institutions and, 244, 258, 263, 290–91; measurement and, 183, 196, 201–8, 273–74; musicians and, 195; nature and, 69–70, 81; policy recommendations for, 290–91; posterity and, 102; statistics and, 201–7; trust and, 157; values and, 210, 216, 220, 236 In Praise of Slowness, 27 institutions, 18; anomie and, 48, 51; balance and, 12–17; blindness of to financial crises, 87–88; broad framework for, 249–52; capitalism and, 240; consumption and, 254, 263; decentralization and, 246; democracy and, 242–43, 251–52, 262; downsizing and, 175, 246, 255; economies of scale and, 253–58; efficiency and, 245–46, 254–55, 261; extinction crisis and, 288; face-to-face contact and, 7, 147, 165–68; failures of, 240–44, 257, 262–63, 267, 289–90; fall of communism and, 226, 239–40, 252; freedom and, 244, 262; globalization and, 244; governance and, 242, 247, 255–58, 261–62; government and, 240–63; growth and, 258, 261, 263; health care and, 247, 252–53; high salaries and, 130, 143–44, 193, 223, 277–78, 286, 296; impact of new technologies and, 252–54; importance of, 261–63; inequality and, 116, 127–31, 141; innovation and, 244, 258, 263, 290–91; legitimacy and, 8, 16, 50, 66, 68–69, 162–63, 213, 226, 269, 274, 292, 296–97; managerialism and, 259; morals and, 254; nature and, 66–69, 82–84; New Public Management and, 245–47; outsourcing and, 159, 161, 175, 219, 287; policy recommendations for, 269, 284–91; politics and, 239–48, 251, 256–63; pollution and, 15, 35, 228; productivity and, 244–47, 257, 263; public choice theory and, 242–43; public deliberation and, 258–60; reform and, 245–48, 256, 285, 288–91, 296–97; responsibility to posterity and, 296; shareholders and, 145, 248, 257–58, 277; statistics and, 245; technology and, 244–46, 251–54, 257–63 (see also technology); values and, 240–42, 246–47, 258–60 intangible assets: measurement and, 199–201, 204–6; satellite accounts and, 38, 81, 204–6, 271; social capital and, 149–52, 157, 161, 199–201 InterAcademy Council, 66–67 interbank market, 1–2 Intergovernmental Panel on Climate Change (IPCC), 59, 66–69, 82, 297 International Monetary Fund (IMF), 90, 101–3, 111, 162–64, 176, 211, 287, 297 International Price Comparison, 124 International Telecommunications Union, 219 Internet, 155, 195, 245, 260, 273, 287–89, 291, 296 invisible hand, 209 iPods, 195 Ipsos Mori poll, 66, 247 Ireland, 172 Iron Curtain, 183, 239, 252 Italy, 95, 97–98, 146, 152 Jackson, Michael, 198 Japan, 42; debt of, 102; equal income distribution in, 125; fairness and, 125–26, 140–41; inequality and, 126; lost decade of, 102; posterity and, 91–92, 95, 97–98, 102; savings rates in, 280; trust and, 169, 175; voter turnout and, 175 Jazz Age, 127 Jefferson, Thomas, 184, 253–54 Johns, Helen, 41 Johnson, Simon, 256–57 Johnson, Steven, 187 Justice (Sandel), 237 Kahneman, Daniel, 215 Kamarck, Elaine, 247–48 Kay, John, 139, 245–46, 257 Kennedy School of Government, 247 Keynes, John Maynard, 101, 183–84, 190 Kleinwort, Dresdner, 87 knowledge economy, 191 Kobayashi, Keiichiro, 102 Korea, 126 Krugman, Paul, 100–103, 127–29, 232, 282 Kyoto Protocol, 62–64 labor: absorbing work and, 10, 48–49; call centers and, 131, 133, 161; creativity and, 166–68, 205–7; downsizing and, 175, 246, 255; global cities and, 165–70; globalization and, 131, 149 (see also globalization); human capital and, 81, 203–4, 282; measurement and, 189–99; migration and, 108–10, 172; outsourcing and, 159, 161, 175, 219, 287; pensions and, 4, 25, 85–86, 90, 92–100, 103–7, 111–13, 174–76, 191, 203, 243, 269–71, 275, 280, 286, 289–90, 293; Protestant work ethic and, 13–14, 236; retirement age and, 94, 97–99, 106–7, 112; skilled, 132–33, 159, 166–67, 276; specialization and, 160–61; technology and, 131–33; unemployment and, 3, 10, 43, 51, 56, 89, 107, 169, 207, 212–13, 243; unions and, 15, 51, 224, 249; unskilled, 132–33, 158, 172, 193; well-being and, 137–39; Whitehall Studies and, 139 lack of control, 47, 138–39 Lawson, Neal, 26 Layard, Richard, 31, 39–40, 43 Lehman Brothers, 1, 85, 87–88, 145, 211, 275–76 Leipzig marches, 239 Leviathan (Hobbes), 114 light bulbs, 59–61 Linux, 205 Lipsky, John, 102, 111 List, John, 117 literacy, 36 Live Nation, 197 living standards, 78–79, 106, 113, 136, 151, 162, 190, 194, 267 lobbyists, 15, 71, 247, 257, 276, 285, 289, 296 Lolapaloozza, 197 Louis Vuitton, 150 Luxury Fever (Frank), 40 Mackenzie, Donald, 221 Madonna, 194 Malthusianism, 95 Mama Group, 197 managerial competence, 2, 16, 150, 209, 259 Manzi, Jim, 231–32 Mao Zedong, 10 markets: asymmetric information and, 17, 186, 214, 219–20, 229, 248, 254, 262–63; black, 225; boom–bust cycles and, 4, 22, 28, 93, 102, 106–9, 136–37, 145, 147, 213, 222–23, 233, 277, 280, 283; capitalism and, 182, 230–38 (see also capitalism); culture and, 230–38; declining population and, 86, 89–90, 95–99, 103, 113; democracy and, 230–38; deregulation and, 7, 212; evidence–based policy and, 233–34; exchange advantage and, 214; externalities and, 15, 70, 80, 211, 228–29, 249, 254; failures of, 226–30, 240–44, 257, 262–63, 267, 289–90; Fama hypothesis and, 221–22; flaws of, 215–16; fractal character of, 134; free market model and, 14, 121, 129, 182–83, 210–11, 218–24, 232, 240, 243, 251; fundamentalism for, 213; gift economy and, 205–7; interbank, 1–2; international trade and, 110, 148, 159, 163; invisible hand and, 209; mathematical models of, 214; merits of, 211–17; missing, 229; moral, 210, 213, 220–25, 230–33; music, 194–98; network effects and, 253, 258; options, 222; as organizing economy, 218; performativity and, 224–25; Protestant work ethic and, 13–14, 236; public choice theory and, 220, 242–45; public domain and, 196; rational calculation and, 214–15; satellite accounts and, 81; shorting of, 86; social, 217–20; stability issues and, 2–4, 25, 70, 101, 124, 135, 140–41, 174, 176, 218, 296; trilemma of, 230–38; values and, 209–10 (see also values); winner take all, 134 Marx, Karl, 14, 28, 131, 221 McDonalds, 27 McKitrick, Ross, 68 Mean Fiddler Group, 197 Measuring Australia’s Progress, 274 measurement: asymmetric information and, 17, 186, 214, 219–20, 229, 248, 254, 262–63; Australian model and, 271, 274; balance and, 12–17; bankers and, 193, 200; capitalism and, 182; challenges of, 188–93; consumption and, 181–82, 198; distribution and, 191–99; evidence–based policy and, 233–34; GDP, 10 (see also gross domestic product [GDP]); Gini coefficient and, 126; governance and, 183, 186; government and, 182–88, 191, 193, 196, 202–3, 206; growth and, 181–85, 188–90, 194, 201–5, 208; happiness and, 35–39; health issues and, 181, 188–93, 200, 207; hedonic techniques and, 274; importance of, 184–85, 187–89; of inequality, 126; innovation and, 183, 196, 201–8, 273–74; intangible assets and, 199–201, 204–6; labor and, 189–99; less publication of, 271–72; living standards and, 13, 65, 78–79, 106, 113, 136, 139, 151, 162, 190, 194, 267; Measuring Progress exercise and, 294; policy recommendations for, 270–74; politics and, 182–84, 191, 193, 203, 208; productivity and, 189–90, 194, 199–201, 206–7; resources for, 294; social capital and, 154; statistics and, 187–89, 198–208; technology and, 181–85, 188–91, 194–201, 204–6; time constraints and, 204–7; trust and, 152–57; uncertainty of accuracy and, 273; unmeasurable entities and, 187; values and, 209, 212–13, 224 Medicare, 93–94 Meek, James, 26 metrification, 184 Metropolitan Museum of Art symposium, 100–101 Mexico, 226 Microsoft, 253, 258 migration, 108–10, 172 Milanovic, Branko, 123–24 Mill, John Stuart, 31–32 Minsky, Hyman, 226 monopolies, 196, 245, 252, 254 Montreal Protocol, 59 Moore’s Law, 156 morals: bankers and, 90, 277–78; criticism of poor and, 142; fairness and, 116–20, 127, 131, 142, 144; greed and, 221 (see also greed); growth and, 275–76, 279, 293, 295, 297; happiness and, 22, 26, 30, 34, 43, 48–49; institutions and, 254; nature and, 55, 70–72, 76, 78; performativity and, 224–25; posterity and, 90; trust and, 149, 174; values and, 185, 210, 213, 220–25, 230–33 MP3 players, 195 music, 11, 194–98, 204, 208, 229, 254 nature: Brundtlandt Report and, 77; carbon prices and, 70–71; climate change and, 57–84 (see also climate change); consumption and, 58–61, 71–76, 79, 82; Copenhagen summit and, 62, 64–65, 68, 162, 292; democracy and, 61, 66, 68; efficiency and, 61–62, 69, 82; environmentalists and, 29, 55–59, 69–70, 99; freedom and, 79; future and, 75–83; global warming and, 57, 64, 66, 68; government and, 58–62, 65–71, 82–84; greenhouse gases and, 23, 29, 35, 59, 61–63, 68, 70–71, 83; green lifestyle and, 55, 61, 76, 289, 293; gross domestic product (GDP) and, 56–60, 75–76, 80–82; growth and, 56–59, 62–66, 69–72, 76, 79–82; happiness and, 56–59, 75–76, 80–84; health issues and, 81; hybrid cars and, 61; innovation and, 69–70, 81; institutions and, 66–69, 82–84; InterAcademy Council and, 66–67; Intergovernmental Panel on Climate Change (IPCC) and, 59, 66–69, 82, 297; Kyoto Protocol and, 62–64; light bulbs and, 59–61; Montreal Protocol and, 59; morals and, 55, 70–72, 76, 78; natural capital and, 79–81, 151, 271, 273; philosophy and, 69–70; plastic and, 61; politics and, 57–71, 75, 77, 82–84; population issues and, 99; productivity and, 78, 82; satellite accounts and, 81; self-interest and, 65; squandered natural wealth and, 181–82; statistics and, 66, 81–82; stewardship and, 78, 80; technology and, 69–72, 76–77, 80, 84; TEEB project and, 78–79 network effects, 253, 258 New Deal, 129 New Economics Foundation, 36 New Public Management theory, 245–47 Newton, Isaac, 214–15 Niger, 122 Nobel Prize, 18, 60, 102, 215, 220, 236, 250, 261 noise, 47 No Logo (Wolf), 34 Nordhaus, William, 37, 70, 73, 156 North, Douglass, 261 Northern Rock, 1, 146 Obama, Barack, 62–63, 87, 173, 260, 285, 288 Oberholzer-Gee, Felix, 197 obesity, 137–38, 279 Office for National Statistics, 274 Olson, Mancur, 242 opinion formers, 61 option pricing theory, 222 Orchestra of the Age of Enlightenment, 194 Organization for Economic Cooperation and Development (OECD), 4, 11, 201, 305n11; happiness and, 38, 52; inequality in, 125–26; nature and, 60, 68; policy recommendations for, 273–74, 281, 283, 287, 291, 293; posterity and, 87, 93–94, 97–99, 112; trust and, 160, 171; values and, 212, 243–44, 246 organized crime, 277 Ormerod, Paul, 41 Orwell, George, 56 Ostrom, Elinor, 17, 220, 250–51, 261–63 Pakistan, 81, 226 Paradox of Choice, The (Schwartz), 10–11, 40 Parmalat, 146 partisanship, 2, 16, 101, 128, 269, 285 Peake, Mervyn, 9 pensions, 4, 25, 243; burden of, 92–95; Chinese savings and, 94; measurement and, 191, 203; policy recommendations for, 269–71, 275, 280, 286, 289–90, 293; posterity and, 85–86, 90–100, 103–7, 111–13; retirement age and, 92, 97–99, 106–7, 112; trust and, 174–76 performativity, 224–25 Persson, Torsten, 136 Pew surveys, 140 philanthropy, 33 philosophy, 16; fairness and, 114–15, 123; freedom and, 237; happiness and, 21, 27, 31–32, 49–50; nature and, 69–70; utilitarian, 31–32, 78, 237; values and, 237–39 Pickett, Kate, 137–40 Piereson, James, 183 Piketty, Thomas, 127, 129 Pimco, 287 Pinch (Willetts), 98–99 Pinker, Steven, 118, 305n4 Poland, 239 police service, 5, 35, 163, 193, 200, 247 policy: Commission on the Measurement of Economic Performance and Social Progress and, 37–38; deregulation and, 7, 212; errors in standard, 8; evidence–based, 233–34; first ten steps for, 294–98; future and, 75–83, 291–98; Intergovernmental Panel on Climate Change (IPCC) and, 59, 66–69, 82, 297; legitimacy and, 8, 16, 50, 66, 68–69, 162–63, 213, 226, 269, 274, 292, 296–97; measurement and, 187–89; OECD countries and, 4, 11, 38, 52, 60, 68, 87, 93–94, 97–99, 112, 125–26, 160, 171, 201, 212, 243–44, 246, 273–74, 281, 283, 287, 291, 293; population growth and, 95–100; practical recommendations for, 269–91; reform and, 8, 82–83, 85 (see also reform); stability issues and, 2–4, 25, 70, 101, 124, 135, 140–41, 174, 176, 218, 296; stimulus packages and, 91, 100–103, 111; sustainability and, 57 (see also sustainability); tradition and, 9; transparency and, 83, 164, 288, 296; trilemma of, 13–14, 230–36, 275; World Forum on Statistics, Knowledge, and Policy and, 38 political correctness, 173, 231 political economy, 27–28 pollution, 15, 35, 228 Population Bomb, The (Ehrlich), 70 population issues: aging, 4, 95–100, 106, 109, 206, 267, 280, 287, 296; baby boomers and, 4, 106, 109; declining population and, 86, 89–90, 95–99, 103, 113; demographic implosion and, 95–100; environmentalists and, 99; global cities and, 165–70; Malthusianism and, 95; migration and, 108–10; one-child policy and, 95–96; posterity and, 89–90, 94–95, 105–6, 109, 112–13; retirement age and, 94, 97–99, 106–7, 112 Porter, Roy, 184 Portugal, 126, 287 posterity, 298; aging population and, 89–90, 94–95, 105–6, 109, 112–13; bankers and, 85–91, 94, 99–102; consumption and, 86, 104–6, 112–13; current generation’s debt to, 90–92, 112–13; declining population and, 86, 89–90, 95–99, 103, 113; default and, 110–12; democracy and, 106; demographic implosion and, 95–100; freedom of investors and, 108; globalization and, 108; government and, 84–95, 98–113; gross domestic product (GDP) and, 91–94, 98–99, 103, 108, 111; growth and, 90, 95, 97, 99, 102, 105–8, 111; health issues and, 89, 93–94, 97–99, 103, 106, 111–13; higher retirement age and, 94–98, 106–7, 112; innovation and, 102; institutional responsibility and, 296; less leisure and, 106–7; Medicare and, 93–94; migration and, 108–9; morals and, 90; pensions and, 85–86, 90, 92–100, 103–7, 111–13; politics and, 86–94, 98, 101–8, 111–13; poverty and, 100; productivity and, 88, 97–99, 102, 105–8, 112; public debt and, 85–86; reform and, 85–86, 98, 111–12; savings and, 86–87, 94, 98, 100–101, 105–8, 112; Social Security and, 93–94; social welfare and, 85, 100, 112; sustainability and, 79 (see also sustainability); taxpayer burden and, 85–91, 94, 99, 103–5; technology and, 107; welfare burden and, 92–95 poverty, 261, 267; desire to spend and, 55–56; fairness and, 125, 128, 138, 142; happiness and, 43; posterity and, 100; trust and, 168–69 printing press, 7 productivity, 16; balance and, 268, 271, 273–76, 281, 287; bureaucratic obstacles to, 285–86; Commission on the Measurement of Economic Performance and Social Progress and, 37–38; fairness and, 131, 135; globalization and, 131 (see also globalization); governance and, 173–77; happiness and, 27, 38, 42, 51; improvements in, 107–8; institutions and, 244–47, 257, 263; measurement and, 189–90, 194, 199–201, 206–7; nature and, 78, 82; posterity and, 88, 97–99, 102, 105–8, 112; public services and, 257; Soviet method and, 246; technology and, 107–8, 157–59, 268; trilemma of, 13–14, 230–36, 275; trust and, 156–59, 162, 166–67, 170, 174 property rights, 80, 174, 195–96, 261 Protestant work ethic, 13–14, 236 psychology: altruism and, 118–22; anomie and, 48, 51; anxiety and, 1, 25, 47–48, 136–38, 149, 174; behavioral economics and, 116–17, 121, 282; choice and, 10–11; coherence and, 49; commuting and, 47; conflict in relationships and, 47; Easterlin Paradox and, 39–44; face-to-face contact and, 7, 147, 165–68; freedom and, 237 (see also freedom); game theory and, 116–18, 121–22; gift economy and, 205–7; greed and, 26, 34, 54, 88, 129, 150, 221–23, 248, 277–79; happiness and, 9–12, 44–50 (see also happiness); lack of control and, 47; noise and, 47; paradox of prosperity and, 174; positive, 9–10, 49–50, 303n51; public choice theory and, 220, 242–45; rational choice theory and, 214–15; shame and, 47; Slow Movement and, 27–28, 205; thrift education and, 283–84, 294–95; well-being and, 137–43 Ptolemy, 274 public choice theory, 220, 242–45 Public Domain, The (Boyle), 196 public goods, 185–86, 190, 199, 211, 229, 249, 261 purchasing power parity (PPP), 306n19 Putnam, Robert, 140–41, 152–54 Quiet Coup, The (Johnson), 256–57 Radio Corporation of America (RCA), 195 Rajan, Raghuram, 136 Rank, Robert, 40 rational choice theory, 214–15 Rawls, John, 31 Reagan, Ronald, 93, 121, 127, 211, 240, 243, 247–48 recession, 9, 11–12, 275; happiness and, 22, 24, 41, 54; nature and, 55–56, 66; plethora of books following, 55; posterity and, 85, 88, 91–93, 100–101, 108, 110; recovery from, 3, 103; trust and, 182; values and, 209–10, 213, 222 reciprocal altruism, 118–22 reform, 8; benchmark for, 218; bankers and, 277–79; bonus taxes and, 278; collective assent to, 269; courage needed for, 203; first ten steps for, 294–98; health care, 285; improving statistics and, 271; institutions and, 245–48, 256, 285, 288–91, 296–97; nature and, 82–85; New Public Management and, 245–46; politics and, 287–88; posterity and, 98, 111–12; public sector, 288–90; trust and, 162–64, 176–77; values and, 218, 233, 275–78, 295 Reinhardt, Carmen, 111 religion, 10; happiness and, 32–33, 43, 50; nature and, 76, 78; Protestant work ethic and, 13–14, 236; trust and, 147 Renaissance, 7 retirement age, 94, 97–99, 106–7, 112 revalorization, 275 Road to Wigan Pier, The (Orwell), 56 Rodrik, Dani, 136 Rogoff, Kenneth, 111 Romantic Economist, The (Bronk), 28 Romanticism, 27 Rothschilds, 147 Rousseau, Jean–Jacques, 114 Royal Bank of Scotland, 146 runs, 1 Ruskin, John, 27–28 Russia, 97–98, 123; Cold War and, 93, 112, 147, 209, 213, 239; Iron Curtain and, 183, 239, 252; production targets and, 246; as Soviet Union, 228, 246 Saez, Emmanuel, 127, 129 salaries: high, 130, 143–44, 193, 223, 277–78, 286, 296; measurement and, 191–99; paradox of, 193; superstar effect and, 134; technology and, 2, 89 Sandel, Michael, 224–25, 237 Sarkozy, Nicolas, 37, 202, 274 satellite accounts, 38, 81, 204–6, 271 Satyam, 146 savings, 1, 280–82, 293; China and, 87, 94, 100, 108; necessary increasing of, 105–6; negative, 105; policy recommendations for, 280–84; posterity and, 86–87, 94, 98, 100–101, 105, 108, 112; thrift education and, 283–84, 294–95 savings clubs, 283 Schumpeter, Joseph, 14 Schwartz, Barry, 10–11, 40 Seabright, Paul, 148–49, 170, 213–14, 228 self-interest: fairness and, 114–22; greed and, 26, 34, 54, 88, 129, 150, 221–23, 248, 277–79; moral sentiments and, 119–20, 142, 221; nature and, 65; reciprocal altruism and, 118–22; values and, 214, 221 Selfish Gene, The (Dawkins), 118 Sen, Amartya, 18, 37, 43, 82, 202, 237, 274, 310n25 shame, 47 shareholders, 88, 145, 248, 257–58, 277 Silicon Valley, 166 Simon, Herbert, 249–50, 254, 261, 270 Simon, Julian, 70 Singapore, 126 Sloan School, 256 Slow Food, 27 Slow Movement, 27–28, 205 smart cards, 252–53 Smith, Adam, 119–20, 209, 221, 255 Smith, Vernon, 215 social capital, 8, 12, 17; definition of, 152–53; fairness and, 116, 121, 139–43; intangible assets and, 149–52, 157, 161, 199–201; measurement of, 154, 185; policy recommendations for, 267, 271, 273, 276; Putnam on, 152–54; trust and, 5, 151–57, 168–74, 177; values and, 223–25, 231, 257 social justice, 31, 43, 53, 65, 123, 164, 224, 237, 286 Social Limits to Growth, The (Hirsch), 190, 231 social markets, 217–20 social networks, 260, 270, 288–89 Social Security, 93–94 social welfare.


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The Trouble With Billionaires by Linda McQuaig

battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, British Empire, Build a better mousetrap, carried interest, collateralized debt obligation, computer age, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Douglas Engelbart, Douglas Engelbart, employer provided health coverage, financial deregulation, fixed income, full employment, George Akerlof, Gini coefficient, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of the telephone, invention of the wheel, invisible hand, Isaac Newton, Jacquard loom, Jacquard loom, Joseph-Marie Jacquard, laissez-faire capitalism, land tenure, Mark Zuckerberg, market bubble, Martin Wolf, mega-rich, minimum wage unemployment, Mont Pelerin Society, Naomi Klein, neoliberal agenda, Northern Rock, offshore financial centre, Paul Samuelson, Plutocrats, plutocrats, Ponzi scheme, pre–internet, price mechanism, purchasing power parity, RAND corporation, rent-seeking, rising living standards, road to serfdom, Ronald Reagan, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, trickle-down economics, Vanguard fund, very high income, wealth creators, women in the workforce

Fig. 10 The higher the tax level, the lower the share of income going to the top 1 per cent16 In addition to making market incomes more equal, countries with high tax levels are able to provide more extensive government transfer payments (such as child allowances, pensions and employment benefits) that particularly benefit low- and middle-income families, thereby further reducing inequality in final, disposable incomes. The redistributive effect of the ‘tax-and-transfer’ system can be illustrated with a chart showing inequality, before and after taxes and transfers. To show this, we have used the Gini coefficient as a measure of inequality. The Gini coefficient is a number between 0 and 1, where 0 corresponds with perfect equality (everyone has the same amount of income) and 1 corresponds with perfect inequality (where one person has all the income). Hence, the higher the number (the closer to 1), the greater the degree of inequality. Before taxes, Italy has the greatest degree of inequality, with a Gini of 0.47. It is followed closely by the United Kingdom (with a Gini of 0.46) and the United States (with a Gini of 0.45).

However, after taxes and transfers, low-tax countries still have a very high degree of inequality. So, for instance, after its minimal taxes and transfers, the US still has a very high Gini of 0.37, leaving Americans with the most unequal distribution of disposable income. The UK’s tax-and-transfer system does somewhat more redistribution, but not much, leaving Britain with one of the most unequal distributions of disposable income. The Nordic countries – who would have guessed? – distinguish themselves once again with impressive tax-and-transfer systems that substantially reduce inequality. For instance, in Denmark, the tax-and-transfer system reduces the Gini coefficient by more than one-third from 0.37 to only 0.24, leaving Denmark with the most equal distribution of disposable income. Figure 11 ranks countries according to the inequality in the distribution of disposable income, but it also shows the important role of the tax-and-transfer system in achieving the final result of a more equal society.

Calbick, ‘The Maple Leaf in the OECD: Canada’s Environmental Performance’, a study prepared for the David Suzuki Foundation and the School of Resource and Environmental Management, Simon Fraser University (June 2010). ‌16 Top income data from The World Top Incomes Database. Highest top 1 per cent income data since 2005 are used, except late 1990s data for Germany, the Netherlands and Switzerland due to data availability. Average tax ratio of 1975-2008 based on OECD data. ‌17 Gini coefficients for people aged 18-65 based on OECD data from the late 2000s. ‌18 As an illustration of the importance of taxes and transfers in society, representative average tax ratios and changes in inequality are correlated. The average tax ratio of 1975-2008 explains about 69 percent of the variation of differences between Gini before taxes and transfers and Gini after taxes and transfers calculated based on OECD data from the late 2000s. The relationship is statistically significant at one-per cent level. ‌19 Countries can then be compared by converting their GDP per capita into US dollars on the basis of the purchasing power of that country’s currency (the purchasing power parity rate). ‌20 In part, the Nordic average is so high because of the high per capita income in Norway, but even without Norway the per capita income in the other three Nordic countries is higher than the Anglo-American average at $40,012. ‌21 Data from OECD.


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A Fine Mess by T. R. Reid

Affordable Care Act / Obamacare, Bernie Sanders, Capital in the Twenty-First Century by Thomas Piketty, carried interest, centre right, clean water, Donald Trump, Double Irish / Dutch Sandwich, game design, Gini coefficient, High speed trading, Home mortgage interest deduction, Honoré de Balzac, income inequality, industrial robot, land value tax, loss aversion, mortgage tax deduction, obamacare, Occupy movement, offshore financial centre, oil shock, Plutocrats, plutocrats, race to the bottom, Ronald Reagan, seigniorage, Silicon Valley, Skype, Snapchat, sovereign wealth fund, Tesla Model S, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, We are the 99%, WikiLeaks

Using the standard international measure of inequality, President Obama was basically correct when he said that among the advanced democracies the imbalance is “most pronounced” in the United States. The customary gauge of economic inequality is called the Gini coefficient, named for the Italian economist who thought it up. In the Gini rankings, a nation where everybody had the same amount of wealth and the same income would get a Gini score of 0; a country where one person took in all the income, and nobody else earned a cent, would get a score of 1. That is, the lower the Gini number, the smaller the gap between that nation’s rich and poor. Generally, the world’s poor countries—where a few families control the wealth, and tens of millions live in squalor—have high Gini coefficients. Nations like Lesotho, Botswana, Honduras, and Haiti have Gini numbers near 0.6, making them the least economically equal societies on the planet.

Among the rich countries, the democracies of western Europe tend to score around 0.3; the world champions at economic equality include Sweden, Denmark, and Norway, where high wages for working people and high taxes on the rich bring the Gini index down to about 0.25. The United States had a Gini coefficient in 2014 of 0.4—the worst rating among rich countries. Among the thirty-four members of the OECD, the club of industrialized democracies, only Mexico and Chile ranked higher than the United States on the inequality scale. As these facts became more widely known, inequality emerged as a matter of broad concern among Americans, the stuff of kitchen-table and watercooler conversations all over the country. In New York, Washington, Cambridge, and Palo Alto, every self-respecting think tank—right, left, center, or far out—held erudite seminars on the issue.

The First Republic, in its zeal for new terminology, replaced the standard word for “tax” (impôt) with the French word contribution, and to this day French politicians routinely talk about taxes as “social contributions,” as a way to maintain the essential French ideal of égalité. “For most of the French left, and a chunk of the right, high taxes are a hallmark of a decent society that puts fairness before profit and public service before business,” the Economist noted. In terms of égalité, at least, this tax regime seems to have worked; France has always had a lower Gini coefficient (that is, a more even distribution of wealth) than most of its European neighbors or the United States. When the Great Recession hit France in 2008, Nicolas Sarkozy, a center-right politician, was president. (Sarkozy supports free higher education, a complete ban on handguns, and unemployment compensation that never ends, but in European terms that makes him “center-right.”) Along with other leaders across Europe, Sarkozy opted for a policy of austerity—tax cuts, reduced government spending, limits on labor unions—as the proper course for economic revival.


pages: 381 words: 101,559

Currency Wars: The Making of the Next Gobal Crisis by James Rickards

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Asian financial crisis, bank run, Benoit Mandelbrot, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, borderless world, Bretton Woods, BRICs, British Empire, business climate, capital controls, Carmen Reinhart, Cass Sunstein, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, Deng Xiaoping, diversification, diversified portfolio, Fall of the Berlin Wall, family office, financial innovation, floating exchange rates, full employment, game design, German hyperinflation, Gini coefficient, global rebalancing, global reserve currency, high net worth, income inequality, interest rate derivative, John Meriwether, Kenneth Rogoff, labour mobility, laissez-faire capitalism, liquidity trap, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, Mexican peso crisis / tequila crisis, money market fund, money: store of value / unit of account / medium of exchange, Myron Scholes, Network effects, New Journalism, Nixon shock, offshore financial centre, oil shock, one-China policy, open economy, paradox of thrift, Paul Samuelson, price mechanism, price stability, private sector deleveraging, quantitative easing, race to the bottom, RAND corporation, rent-seeking, reserve currency, Ronald Reagan, sovereign wealth fund, special drawing rights, special economic zone, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, time value of money, too big to fail, value at risk, War on Poverty, Washington Consensus, zero-sum game

One of the best measures of the rent seeking relationship between elites and citizens in a stagnant economy is the Gini coefficient, a measure of income inequality; a higher coefficient means greater income inequality. In 2006, shortly before the recent recession began, the coefficient for the United States reached an all-time high of 47, which contrasts sharply with the all-time low of 38.6, recorded in 1968 after two decades of stable gold-backed money. The Gini coefficient trended lower in 2007 but was near the all-time high again by 2009 and trending higher. The Gini coefficient for the United States is now approaching that of Mexico, which is a classic oligarchic society characterized by gross income inequality and concentration of wealth in elite hands. Another measure of elite rent seeking is the ratio of amounts earned by the top 20 percent of Americans compared to amounts earned by those living below the poverty line.

Another measure of elite rent seeking is the ratio of amounts earned by the top 20 percent of Americans compared to amounts earned by those living below the poverty line. This ratio went from a low of 7.7 to 1 in 1968 to a high of 14.5 to 1 in 2010. These trends in both the Gini coefficient and the wealth-to-poverty income ratio in the United States are consistent with Tainter’s findings on civilizations nearing collapse. When society offers its masses negative returns on inputs, those masses opt out of society, which is ultimately destabilizing for masses and elites. In this theory of diminishing returns, Tainter finds the explanatory variable for civilizational collapse. More traditional historians have pointed to factors such as earthquakes, droughts or barbarian invasions, but Tainter shows that civilizations that were finally brought down by barbarians had repelled barbarians many times before and civilizations that were destroyed by earthquakes had rebuilt from earthquakes many times before.

Gates, Robert Gazprom Geithner, Timothy General Agreement on Tariffs and Trade (GATT) General Electric (GE) General Motors (GM) Genoa Conference of 1922 Germany bilateral trade relations with China currency collapse in 1920s and European sovereign debt crisis of 2010 and G20 gold reserves and gold standard and panic of 1931 reichsmark rentenmark rise of Nazi party support for euro trade deficits during 1980s and U.S. in London Gold Pool Weimar hyperinflation and World War I reparations Gertz, Bill Gini coefficient global corporations globalization gold and Bretton Woods system China’s 2009 five hundred metric tons of gold transfer classical gold standard of 1870 to 1914 as currency anchor FDR’s gold confiscations flaws in 1920s gold exchange standard flexible gold standard France and desire to return to gold standard Genoa Conference and return to gold standard gold clauses in contracts gold SDR gold standard during war time gold standard, return to and Great Depression international gold reserves London Gold Pool 1930s deflation and U.S. gold devaluation under Nixon’s New Economic Policy and Panic of 1931 vs. paper money prices during U.S. recessions, 1970s to 1980s pure gold standard stocks and two-tier system, creation of U.S. and dollar-gold parity U.S. gold reserves gold bullion and coins gold mining Gold Reserve Act of 1934 Gold Standard Acts of 1900 and 1925 Goldman Sachs Gramm, Phil Great Depression beggar-thy-neighbor devaluations during Federal Reserve role during France and gold as contributing factor to impact on U.S. economy Greece Greenspan, Alan gross domestic product (GDP) in China four components of growth in major currencies and monetarism and changes in U.S. consumer and growth of in U.S. during Kennedy-Johnson years U.S. economy and 2011 Group of Eight (G8) Group of Seven (G7) Group of Ten (G10) Group of Twenty (G20) Brazil and and Panic of 2008 and SDRs 2008 Summit on Financial Markets and the World Economy 2009 Pittsburgh G20 summit 2011 Cannes, France G20 summit U.S. rebalancing plan and Group of Two (G2) Gutfreund, John Halliwell, Steve Hamilton, Alexander hedge funds Hemingway, Ernest Herodotus heuristics, in economics Hitler, Adolf Hoover, Herbert Hu Jintao Hua Guofeng Hughes, Charles Evans Humphrey-Hawkins Full Employment Act of 1978 hyperinflation import surtax India Indonesia inflation caused by U.S.


pages: 226 words: 59,080

Economics Rules: The Rights and Wrongs of the Dismal Science by Dani Rodrik

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airline deregulation, Albert Einstein, bank run, barriers to entry, Bretton Woods, butterfly effect, capital controls, Carmen Reinhart, central bank independence, collective bargaining, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Donald Davies, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, Everything should be made as simple as possible, Fellow of the Royal Society, financial deregulation, financial innovation, floating exchange rates, fudge factor, full employment, George Akerlof, Gini coefficient, Growth in a Time of Debt, income inequality, inflation targeting, informal economy, information asymmetry, invisible hand, Jean Tirole, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, labor-force participation, liquidity trap, loss aversion, low skilled workers, market design, market fundamentalism, minimum wage unemployment, oil shock, open economy, Pareto efficiency, Paul Samuelson, price stability, prisoner's dilemma, profit maximization, quantitative easing, randomized controlled trial, rent control, rent-seeking, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, school vouchers, South Sea Bubble, spectrum auction, The Market for Lemons, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, trade liberalization, trade route, ultimatum game, University of East Anglia, unorthodox policies, Vilfredo Pareto, Washington Consensus, white flight

It is typically historically and geographically specific. The specific example I will consider here is the theories behind the rise in inequality in the United States and some other advanced economies since the late 1970s. Even if widely accepted, these theories are not meant to apply to other settings. The explanations I will consider do not attempt to account also for, say, the rise of inequality in this country during the gilded age before World War I or the decline in inequality in many Latin American countries since the 1990s. They are sui generis. The steep rise in US inequality that began in the mid-1970s is well documented. The Gini coefficient, a widely used measure of inequality that varies from 0 (no inequality) to 1 (maximum inequality, with all income going to a single household), rose from 0.40 in 1973 to 0.48 in 2012—a 20 percent increase.15 The country’s richest 10 percent raised their share of national income from 32 to 48 percent over the same period.16 What caused this dramatic change?

., 144–45, 195, 210n–11n housing bubble, 153–54, 156 human capital, 87, 88, 92 Humphrey, Thomas M., 13n Hunting Causes and Using Them: Approaches in Philosophy and Economics (Cartwright), 22n import quotas, 149 incentives, 7, 170, 172, 188–92 income: functional distribution of, 121 military service and, 108 personal distribution of, 121 income inequality, 117, 124–25, 138–44, 147–49 deregulation in, 143 factor endowments theory in, 139–40 Gini coefficient and, 138 globalization in, 139–41, 143 in manufacturing, 141 offshoring in, 141 skill premium in, 138–40, 142 skill upgrading in, 140, 141, 142 technological change in, 141–43 trade in, 139–40 India, 107, 154 Indonesia, 166 industrial organization, 201 industrial revolution, 115 industry: developing economies and policies on, 75–76, 87, 88 government intervention and, 34–35 inflation, 185 in business cycles, 126–27, 130–31, 133, 135, 137 public spending and, 114 infrastructure, 87, 91, 111, 163 Institute for Advanced Study (IAS), xii–xiii, xiv School of Social Science at, xii Institute for International Economics, 159 institutions: development economics and, 98, 161, 202, 205–7 labor productivity and, 123 insurance, banking and, 155 interest rates, 39, 64, 110, 129–30, 156, 161 internal validity, 23–24 International Bank for Reconstruction and Development, 2 see also World Bank international economics, 201–2 International Monetary Fund (IMF), 1n, 2 Washington Consensus and, 160, 165 Internet, big data and, 38 “Interview with Eugene Fama” (Cassidy), 157n investment: business cycles and, 129–30, 136 foreign markets and, 87, 89, 90, 92, 165–67 income inequality and, 141 savings and, 129–30, 165–67 Invisible Hand Theorem, 48–50, 51n, 182, 186 Israel, 103, 188 day care study in, 71, 190–91 Japan: city growth models and, 108 income inequality and, 139 Jenkins, Holman W., Jr., 135n Jevons, William Stanley, 119 Kahneman, Daniel, 203 Kenya, 106–7 Keynes, John Maynard, 1–2, 31, 46, 165 on business cycles, 127–37 on liquidity traps, 130 see also models, Keynesian types of Klemperer, Paul, 36n Klinger, Bailey, 111n Korea, South, 163, 164, 166 Kremer, Michael, 106–7 Krugman, Paul, 136, 148 Kuhn, Thomas, 64n Kupers, Roland, 85 Kydland, Finn E., 101n labor markets, 41, 52, 56, 57, 92, 102, 108, 111, 119, 163 labor productivity, 123–24, 141 labor theory of value, 117–19 Lancaster, Kelvin, 59 Latin America, Washington Consensus and, 159–63, 166 Leamer, Edward, 139 learning, rule-based vs. case-based forms of, 72 Leijonhufvud, Axel, 9–10 Lepenies, Philipp H., 211n leverage, 154 Levitt, Steven, 7 Levy, Santiago, 3–4, 105–6 Lewis, W.

., 134–35, 151n, 158 Feenstra, Rob, 141 field experiments, 23–24, 105–8, 173, 202–5 financial costs, 70 financial industry: globalization of, 164–67 in Great Recession, 152–59, 184 financial markets, deregulation and, 143, 155, 158–59, 162 “Fine Is a Price, A” (Gneezy and Rustichini), 71n fines, 71 First Fundamental Theorem of Welfare Economics, 47–51, 54 fiscal policies, 75–76, 87, 88, 147–48, 149, 160–61, 171 Fischer, Stanley, 165–66 forward causation, 115 Foundations of Economic Analysis (Samuelson), 125 Fourcade, Marion, 79n, 200n France, comparative advantage principle and, 59–60 Freakonomics (Levitt and Dubner), 7 Free to Choose, 49 free trade, 11, 54, 141, 169, 170, 182–83, 194 Friedman, Milton: on assumptions in modeling, 25–26 on cigarette taxes, 27–28 on invisible hand theorem, 49 on liquidity and Great Depression, 134 on model complexity, 37 fuel subsidies, 193 functional distribution of income, 121 Galbraith, John Kenneth, 184 Galileo Galilei, 29 Gambetta, Diego, 34 game theory, 5, 14–15, 33, 36, 61–62, 103–4, 133 simultaneous vs. sequential moves in, 68 garment industry, general-equilibrium effects in, 57–58 Gelman, Andrew, 115 general-equilibrium interactions, 41, 56–58, 69n, 91, 120 General Theory of Second Best, 58–61 Germany, comparative advantage principle and, 59–60 Gibbard, Allan, 20 Gilboa, Itzhak, 72, 73 Gini coefficient, 138 globalization, 139–41, 143, 164–67, 184 Gneezy, Uri, 71n Gold Standard, 2, 127 goods and services, economic models and, 12 Gordon, Roger, 151n Grand Theory of Employment, Interest, and Money, The (Keynes), 128 greenback era, 127n Greenspan, Alan, 158, 159 gross domestic product (GDP), 151n labor productivity and, 123 growth diagnostics, 86–93, 90, 97, 110–11 Haldane, Andrew, 197 Hamilton, Alexander, 187 Hanna, Rema, 107 Hanson, Gordon, 141 Harvard University, xi, 111, 136, 149, 197, 198 Hausmann, Ricardo, 111 health care: in antipoverty programs, 4, 105–7 models and, 5, 36–37, 105–7 Heckscher, Eli, 139 Herndon, Thomas, 77 Hicks, John, 128, 133 Hiebert, Stephanie, xv Hirschman, Albert O., 144–45, 195, 210n–11n housing bubble, 153–54, 156 human capital, 87, 88, 92 Humphrey, Thomas M., 13n Hunting Causes and Using Them: Approaches in Philosophy and Economics (Cartwright), 22n import quotas, 149 incentives, 7, 170, 172, 188–92 income: functional distribution of, 121 military service and, 108 personal distribution of, 121 income inequality, 117, 124–25, 138–44, 147–49 deregulation in, 143 factor endowments theory in, 139–40 Gini coefficient and, 138 globalization in, 139–41, 143 in manufacturing, 141 offshoring in, 141 skill premium in, 138–40, 142 skill upgrading in, 140, 141, 142 technological change in, 141–43 trade in, 139–40 India, 107, 154 Indonesia, 166 industrial organization, 201 industrial revolution, 115 industry: developing economies and policies on, 75–76, 87, 88 government intervention and, 34–35 inflation, 185 in business cycles, 126–27, 130–31, 133, 135, 137 public spending and, 114 infrastructure, 87, 91, 111, 163 Institute for Advanced Study (IAS), xii–xiii, xiv School of Social Science at, xii Institute for International Economics, 159 institutions: development economics and, 98, 161, 202, 205–7 labor productivity and, 123 insurance, banking and, 155 interest rates, 39, 64, 110, 129–30, 156, 161 internal validity, 23–24 International Bank for Reconstruction and Development, 2 see also World Bank international economics, 201–2 International Monetary Fund (IMF), 1n, 2 Washington Consensus and, 160, 165 Internet, big data and, 38 “Interview with Eugene Fama” (Cassidy), 157n investment: business cycles and, 129–30, 136 foreign markets and, 87, 89, 90, 92, 165–67 income inequality and, 141 savings and, 129–30, 165–67 Invisible Hand Theorem, 48–50, 51n, 182, 186 Israel, 103, 188 day care study in, 71, 190–91 Japan: city growth models and, 108 income inequality and, 139 Jenkins, Holman W., Jr., 135n Jevons, William Stanley, 119 Kahneman, Daniel, 203 Kenya, 106–7 Keynes, John Maynard, 1–2, 31, 46, 165 on business cycles, 127–37 on liquidity traps, 130 see also models, Keynesian types of Klemperer, Paul, 36n Klinger, Bailey, 111n Korea, South, 163, 164, 166 Kremer, Michael, 106–7 Krugman, Paul, 136, 148 Kuhn, Thomas, 64n Kupers, Roland, 85 Kydland, Finn E., 101n labor markets, 41, 52, 56, 57, 92, 102, 108, 111, 119, 163 labor productivity, 123–24, 141 labor theory of value, 117–19 Lancaster, Kelvin, 59 Latin America, Washington Consensus and, 159–63, 166 Leamer, Edward, 139 learning, rule-based vs. case-based forms of, 72 Leijonhufvud, Axel, 9–10 Lepenies, Philipp H., 211n leverage, 154 Levitt, Steven, 7 Levy, Santiago, 3–4, 105–6 Lewis, W.


pages: 868 words: 147,152

How Asia Works by Joe Studwell

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affirmative action, anti-communist, Asian financial crisis, bank run, banking crisis, barriers to entry, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collective bargaining, crony capitalism, cross-subsidies, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Deng Xiaoping, failed state, financial deregulation, financial repression, Gini coefficient, glass ceiling, income inequality, income per capita, industrial robot, Joseph Schumpeter, Kenneth Arrow, land reform, land tenure, large denomination, liberal capitalism, market fragmentation, non-tariff barriers, offshore financial centre, oil shock, open economy, passive investing, purchasing power parity, rent control, rent-seeking, Right to Buy, Ronald Coase, South China Sea, The Wealth of Nations by Adam Smith, urban sprawl, Washington Consensus, working-age population

More recently Michael Lipton, in Land Reform in Developing Countries (London: Routledge, 2009), p. 275 noted that the worst poverty remains rural in Latin America and is largely due to extreme and inefficient land inequality. 11. The estimate for Taiwan is from K.T. Li, Economic Transformation of Taiwan (London: Shepheard-Walwyn, 1988), chapter 21. 12. Or as Deininger puts it: ‘there is a strong negative relationship between initial inequality in asset [land] distribution and long-term growth’ and ‘inequality [in land distribution] reduces income growth for the poor, but not for the rich’. In Deininger’s data set, long-term growth refers to the period from 1960 to 1992. The only other developing countries he found that grew an average of more than 2.5 per cent with very unequal land distribution (defined as having a land distribution Gini coefficient of more than 70) are Puerto Rico (a small and anomalous part of the United States) and Israel.

By one estimate, the transfer of wealth involved in the land reform was equivalent to 13 per cent of Taiwan’s GDP passing from one group of people to another.49 The structural effects were the creation of a textbook market environment in which everybody had a small amount of capital, and an evening out of income distribution. When the share of property income in a society falls (here because fewer people were renting out land), income from current work is relatively more important and overall incomes diverge less. Household income surveys in Taiwan showed that the country moved from a Gini coefficient – the standard measure of equality, where 0 is perfect equality and 1 is perfect inequality – on a par with Brazil in the early 1950s (scoring 0.56) to a level in the mid 1960s that was unprecedented for a developing country (0.33).50 Greater equality was welcomed by the average Taiwanese, but it was the impact of land reform and a more incentivising market structure on output which was truly revolutionary. Taiwanese agriculture in the 1950s needed to provide a vast amount of additional food and employment – the population increased faster than anywhere else in the region – and to generate foreign exchange in order to plug a large gap in the state’s balance of payments.

This lack of domestic and international political conviction over the importance of household farming in development was the first step towards the relative economic underperformance of the south-east Asian region. No country bears this out more painfully than the Philippines. Journey 2: Negros Occidental Out on the runway of Manila’s Ninoy Aquino airport, a large private jet comes in to land in the afternoon sun. It is a useful reminder, if you have travelled down from north-east Asia, that you have left the world of 0.3 Gini coefficients and entered the world of 0.5 Gini coefficients – that is, a different kind of ‘developing’ economy. The plane I am on is travelling to Bacolod, the dominant city in Negros Occidental, the western half of the island of Negros. It is an area of the Philippines sometimes referred to as ‘Sugarlandia’, because of its historical role as the epicentre of the plantation sugar industry. It is a brief one-hour flight. On the descent, light green fields shimmer up and down the coastal plain.


pages: 267 words: 79,905

Creating Unequal Futures?: Rethinking Poverty, Inequality and Disadvantage by Ruth Fincher, Peter Saunders

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barriers to entry, ending welfare as we know it, financial independence, full employment, Gini coefficient, income inequality, income per capita, labour market flexibility, labour mobility, low skilled workers, low-wage service sector, marginal employment, minimum wage unemployment, New Urbanism, open economy, pink-collar, positional goods, purchasing power parity, shareholder value, spread of share-ownership, The Bell Curve by Richard Herrnstein and Charles Murray, urban planning, urban renewal, very high income, women in the workforce, working poor, working-age population

For example, the United Nations Human Development Report 1993 showed that among the twenty industrialised countries for which figures were available for the period 1985–89, the income share of the lowest 40 per cent of households was smallest in Australia, and the ratio of the incomes of the highest 20 per cent to those of the lowest 20 per cent was greatest.9 When the Human Development Index (HDI) is adjusted for this relatively unequal distribution, Australia’s HDI rank drops from seventh to eleventh among the industrial countries, one of the largest falls recorded. The Economist (November 5–11, 1994, pp. 19–23) cited similar figures, giving the United States, Australia, New Zealand and Switzerland the highest level of income inequality among thirteen countries, and Sweden and Japan the lowest inequality. Table 2.2 presents the results of a survey by Atkinson (1994), which shows income inequality in seventeen OECD countries in the late 1980s. The level of income inequality, as measured by the Gini coefficient, was highest in the United States, with Australia being ranked as the sixth most unequal of these countries, with a Gini coefficient 15 per cent higher than the mean. As emphasised by Atkinson (1994), however, these rankings are based on individual studies from each country and the figures may therefore not be comparable across countries.

Table 2.2 Income inequality in OECD countries, late 1980s Country Year Gini coefficent Gini as % of mean Rank Australia Belgium Canada Denmark Finland France Germany Ireland Italy Japan Netherlands New Zealand Norway Portugal Sweden United Kingdom United States Mean 1989 1988 1983 1987 1985 1984 1990 1987 1989 1989 1989 1989 1989 1989 1989 1989 1989 – .322 .234 .382 .209 .200 .372 .260 .352 .297 .296 .296 .295 .244 .312 .210 .324 .431 .279 115 84 137 75 72 133 93 126 106 106 106 106 87 112 75 116 154 100 6 14 2 15 17 3 12 4 8 8 8 8 13 7 15 5 1 – Source: Atkinson 1994, pp. 41–2. differences in income inequality in selected countries in the middle of the 1980s, measured using identical analytical procedures for all countries.10 The Gini coefficient is greatest in the United States, followed by Italy, Australia and then France. Inequality is lower in Sweden than in any other country, followed by Belgium, Luxembourg and then Germany. A further measure of income inequality is shown in Table 2.3. This is the ratio of the income share of the highest equivalent income quintile to the share of the lowest quintile, which is a measure of the distance between the highest and lowest income groups.11 The range is widest in the United States, followed by Australia and then Canada and Italy.

Table 2.4 provides a comparison of the results of a number of studies which have, inter alia, estimated the extent of poverty in Australia. Most of these studies have used a poverty line set at 50 per cent of equivalent median income. Thus, these are studies of the extent of relative low income rather than deprivation, and as such they measure one aspect of inequality rather than poverty (Veit-Wilson 1993). Nevertheless, they are very pertinent 58 PDF OUTPUT c: ALLEN & UNWIN r: DP2\BP4401W\MAIN p: (02) 6232 5991 f: (02) 6232 4995 36 DAGLISH STREET CURTIN ACT 2605 58 UNDERSTANDING POVERTY AND SOCIAL EXCLUSION Table 2.3 Income inequality in countries in LIS database, mid-1980s Year Gini coefficient Income share ratio a 1985–86 1985 1987 1984 1984 1986 1985 1987 1987 1986 1986 .31 .23 .28 .30 .25 .31 .23 .26 .21 .29 .34 5.07 3.19 4.33 4.55 3.49 4.86 3.22 3.85 3.04 4.54 6.46 Country Australia Belgium Canada France Germany Italy Luxembourg Netherlands Sweden United Kingdom United States Note: Source: a This is the ratio of the income share of the highest quintile of the income distribution to the share of the lowest quintile.


pages: 440 words: 108,137

The Meritocracy Myth by Stephen J. McNamee

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affirmative action, Affordable Care Act / Obamacare, Bernie Madoff, British Empire, collective bargaining, computer age, conceptual framework, corporate governance, deindustrialization, delayed gratification, demographic transition, desegregation, deskilling, equal pay for equal work, estate planning, failed state, fixed income, gender pay gap, Gini coefficient, glass ceiling, helicopter parent, income inequality, informal economy, invisible hand, job automation, joint-stock company, labor-force participation, low-wage service sector, marginal employment, Mark Zuckerberg, mortgage debt, mortgage tax deduction, new economy, New Urbanism, obamacare, occupational segregation, old-boy network, pink-collar, Plutocrats, plutocrats, Ponzi scheme, post-industrial society, prediction markets, profit motive, race to the bottom, random walk, school choice, Scientific racism, Steve Jobs, The Bell Curve by Richard Herrnstein and Charles Murray, The Spirit Level, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, upwardly mobile, We are the 99%, white flight, young professional

Because of the amount of ownership highly concentrated in this group, the top 1 percent of wealth holders are often referred to as “the ownership class” and are used as a proxy threshold for inclusion in the American “upper class.” In short, the degree of economic inequality in the United States is substantial by any measure. In fact, the United States now has greater income inequality and higher rates of poverty than other industrial countries (Wilkinson and Pickett 2009; Grusky and Krichell-Katz 2012; Mishel et al. 2012; Kerbo 2006; Smeeding, Ericson, and Jantti 2011; Salverda, Nolan, and Smeeding 2009; Sieber 2005). Moreover, the extent of this inequality is increasing. One standard measurement of the extent of inequality is the Gini coefficient, which measures the extent of the discrepancy between the actual distribution of income and a hypothetical situation in which each quintile of the population receives the same percentage of income. Values of the Gini coefficient range between zero and one, where zero indicates complete equality and one indicates complete inequality.

Values of the Gini coefficient range between zero and one, where zero indicates complete equality and one indicates complete inequality. Thus, the higher the number, the greater the degree of inequality. Using reports from the U.S. Census Bureau, Levine (2012b) demonstrates that the Gini coefficient for the United States has steadily and incrementally increased from 0.386 in 1968 to 0.469 in 2010—representing a 21.5 percent increase over a forty-two-year span. Increases in wealth inequality are even more dramatic. The ratio of wealth of the top 1 percent of wealth holders to median wealth had increased from 125 times the median in 1962 to 225 times by 2009 (Mishel et al. 2012, 383). In short, the gap between those who live off investments and the large majority of people who work for a living has widened considerably in recent decades. It is instructive to point out that this level of wealth inequality is greatly underestimated by the American public.

., 1 , 2.1-2.2 entrepreneurial capitalists, 1 , 2 , 3 entrepreneurial traits, 1 , 2 franchisees not considered as entrepreneurs, 1 irregular economy, participation in, 1.1-1.2 luck as part of success, 1 , 2 random-walk hypothesis, 1 social capital, use of, 1 , 2 , 3 upward mobility, aiming for, 1 , 2 See also self-employment Etcoff, Nancy, 1.1-1.2 ethics See moral character F Forbes magazine income listings, 1.1-1.2 , 2.1-2.2 , 3 franchises, 1.1-1.2 , 2 free-market economy, 1.1-1.2 , 2 T The Frontier in American History (Turner), 1.1-1.2 F frontier influence in America, 1 , 2 , 3 , 4 functional theory of inequality, 1 G gambling, 1 , 2 , 3 , 4.1-4.2 , 5 Gates, Bill, 1 , 2 , 3 , 4.1-4.2 , 5 Gendall, Murray, 1 Gilded Age, 1 , 2 , 3 Gini coefficient, 1.1-1.2 Gladwell, Malcolm, 1 , 2 glass ceiling, 1 , 2 , 3.1-3.2 , 4 government programs education funding, 1 , 2 , 3 health care, 1 , 2 highway subsidies and suburb development, 1 , 2 home ownership, encouraging, 1 , 2 land giveaways, 1 the poor as targets of, 1 , 2 , 3 proposed asset-building policies, 1.1-1.2 “thousand points of light” as alternative, 1 transfer payment, 1 Granovetter, Mark, 1.1-1.2 Great Depression, 1 , 2 , 3 Great Recession African Americans affected by, 1 , 2 age discrimination during, 1 class issues resulting from, 1 debt and bankruptcies, rise of, 1.1-1.2 factors leading to, 1.1-1.2 home ownership during, 1.1-1.2 , 2 mortgage debt as contributor, 1 retirement delays caused by, 1 self-employment increase, 1 white-collar crime leading to, 1 H Hamermesh, Daniel S., 1.1-1.2 , 2 hard work beauty achieved through, 1 capitalism, associated with, 1 , 2 consumption as reward, 1 as determinant of inequality, 1 increased work hours as a coping strategy, 1.1-1.2 modest effects of, 1 self-made men and, 1 as a success factor, 1 , 2 , 3.1-3.2 , 4 , 5 , 6 health health care plans, 1.1-1.2 , 2 , 3 , 4.1-4.2 , 5 , 6 older workers, 1 wealth affecting, 1 , 2 , 3.1-3.2 , 4 , 5 Herrnstein, Richard, 1.1-1.2 , 2 hierarchy-of-needs theory, 1 , 2 higher education See college hiring practices, 1.1-1.2 , 2 , 3 Hispanics, 1 , 2 , 3 , 4 , 5 , 6 , 7 Hochschild, Jennifer, 1 hockey player success, 1.1-1.2 Home Advantage (Lareau), 1.1-1.2 home ownership, 1.1-1.2 , 2.1-2.2 , 3 , 4.1-4.2 homosexuality and discriminatory practices, 1.1-1.2 , 2 human capital, 1 , 2.1-2.2 , 3 , 4 , 5 , 6 I IBM, 1.1-1.2 immigrants, 1.1-1.2 , 2 , 3 , 4 , 5 , 6 , 7 individualism as culturally dominant, 1 democracy, expressed through, 1 , 2.1-2.2 as greatly valued, 1 , 2 immigrants and, 1.1-1.2 as part of the entrepreneurial personality, 1 pioneer spirit reinforcing, 1 through self-employment, 1 self-help books promoting, 1 inequalities charitable giving as a means of reducing, 1.1-1.2 conflict and functional theories of, 1.1-1.2 economic inequalities, 1 , 2 , 3 , 4.1-4.2 , 5 , 6 , 7 , 8 educational system and, 1 , 2.1-2.2 , 3.1-3.2 , 4 , 5 , 6 , 7 , 8 , 9 gender inequality, 1.1-1.2 government spending as a factor, 1 , 2 ideologies of, 1.1-1.2 labor unions working to reduce, 1 matrix of domination, 1 residential inequalities, 1 , 2 taxes and, 1.1-1.2 , 2 in wages and income, 1.1-1.2 , 2.1-2.2 , 3.1-3.2 , 4 , 5 , 6.1-6.2 in wealth, 1 , 2 , 3.1-3.2 , 4 , 5 , 6 , 7 , 8 , 9 inheritance advantages of wealth inheritance, 1 , 2.1-2.2 , 3 attitudes towards, 1 , 2 baby boomers and, 1.1-1.2 , 2 conflict theories, within, 1 cultural capital and, 1 , 2.1-2.2 , 3 , 4 domestic partnerships and, 1 estate and inheritance taxes, 1.1-1.2 , 2 of estates, 1 , 2 Forbes magazine, heirs listed in, 1.1-1.2 inequalities, perpetuating, 1 , 2 , 3 luck and, 1 as a natural right, 1 nepotism and, 1.1-1.2 as a nonmerit factor, 1.1-1.2 , 2 , 3 , 4 , 5 , 6 , 7 , 8 old money and, 1.1-1.2 parental motivation, 1.1-1.2 , 2 primogeniture, 1 relay race, compared to, 1 , 2.1-2.2 , 3 , 4 , 5 wealth distribution through, 1 women and inheritance of wealth, 1 In Praise of Nepotism: A Natural History (Bellow), 1.1-1.2 A An Inquiry into the Nature and Causes of the Wealth of Nations (Smith), 1 I integrity, 1 , 2.1-2.2 inter vivo transfers, 1.1-1.2 , 2 , 3 , 4 investments, economic, 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11.1-11.2 , 12 , 13 IQ and IQ tests, 1.1-1.2 , 2.1-2.2 , 3 , 4 , 5 , 6 irregular economy, 1 , 2.1-2.2 , 3 , 4 J Jencks, Christopher, 1 , 2 jobs See occupations Jones, Janelle, 1.1-1.2 K Kildall, Gary, 1.1-1.2 Kozol, Jonathan, 1 L labor unions, 1 , 2 , 3.1-3.2 Lareau, Annette, 1.1-1.2 Lears, Jackson, 1 Lewis, Oscar, 1.1-1.2 Livingstone, David W., 1 , 2 lookism, 1 , 2 , 3 , 4 , 5 , 6 lottery, 1 , 2 , 3.1-3.2 , 4 lower class See working class luck denial of, 1.1-1.2 , 2 with gambling, 1 getting ahead, as a factor in, 1 , 2 , 3.1-3.2 lottery and, 1 , 2 as a nonmerit factor, 1 as part of capitalism, 1 in striking it rich, 1 , 2 wealth attainment and, 1 , 2.1-2.2 , 3 M marriage career interruptions due to, 1 marrying into money, 1 , 2 the poor and, 1 , 2.1-2.2 sexual discrimination and, 1.1-1.2 , 2 trailing partners and hiring practices, 1 upper class and, 1 , 2 , 3 , 4.1-4.2 , 5 Marx, Karl, 1 Maslow, Abraham, 1 , 2 Massey, Douglas S., 1 , 2 Matthew effect, 1 , 2 matrix of domination, 1.1-1.2 Medicare, 1 , 2.1-2.2 mentors, 1 , 2.1-2.2 , 3 , 4 , 5.1-5.2 meritocracy affirmative action and, 1 American promotion of merit, 1.1-1.2 , 2 , 3.1-3.2 , 4 , 5 , 6 coping strategies, 1 , 2 credentials, lack of as a barrier, 1.1-1.2 as a desired outcome, 1 discrimination as the antithesis of merit, 1.1-1.2 , 2.1-2.2 , 3 , 4 , 5 , 6 , 7.1-7.2 , 8 , 9.1-9.2 , 10 , 11 education as a merit filter, 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 employment opportunities, 1.1-1.2 , 2.1-2.2 , 3 entrepreneurial success, 1 fairness of the system, 1 , 2.1-2.2 , 3 , 4 , 5 folklore of, 1 government spending and, 1.1-1.2 , 2 in the hiring process, 1.1-1.2 , 2 human capital factors, 1 , 2 , 3 income based on merit, 1 inheritance as a nonmerit factor, 1 , 2.1-2.2 , 3 , 4 , 5.1-5.2 , 6 , 7.1-7.2 , 8 , 9 , 10 , 11 , 12 , 13.1-13.2 intergenerational wealth transfers, 1.1-1.2 legacy preferences as nonmerit based, 1.1-1.2 , 2 luck as a nonmerit factor, 1 , 2 , 3 , 4 , 5.1-5.2 market trends, 1.1-1.2 meritocratic aristocracy, 1.1-1.2 nepotism as nonmeritorious, 1.1-1.2 the new elite as extra-meritorious, 1 noblesse oblige increasing potential for, 1 nonmerit factors suppressing merit, 1 , 2 , 3 , 4 , 5 Barack Obama as example of, 1.1-1.2 , 2 the past, reverence for, 1 physical attractiveness as a nonmerit factor, 1 , 2 pure merit system, 1.1-1.2 reform movements and, 1 , 2 self-employment as an expression of, 1 social and cultural capital as nonmerit factors, 1.1-1.2 , 2 , 3 , 4.1-4.2 , 5.1-5.2 , 6 , 7 , 8.1-8.2 , 9 , 10 , 11 structural mobility and, 1.1-1.2 talents and abilities of the merit formula, 1 , 2 , 3 , 4 , 5 , 6 taxes and nonmerit advantages, 1.1-1.2 Mexican Americans and Mexican immigrants, 1 , 2 , 3 , 4 Microsoft, 1.1-1.2 middle class America as not middle class, 1 asset building, 1 cultural capital, 1.1-1.2 deferment of gratification, 1 education and, 1 , 2 , 3 Great Recession affecting, 1 home ownership, 1 inner cities, flight from, 1 , 2 Barack Obama, background of, 1.1-1.2 old class vs. new, 1.1-1.2 precarious status of, 1.1-1.2 sports choices of, 1 upper-middle class, 1 , 2 T The Millionaire Mind (Stanley), 1 M millionaires, 1 , 2 , 3 minority groups affirmative action, 1.1-1.2 , 2.1-2.2 asset accumulation, 1.1-1.2 core employment, underrepresentation in, 1 disadvantages of, 1 discrimination experiences, 1 , 2.1-2.2 , 3 , 4.1-4.2 , 5 , 6.1-6.2 , 7 , 8 , 9 , 10 education issues, 1.1-1.2 as inner city dwellers, 1 opportunities expanding, 1 , 2 , 3 self-employment and, 1 social capital, lack of, 1 , 2 , 3 moral character, 1.1-1.2 , 2 Mormons, 1 Murray, Charles, 1.1-1.2 , 2 , 3.1-3.2 Muslims, 1.1-1.2 N National College Athletic Association (NCAA), 1 nepotism, 1.1-1.2 , 2 net worth affirmative action and, 1 defined, 1 by income group, 1 of minority groups, 1 of Barack Obama family, 1 of one percenters, 1 , 2 , 3 of Walton heirs, 1.1-1.2 wealth scale, 1.1-1.2 new elite, 1 , 2.1-2.2 noblesse oblige, 1.1-1.2 O Obama, Barack, 1.1-1.2 , 2 , 3 , 4 Obama, Michelle, 1.1-1.2 occupations attitude as a factor, 1 , 2 blue-collar jobs, 1 , 2 , 3 , 4 , 5 CEO salaries, 1.1-1.2 , 2 changes in opportunities, 1.1-1.2 , 2 cultural capital and, 1.1-1.2 , 2 the disabled and employment difficulties, 1 discrimination, 1 , 2 , 3.1-3.2 , 4 , 5 , 6 , 7 downsizing, 1.1-1.2 , 2 , 3 , 4 , 5 , 6 education linked to, 1 , 2.1-2.2 , 3.1-3.2 , 4.1-4.2 , 5 , 6.1-6.2 , 7.1-7.2 , 8 , 9.1-9.2 , 10.1-10.2 , 11 , 12.1-12.2 , 13 , 14.1-14.2 fastest growing jobs, 1.1-1.2 , 2.1-2.2 health hazards, 1 nepotism and, 1 , 2 occupational mobility, 1.1-1.2 , 2 occupational segregation, 1 , 2.1-2.2 outsourcing, 1.1-1.2 , 2 , 3 , 4 , 5 , 6 physical attraction and occupational success, 1 self-employment and, 1 self-made men, 1.1-1.2 social capital and occupational opportunities, 1 , 2 , 3 , 4 wages, 1.1-1.2 , 2 , 3 , 4 , 5.1-5.2 , 6.1-6.2 , 7.1-7.2 , 8 white-collar jobs, 1 , 2 , 3 , 4 , 5 , 6 Occupy Wall Street (OWS), 1 old boy networks, 1 , 2 , 3.1-3.2 old money, 1.1-1.2 , 2.1-2.2 Outliers: The Story of Success (Gladwell), 1 , 2 outsourcing, 1.1-1.2 , 2 , 3 , 4 , 5 , 6 ownership class, 1 , 2 , 3 , 4 P Paterson, Tim, 1 Peale, Norman Vincent, 1.1-1.2 pensions, 1.1-1.2 , 2 , 3 , 4 , 5 , 6 pink-collar ghetto, 1.1-1.2 poverty children affected by, 1 , 2 culture-of-poverty theory, 1.1-1.2 , 2 full-time work below poverty level, 1 as a matter of attitude, 1 meritocracy and, 1 , 2 minority rates of, 1 , 2 poverty threshold, 1 regional variations in poverty rates, 1.1-1.2 , 2 senior citizens and poverty rates, 1 U.S. poverty rates, 1 T The Power of Positive Thinking (Peale), 1.1-1.2 P Protestants and the Protestant ethic, 1.1-1.2 , 2 , 3 , 4 , 5 Puritan values, 1.1-1.2 R racism and racial issues affirmative action, 1.1-1.2 athletes and, 1 crime and the legal system, 1.1-1.2 disabilities, disproportionate experience of, 1 discrimination and, 1 , 2.1-2.2 , 3.1-3.2 , 4 , 5.1-5.2 , 6 , 7 , 8 in education, 1.1-1.2 employment, affecting, 1 Great Recession worsening racial equality, 1 home ownership, 1 ideologies of inequality, as part of, 1 income gaps, 1 language skills and, 1 Obama, election of, 1 , 2 scientific racism, 1.1-1.2 segregation, 1 , 2.1-2.2 , 3 social capital and, 1 , 2 , 3 , 4 white flight, 1 , 2 random-walk hypothesis, 1 recession See Great Recession references, 1 , 2 , 3 retirement as part of the American Dream, 1 , 2 delayment as a coping strategy, 1 , 2.1-2.2 , 3 home ownership and funding of, 1 as jeopardized, 1 , 2.1-2.2 proposed supplementation, 1 self-employment and, 1 , 2 , 3 right attitude, 1 , 2.1-2.2 , 3 , 4 , 5 , 6 , 7 T The Rise of Meritocracy, 1870–2033:An Essay on Education and Equality (Young), 1 , 2 R Rivera, Lauren, 1 Rosenau, Pauline Vaillancourt, 1.1-1.2 S Schmitt, John, 1.1-1.2 schools See education segregation educational, 1 , 2 , 3 occupational, 1 , 2 , 3 , 4.1-4.2 racial, 1 , 2.1-2.2 , 3 , 4 , 5 residential, 1 , 2 , 3.1-3.2 of the wealthy, 1.1-1.2 white flight, 1 See also discrimination self-employment American Dream, as exemplifying, 1 franchises, 1 freelancing, 1 , 2 income, 1.1-1.2 irregular economy and, 1.1-1.2 , 2 , 3 , 4 petty bourgeoisie and, 1 psychological characteristics, 1 rates of, diminished, 1 , 2 , 3 , 4.1-4.2 , 5 , 6 , 7.1-7.2 , 8 risk, 1 , 2 , 3.1-3.2 , 4 subcontractors, 1 taxes, 1.1-1.2 , 2 women and minorities, 1.1-1.2 self-help books, 1 , 2 self-made individuals, 1 , 2 , 3 , 4.1-4.2 , 5 , 6 sexual harassment, 1.1-1.2 Shapiro, Thomas, 1 , 2.1-2.2 slaves and slavery, 1 , 2 , 3 , 4 , 5 , 6 , 7 small businesses, 1 , 2 , 3 , 4 , 5.1-5.2 , 6 , 7.1-7.2 , 8 , 9 Smith, Adam, 1 social capital benefits of, 1.1-1.2 , 2 defined, 1 , 2 , 3 discrimination and, 1 , 2 economic opportunities, having access to, 1 , 2 , 3 education and, 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 mentorship as a form of, 1 nepotism and, 1.1-1.2 , 2 racism and lack of, 1 , 2 , 3 , 4 restricted access, effects of, 1.1-1.2 , 2.1-2.2 social climbing, 1 , 2 , 3.1-3.2 , 4 of U.S. presidents, 1.1-1.2 weak ties, 1.1-1.2 social climbing, 1 , 2 , 3.1-3.2 , 4 social clubs, 1 , 2 , 3.1-3.2 social mobility athletic and artistic abilities, associated with, 1 , 2.1-2.2 , 3 cultural capital as a factor in, 1 education link, 1 , 2 , 3 hard work as a factor, 1 individual merit, 1 integrity hindering, 1.1-1.2 marrying for money, 1 reduction of opportunities, 1 , 2 during Republican administrations, 1 role of government, 1 , 2 social climbing, 1.1-1.2 , 2 status attainment, 1 through self-employment, 1 social reform movements, 1.1-1.2 Social Register, 1 social reproduction theory, 1.1-1.2 , 2 Social Security, 1.1-1.2 , 2 , 3 , 4 , 5.1-5.2 Something for Nothing: Luck in America (Lears), 1.1-1.2 T the South, 1 , 2.1-2.2 , 3 , 4 , 5 S Stanley, Thomas, 1 status-attainment theory, 1.1-1.2 Stevens, Mitchell, 1 stock market, 1 , 2 , 3 , 4 student loans, 1 , 2.1-2.2 success athletic success, 1 , 2.1-2.2 attitudes associated with, 1 , 2 , 3.1-3.2 birth timing and, 1.1-1.2 , 2 cultural capital, 1 , 2 , 3 , 4 discrimination, achieving success through, 1 education, as a factor in, 1 , 2 , 3 , 4 , 5 entrepreneurial success, 1 , 2 , 3 God’s grace, success as sign of, 1 , 2 hard work and, 1 , 2 , 3.1-3.2 , 4 , 5 human capital factors, 1 individualism as key to, 1 intelligence as a determinant, 1 luck as important, 1 meritocracy myth and, 1 mind-power ethic as success formula, 1.1-1.2 moral character and, 1 , 2 , 3.1-3.2 , 4 parental involvement, 1.1-1.2 , 2 , 3.1-3.2 the right stuff, being made of as key, 1.1-1.2 , 2.1-2.2 , 3 , 4 small businesses and, 1 social capital increasing likelihood of, 1 , 2 , 3 suburban living as marker of, 1 10,000 hour rule, 1 women and, 1 , 2 supply side, 1 , 2 , 3 , 4 , 5 , 6.1-6.2 Survival of the Prettiest (Etcoff), 1.1-1.2 Swift, Adam, 1.1-1.2 T talent and abilities American aristocracy, 1 American Dream, leading to, 1 of athletes and celebrities, 1 education enhancing, 1 , 2 , 3.1-3.2 functional theory of inequality, 1 jobs matched to talent, 1 success achieved through, 1 , 2 , 3 , 4 , 5 , 6 talent-use gap, 1 upward mobility and, 1 , 2.1-2.2 , 3.1-3.2 taxes capital gains, 1.1-1.2 estate taxes, 1 , 2 , 3.1-3.2 government policies linked with, 1 , 2 incentives and credits, 1.1-1.2 income taxes, lowered by Republicans, 1 irregular economy, avoiding, 1.1-1.2 progressive taxation, 1.1-1.2 , 2 , 3 , 4 property taxes and school funding, 1.1-1.2 self-employment and, 1.1-1.2 , 2 Social Security affected by, 1 , 2 the South and lower taxes, 1 tax breaks for the wealthy, 1 , 2 , 3 , 4.1-4.2 of urban areas, 1 , 2 Thurow, Lester, 1 , 2.1-2.2 Tocqueville, Alexis de, 1.1-1.2 , 2 tracking, 1 , 2.1-2.2 , 3 , 4 Turner, Frederick Jackson, 1.1-1.2 U Unequal Childhoods (Lareau), 1 upper class charitable giving and, 1 cultural capital, holders of, 1 , 2 , 3.1-3.2 , 4.1-4.2 , 5 deferred gratification, capability of, 1 distinctive lifestyle, 1.1-1.2 , 2 education, 1 , 2 endogamy, tendency towards, 1.1-1.2 as exclusive, 1.1-1.2 , 2 as isolated, 1.1-1.2 one percenters as members, 1 Plymouth Puritans as wellspring, 1 political power, 1.1-1.2 social clubs, frequenting, 1.1-1.2 virtues found in, 1 WASP background of, 1 women of, 1 , 2 , 3 upward mobility attitudes as affecting, 1 barriers to, 1 through college education, 1 credentialism and, 1 downward mobility, vs., 1 through entrepreneurialism, 1 glass ceiling as limiting, 1 integrity as suppressing, 1.1-1.2 irregular economy, as avenue, 1 marriage as a means of, 1.1-1.2 Michelle Obama as example, 1 slowing rates of, 1 See also social climbing See also social mobility V Vedder, Richard, 1 , 2 virtue, 1.1-1.2 , 2 , 3 , 4 , 5 , 6 , 7 W Walmart, 1 Walton, Sam, 1 , 2 , 3 wealth accumulation gaps, 1 , 2 , 3 advantages of wealth inheritance, 1 , 2.1-2.2 capital investments, 1 charitable giving and the wealthy, 1 , 2.1-2.2 culture of, 1 , 2 discrimination and, 1 , 2 distribution as skewed, 1.1-1.2 Forbes magazine listings, 1.1-1.2 gambling, attainment through, 1 government intervention, 1.1-1.2 , 2 Great Recession affecting, 1 guilt feelings, 1.1-1.2 hard work as negligible, 1 inequalities of, 1 , 2 , 3.1-3.2 , 4 , 5 , 6 , 7 , 8 , 9 lottery, wealth attainment through, 1 luck as a factor, 1 , 2.1-2.2 , 3 marriage rates, affecting, 1 nepotism aiding in transference of, 1 old money, 1.1-1.2 , 2.1-2.2 one percenters, 1 , 2 , 3 , 4 , 5 ostentatious displays of, 1 political power, 1.1-1.2 property ownership producing, 1 , 2 pursuit of as a moral issue, 1.1-1.2 , 2 race affecting, 1 social and cultural capital, converted to, 1 , 2 the superwealthy, 1 , 2 , 3 , 4.1-4.2 tax breaks for the wealthy, 1 taxes on, 1.1-1.2 transfers of, 1.1-1.2 , 2 , 3.1-3.2 women and, 1 See also inheritance See also self-employment Weber, Max, 1.1-1.2 welfare, 1 , 2 , 3 , 4 , 5 , 6 , 7 white Anglo-Saxon Protestants (WASPs), 1.1-1.2 , 2 white-collar crime, 1.1-1.2 , 2 Wilson, William Julius, 1 , 2 Winfrey, Oprah, 1.1-1.2 Wisconsin school, 1.1-1.2 women attractiveness as a success factor, 1 , 2 , 3.1-3.2 discrimination against, 1 , 2 , 3 , 4 , 5.1-5.2 , 6.1-6.2 , 7.1-7.2 , 8.1-8.2 , 9.1-9.2 , 10 economic disparities, 1 , 2 , 3.1-3.2 educational attainment, 1.1-1.2 , 2 family concerns, 1.1-1.2 , 2.1-2.2 , 3.1-3.2 glass ceiling, experiencing, 1 , 2 , 3.1-3.2 , 4 inferiority, feelings of, 1.1-1.2 labor force participation, increasing, 1.1-1.2 , 2 mentorships, access to, 1 , 2.1-2.2 occupational disparities, 1 , 2 , 3.1-3.2 , 4.1-4.2 , 5.1-5.2 political underrepresentation, 1.1-1.2 self-employment and, 1.1-1.2 as trailing partners, 1 of the upper class, 1 , 2 , 3 working class American Dream and, 1 cultural capital, lack of, 1.1-1.2 , 2 economic instability, 1.1-1.2 education issues, 1 , 2 , 3 hard work and, 1 health risks, 1 home ownership, 1 lower class value stretch, 1 nepotism, effect of, 1 the new lower class, 1 women and incomes, 1 work See hard work See occupations Y Young, Michael, 1 , 2 About the Authors Stephen J.


pages: 233 words: 75,712

In Defense of Global Capitalism by Johan Norberg

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Asian financial crisis, capital controls, clean water, correlation does not imply causation, creative destruction, Deng Xiaoping, Edward Glaeser, Gini coefficient, half of the world's population has never made a phone call, Hernando de Soto, illegal immigration, income inequality, informal economy, Joseph Schumpeter, Kenneth Rogoff, land reform, Lao Tzu, liberal capitalism, manufacturing employment, market fundamentalism, Mexican peso crisis / tequila crisis, Naomi Klein, new economy, open economy, profit motive, race to the bottom, rising living standards, school vouchers, Silicon Valley, Simon Kuznets, structural adjustment programs, The Wealth of Nations by Adam Smith, Tobin tax, trade liberalization, trade route, transaction costs, trickle-down economics, union organizing, zero-sum game

Once we shift our focus to people rather than nations, the evidence is overwhelming that the past 30 years have witnessed a global equalization.24 Comparing just the richest and poorest tenths, inequality has increased, suggesting that a 56 small group has lagged behind (we shall be returning to see which countries and why), but a study of all countries clearly points to a general growth of equality. If, for example, we compare the richest and poorest fifth or the richest and poorest third, we find the differences diminishing. Economists usually measure the degree of inequality by means of the ‘‘Gini coefficient.’’ If that number is zero, complete equality prevails, and everyone owns the same amount. If it is one, there is total inequality, with one person owning everything. The Gini coefficient for the whole world declined from 0.6 in 1968 to 0.52 in 1997, a reduction of more than 10 percent. Because equality between the rich and poor within these countries appears to have been roughly constant during this time (having increased in half and diminished in half), global equality, quite contrary to popular supposition, is increasing.

See also Individual liberty power over our own lives and, 11, 290–91 of the press, 17 self-determination and, 286–91 tasting and thus demanding, 286, 291 Freedom House, 39 French culture, 283–84 Friedman, Thomas, 268 Fugitives, numbers living as, 60 Fyodorov, Boris, 179 Garbage, problem of, 232 Gates, Bill, philanthropy in developing countries, 189 GDP. See Gross domestic product Geijer, Erik Gustaf, 12 Gender equity, prosperity and, 45 George, Susan, 139 Germany, 72 Ghana equality/inequality, 133 liberalization, growth, and development, 110 Giddens, Anthony, 284 ‘‘Gini coefficient’’ for measuring inequality, 57 Girls education, 45–46, 53 life expectancy in South Asia, 46 Global Alliance for Workers and Communities, 218–19 Global economic institutions, 177–84 See also World Bank; International Monetary Fund Global environmental problems, statistics and facts, 230–35 Global food production, 32–33 Global growth, past centuries, 76 Global homogeneity, 280–82 Global inequality, 54–59 Global misery, 20–24, 60–61 The Global Trap, 136 Globalism cultural encounters of, 281–85 self-determination and, 286–91 Globalization, 9–14 credit for the good that happens, 289–90 criticism, 10–11, 14–15 democratization of political systems and, 268–76 freedom and, 286–91 growth during 1990s, 135f of late 19th century, 287–88 and local power relations and the poor, 90 reservations about, 60–61 as scapegoat, 289 Globalization index, 89 Gold and green forests, 224n Goldman-Sachs, 251 Government administration and collection of Tobin tax worldwide, 257 expansion of government machinery, 275 industrial initiatives in developing countries, 174–75 interventions in ‘‘miracle’’ economies, 100 316 mismanagement of finances, 271 need for, 8 See also specific countries Gray, John, 15 ‘‘Green revolution,’’ 33 Greider, William, 136, 138–39 Gross domestic product (GDP) capitalism and inequality in, 153–54 growth and, 76–77 multinational corporations’ sales in relation to, 214–16 per capita GDP level and environmental improvements, 229–30 trade increases and rise in per capita income, 132 Growth and development, 72–83 broad, free financial markets and, 247–48 child labor decline and, 200 conflict between environment and, 224–38 connected to better air and water quality, 230 East Asian growth ‘‘miracle,’’ 99–103 economic freedom and, 72–83 free trade and growth, 119f free trade benefits, 128–35 GDP and, 76–77 global growth in past centuries, 76 government intervention and, 100, 102, 165–66, 174–75 growth in open poor economies versus open affluent ones, 133–35 impact of African politics on, 104–11 impact of East Asian politics on, 99–103 pollution and, 229 stunting growth for sake of environmental protection, 228–29 See also Developing countries; Economic growth Haiti exports to EU, 161 registering property, 92 HDI.

See International Monetary Fund Immigrants dollar benefit to host country, 149 illegal, 149 need for, 148–50 welfare policy reform and, 149–50 Immigration/emigration, free trade and, 145–50 Imperialism, wealth and poverty and, 152 Import barriers, 120 Import duties, reduction, 162 Import quotas, 120 Import substitution, 163 Import tariffs, 176 Income distribution in liberal economy, 87–88 gaps, 82–83 high growth and income differences, 86 living standards and, 77f trade increases and rise in per capita income, 132 world income distribution, 1960, 1980, and 2000, 58f Indebtedness, freedom and, 270–72 Index of openness, 103 India, 51–53 Berg and Karlsson in, 21–22 child education, 36 development assistance, 183 education, 45, 53 failed government industrial initiatives, 174 ‘‘green revolution,’’ 33 growth and development, 51, 53, 77–78 relief for the poor, 97–98 service sector jobs, 170 starvation, 34 women, 43 Individual decisionmaking and responsibility, 67 Individual liberty, 8, 11, 14, 16, 22, 89, 290–91 See also Freedom; specific freedoms, liberties, and rights 318 Indonesia absolute poverty, 99 Asian crisis and, 250, 251, 260, 263 dictatorships, 269 failed government industrial initiatives, 174 government intervention, 100 growth and income differences, 86 ‘‘open’’ economy, 103 water supply, 35 worker satisfaction, 219 Industrial Revolution, standard of living improvement and, 60–61 Industrialized countries abolition of tariffs and quotas, 176 annual growth rates, 129, 130 competition with developing countries, 205 learning from, 278–80 size in relation to corporations, 214–16 work-related stress and burnout, 206–9 Inequality distribution of capitalism in developing countries, 152–55 economic growth and, 84–89 ‘‘Gini coefficient’’ for measuring, 57 global, 54–59 between persons versus between countries, 56–57 results in trade-liberalizing countries, 133 ‘‘Infant industry tariffs,’’ 173 Infant mortality, 29, 30f, 53 Infectious disease, WHO and, 188–89 Inflation, 96, 100 hyperinflation, 96, 131, 167 Information sharing, free trade and, 128–29 Information technology, 52–53, 170, 215, 279–80 Injustices, 21 Innovation ‘‘creative destruction and,’’ 140 cultural, 150 free trade and, 128–29 new garbage and old raw material uses, 233 saving and investment and, 76 Intellectual property (IP) rights, 196–97 International financial markets, 246–48 attention to government finance management, 271 International investments in developing countries, 154–55 International Labor Organization (ILO), 196, 200, 218 International markets, access to, 279–80 International Monetary Fund (IMF), 177–84 Asian crisis and, 260 crisis management and, 265 Internationalization borders and, 9 cultural encounters of globalism, 281–85 East Asia, 102–3 ‘‘hypercapitalism’’ and, 10 319 Internet, 11–12 access to international markets and, 279–80 women and, 45 Investment considerations other than wages, 204–5 in developing countries, 154–55, 244–45, 256 in East Asia, 102–3 free movements of capital and, 244–48 risk, 247, 254–56 Tobin tax and, 253–58 Investment boundaries, 243–44 Investors, Asian crisis and herd mentality of, 262 IP.


pages: 327 words: 90,542

The Age of Stagnation by Satyajit Das

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9 dash line, accounting loophole / creative accounting, additive manufacturing, Airbnb, Albert Einstein, Alfred Russel Wallace, Anton Chekhov, Asian financial crisis, banking crisis, Berlin Wall, bitcoin, Bretton Woods, BRICs, British Empire, business process, business process outsourcing, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Clayton Christensen, cloud computing, collaborative economy, colonial exploitation, computer age, creative destruction, cryptocurrency, currency manipulation / currency intervention, David Ricardo: comparative advantage, declining real wages, Deng Xiaoping, deskilling, disintermediation, Downton Abbey, Emanuel Derman, energy security, energy transition, eurozone crisis, financial innovation, financial repression, forward guidance, Francis Fukuyama: the end of history, full employment, gig economy, Gini coefficient, global reserve currency, global supply chain, Goldman Sachs: Vampire Squid, happiness index / gross national happiness, Honoré de Balzac, hydraulic fracturing, Hyman Minsky, illegal immigration, income inequality, income per capita, indoor plumbing, informal economy, Innovator's Dilemma, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, John Maynard Keynes: technological unemployment, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, labour mobility, light touch regulation, liquidity trap, Long Term Capital Management, low skilled workers, Lyft, Mahatma Gandhi, margin call, market design, Marshall McLuhan, Martin Wolf, Mikhail Gorbachev, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, oil shale / tar sands, oil shock, old age dependency ratio, open economy, passive income, peak oil, peer-to-peer lending, pension reform, Plutocrats, plutocrats, Ponzi scheme, Potemkin village, precariat, price stability, profit maximization, pushing on a string, quantitative easing, race to the bottom, Ralph Nader, Rana Plaza, rent control, rent-seeking, reserve currency, ride hailing / ride sharing, rising living standards, risk/return, Robert Gordon, Ronald Reagan, Satyajit Das, savings glut, secular stagnation, seigniorage, sharing economy, Silicon Valley, Simon Kuznets, Slavoj Žižek, South China Sea, sovereign wealth fund, TaskRabbit, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the market place, the payments system, The Spirit Level, Thorstein Veblen, Tim Cook: Apple, too big to fail, total factor productivity, trade route, transaction costs, unpaid internship, Unsafe at Any Speed, Upton Sinclair, Washington Consensus, We are the 99%, WikiLeaks, Y2K, Yom Kippur War, zero-coupon bond, zero-sum game

Its rapturous treatment in Anglo-Saxon territories has been less about the book than deep-seated anxiety about inequality. The book challenges the mythology central to liberal societies of an egalitarian meritocracy based on skill, hard work, entrepreneurship, and competition. As with GDP, measuring inequality is difficult. One measure is the Gini coefficient, developed by Italian statistician and sociologist Corrado Gini. A measure of zero represents perfect equality, with everyone having the same income, while a hundred represents perfect inequality, with one person receiving all the income. Another measure is concentration, which uses the percentage of income or wealth controlled by the top 1 percent of the population. Both measures indicate rising inequality. The Gini coefficient for the world rose to 68 in 2005, from 49 in 1820. Based on the latest statistics, the US scored 41.

George Orwell was prescient when he wrote that “we all live by robbing Asiatic coolies, and those of us who are ‘enlightened’ all maintain that those coolies ought to be set free; but our standard of living, and hence our ‘enlightenment,’ demands that the robbery shall continue.”12 Economic apartheid, in the shape of inequality, now threatens growth.13 The newfound focus on inclusive capitalism highlights the exclusion of significant portions of the population from the benefits of economic expansion. Greater income inequality increasingly constrains an already weak recovery. Empirical research suggests that an increase in income inequality by one Gini coefficient point decreases the annual growth in GDP per capita by around 0.2 percent. Higher income households have a lower marginal propensity to consume, spending a lower portion of each incremental dollar of income than those with lower incomes.

Canada, Australia and New Zealand were measured at 34, 31, and 36 respectively. The UK, Germany, France, and Italy scored 38, 31, 33, and 36. Japan came in at 38. Brazil, Russia, India, China, and South Africa recorded 53, 40, 34, 37, and 65 respectively.2 The concentration of income indicates similar patterns of inequality to the Gini coefficient. In 2012, the top 1 percent of American households received around 19 percent of US income. The percentages for Canada, Australia, and New Zealand were measured at 12, 9, and 8 respectively. The UK, Germany, France, and Italy scored 13, 13, 8, and 9. Japan came in at 10. Inequality increased significantly between 1980 and 2002. In the US since 1977, the top 1 percent of earners received 47 percent of all income growth. In Canada, it was 37 percent. In Australia and Britain, the top 1 percent received 20 percent of all income increases.


pages: 355 words: 63

The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics by William R. Easterly

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Andrei Shleifer, business climate, Carmen Reinhart, central bank independence, clean water, colonial rule, correlation does not imply causation, creative destruction, endogenous growth, financial repression, Gini coefficient, Gunnar Myrdal, Hernando de Soto, income inequality, income per capita, inflation targeting, interchangeable parts, inventory management, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, large denomination, manufacturing employment, Network effects, New Urbanism, open economy, Productivity paradox, purchasing power parity, rent-seeking, Ronald Reagan, selection bias, Silicon Valley, Simon Kuznets, The Wealth of Nations by Adam Smith, Thomas Malthus, total factor productivity, trade liberalization, urban sprawl, Watson beat the top human players on Jeopardy!, Yogi Berra, Yom Kippur War

This is indeed what researchers have found: higher inequality in income or land is associated with lower growth. Let’s look at the relationship between land inequality and economic growth. I am measuring inequality with the Gini coefficient, which goes from 0 (everyone has equal land) to 1 (1person has all the land). The fourth of the sample with the lowest inequality (average Gini coefficient of .45) hadthe highest average growth. This fourth includes such growth superstars as South Korea, Japan, and Taiwan. (Korea had the highest growth rate and the most equal land distribution in the sample.) The fourth of the sample with the highest land inequality (average Gini coefficient of 35)had the lowest growth. This highly unequal fourth includes such growth disasters as Argentina, Peru, and V e n e ~ u e l a .In ~ Argentina, for example, it was the policies of Juan and Eva Peron to redistribute income toward the descamisados (shirtless ones) that sent the Argentine economy spiraling downward until recently.

See Hunger Foreign Assistance, 9, 25, 26,28, 31-35, 37, 38, 43, 58, 79, 101, 109, 110, 118, 274 aid contests, 119 Foreign direct investment, 131 Foreign exchange, 82, 106,114, 129, 130 France, 110,157,268 337 Frankel, Jeffrey, 231 Freedom from expropriation, 250 Freedom from government repudiation of contracts, 250 Free market, 152, 178 Free trade, 230-231,239 Gabon, 201 Gambia, 73,164 Gates, Bill, 185 Geneva, 289 Georgia, 12,233 Germany, 54,65,268 Ghana, 214,219,222-223,229,251-252, 256-257,259-261,264,267 adjustment loans, 103, 104 Ashanti Empire, 256-257,264 cocoa, 222,256-257,261,264 famine, 28 growth and aid, 5 , 2 6 , 2 7 , 4 4 , 74, 119 infrastructure, 7, 107, 108, 111, 112, 113 Rawlings government, 28 Gini coefficient, 265 Government, 148,154, 168, 177,179,181, 217-219,221,234,241,249,252,255258,261,277,279,285-286,290-291 budget deficits, 218-219, 239, 260 leaders (officials), 181, 241, 247, 250, 258,263 policies, 158, 168, 169, 213, 218, 234235,251,259 programs, 169 welfare payments, 168 Gramm-Rudman, 113 Great Depression, 30, 95 Greece, 267-268 Growth disasters, 42, 59, 60, 74 Growth theories Harrod-Domar Model, 2 8 , 2 9 , 3 6 minimum standard model (revised), 34, 35 population pressure principle, 94 Solow model with diminishing returns to investment, 50, 51, 52, 53, 54,57, 68, 69,78 surplus labor model, 30, 31,40,41 Growth Oriented Adjustment Programs, 102.

Frimpong-Ansah 1991, p. 95 d who founda link 310 Notes 5. The source for the Ghana storyis Easterly and Levine 1997;consult them for further references. 6. Leith 1974. 7.The measure of inequality is the Ginicoefficient.The data and results on land inequality and growth are from Deininger and Squire 1998; others who have found a negative relationship between inequality and growth include Alesina and Rodrik 1994; Persson and Tabellini 1994; Perotti 1996; and Clarke 1995. A contrarian positive inequality and growthresult is found by Forbes 1998,2000, using fixed effects to remove country averages; however, Deininger and Olinto 2000 find a negative effect of lnnd inequality on growth even using fixed effects. 8. Easterly, 1999b. This result comes from a regression of democracy (political rights measured by the Gastil index) and civil liberties on the shareof the middle class and ethnic heterogeneity. 9.


pages: 374 words: 114,660

The Great Escape: Health, Wealth, and the Origins of Inequality by Angus Deaton

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Admiral Zheng, agricultural Revolution, Branko Milanovic, BRICs, British Empire, call centre, clean water, colonial exploitation, Columbian Exchange, creative destruction, declining real wages, Downton Abbey, end world poverty, financial innovation, germ theory of disease, Gini coefficient, illegal immigration, income inequality, invention of agriculture, invisible hand, John Snow's cholera map, knowledge economy, Louis Pasteur, low skilled workers, new economy, purchasing power parity, randomized controlled trial, rent-seeking, rising living standards, Ronald Reagan, Simon Kuznets, Steve Jobs, Steven Pinker, structural adjustment programs, The Spirit Level, too big to fail, trade route, very high income, War on Poverty

See also men; women gender roles, 133 Germany: cholera in, 96; foreign aid of, 275; POW camps of, 2–3 germ theory of disease: development of, 10, 96–97; effects of application of, 126, 239, 319; inequalities resulting from, 98, 140; practices based on, 93, 94, 99–100, 133, 239; spread of, 101, 127, 133, 150–51 Ghana: commodity exports of, 286; foreign aid received by, 300–301, 315; incomes in, 284 Gilens, Martin, 212 Gini coefficient, 187–88. See also income inequalities givewell.org, 271 givingwhatwecan.org, 269, 271 Glass-Steagall Act, 211, 213 Global Alliance for Vaccines and Immunisation (GAVI Alliance), 104, 321 Global Fund to Fight AIDS, Tuberculosis and Malaria, 276, 307–8, 309 globalization: economic growth and, 231–32; health effects of, 149–52; impact on wages, 195, 257; impacts on labor, 194–96; inequality as consequence of, 5, 41–42, 195, 257–59, 260; inequality reductions from, 257; in past, 150; politics and, 10–11; of production, 10, 195, 246 global poverty: amounts needed to eliminate, 268–70, 271–73; economic growth and, 233–35, 312; inequalities, 4–5, 41–46, 257–59, 261–63; poverty lines, 220, 223–24, 249, 256; reduction of, 44–46, 45f, 167, 247, 249–51.

The “stat” in statistics is not there by accident. The Distribution of Incomes in the United States The evolution of income can be looked at from three different perspectives: growth, poverty, and inequality. Growth is about the average and how it changes, poverty about the bottom, and inequality about how widely incomes are spread across families or people. The spread is often measured by the Gini coefficient, named after Corrado Gini, an Italian economist who worked in the first half of the twentieth century. Gini’s coefficient, or simply the Gini, is a number that lies between 0 (perfect equality—everyone has the same) and 1 (perfect inequality, with one person having everything). It measures how far people are apart on average. (If you really want know the details, it is the average difference in income between all pairs of people divided by twice the average income.

About half of American families pay no federal income taxes. Even so, taxes have not played a very large part in shaping the changes in inequality since the 1970s, most of which have been driven by pretax income. In the 1980s tax policy widened disparities somewhat, by means of tax reductions that favored the better-off, while in the 1990s the opposite was true, with tax increases at the top and expansions in the Earned Income Tax Credit, which provides benefits at the bottom. Since 2001, tax cuts have once again favored high-income taxpayers. The Congressional Budget Office estimates that, between 1979 and 2007, income inequality (measured by the Gini coefficient, though on a slightly different basis) increased by about a quarter for pretax income and by about a third for after-tax income (including the value of Medicare).


pages: 366 words: 94,209

Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity by Douglas Rushkoff

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3D printing, activist fund / activist shareholder / activist investor, Airbnb, algorithmic trading, Amazon Mechanical Turk, Andrew Keen, bank run, banking crisis, barriers to entry, bitcoin, blockchain, Burning Man, business process, buy low sell high, California gold rush, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, centralized clearinghouse, citizen journalism, clean water, cloud computing, collaborative economy, collective bargaining, colonial exploitation, Community Supported Agriculture, corporate personhood, corporate raider, creative destruction, crowdsourcing, cryptocurrency, disintermediation, diversified portfolio, Elon Musk, Erik Brynjolfsson, ethereum blockchain, fiat currency, Firefox, Flash crash, full employment, future of work, gig economy, Gini coefficient, global supply chain, global village, Google bus, Howard Rheingold, IBM and the Holocaust, impulse control, income inequality, index fund, iterative process, Jaron Lanier, Jeff Bezos, jimmy wales, job automation, Joseph Schumpeter, Kickstarter, loss aversion, Lyft, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, Marshall McLuhan, means of production, medical bankruptcy, minimum viable product, Naomi Klein, Network effects, new economy, Norbert Wiener, Oculus Rift, passive investing, payday loans, peer-to-peer lending, Peter Thiel, post-industrial society, profit motive, quantitative easing, race to the bottom, recommendation engine, reserve currency, RFID, Richard Stallman, ride hailing / ride sharing, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Snapchat, social graph, software patent, Steve Jobs, TaskRabbit, The Future of Employment, trade route, transportation-network company, Turing test, Uber and Lyft, Uber for X, unpaid internship, Y Combinator, young professional, zero-sum game, Zipcar

If corporations convert too many assets from the working and business economies into pure capital, then the whole system seizes up for lack of fuel. The main figure they cite, the Gini coefficient of income inequality, measures how much income has been monopolized by the shareholders at the top. A Gini coefficient of 0 would mean that everyone has the same amount of money; a coefficient of 1 means that all the income is being taken by just one person or corporation. According to Beth Ann Bovino, chief economist at S&P, once that coefficient goes above 0.4 or 0.45—where we are as of this writing—it hurts growth for everyone. “It’s good for a market economy to have income inequality but to extremes, it can actually damage growth long term and make it less sustainable.”19 Bovino showed that it’s not just the extreme of inequality that’s to blame but the decline of labor and business income in the face of rising capital gains.

., 229 Circuit City, 90 Citizens United case, 72 Claritas, 32 click workers, 50 climate change, 135, 227–28, 237 coin of the realm, 128–29 collaboration as corporate strategy, 106–7 colonialism, 71–72 commons, 215–23 co-owned networks and, 220–23 history of, 215–16 projects inspired by, 217–18 successful, elements of, 216–17 tragedy of, 215–16 worker-owned collectives and, 219–20 competencies, of corporations, 79–80 Connect+Develop, 107 Consumer Electronics Show, 19 Consumer Reports,33 contracting with small and medium-sized enterprises, 112 cooperative currencies, 160–65 favor banks, 161 LETS (Local Exchange Trading System), 163–65 time dollar systems, 161–63 co-owned networks, 220–23 corporations, 68–82 acquisition of startups, growth through, 78 amplifying effect of, 70, 73 Big Shift and, 76 cash holdings of, 76, 77–78 competency of, 79–80 cost reduction, growth through, 79–80 decentralized autonomous corporations (DACs), 149–50 Deloitte’s study of return on assets (ROA) of, 76–77 distributive alternative to platform monopolies, 93–97 evaluation of, 69–74 extractive nature of, 71–72, 73, 74, 75, 80–82 growth targets, meeting, 68–69 income inequality and, 81–82 limits to corporate model, 75–76, 80–82 managerial and financial methods to deliver growth by, 77–79 monopolies (See monopolies) obsolescence created by, 70–71, 73 offshoring and, 78–79 personhood of, 72, 73–74, 90, 91 recoding of, 93–97, 125–26 repatriation and, 80 retrieval of values of empire and, 71–72, 73 as steady-state enterprises, 97–123 Costco, 74 cost reduction, and corporate growth, 79–80 Couchsurfing.com, 46 crashes of 1929, 99 of 2007, 133–34 biotech crash, of 1987, 6 flash crash, 180 Creative Commons, 215 creative destruction, 83–87 credit, 132–33 credit-card companies, 143–44 crowdfunding, 38–39, 198–201 crowdsharing apps, 45–49 crowdsourcing platforms, 49–50 Crusades, 16 Cumbrian Pounds, 156 Curitiba, Brazil modified LETS program, 164–65 Daly, Herman, 184 data big, 39–44 getting paid for our own, 44–45 “likes” economy and, 32, 34–36 in pre-digital era, 40 Datalogix, 32 da Vinci, Leonardo, 236 debt, 152–54 decentralized autonomous corporations (DACs), 149–50 deflation, 169 Dell, 115–16 Dell, Michael, 115–16 Deloitte Center for the Edge, 76–77 destructive destruction, 100 Detroit Dollars, 156 digital distributism, 224–39 artisanal era mechanisms and values retrieved by, 233–34 developing distributive businesses, 237–38 digital industrialism compared, 226 digital technology and, 230–31 historical ideals of distributism, 228–30 leftism, distinguished, 231 Pope Francis’s encyclical espousing distributed approach to land, labor and capital, 227–28 Renaissance era values, rebirth of, 235–37 subsidiarity and, 231–32 sustainable prosperity as goal of, 226–27 digital economy, 7–11 big data and, 39–44 destabilizing form of digitally accelerated capitalism, creation of, 9–10 digital marketplace, development of, 24–30 digital transaction networks and, 140–51 disproportionate relationship between capital and value in, 9 distributism and, 224–39 externalizing cost of replacing employees in, 14–15 industrialism and, 13–16, 23–24, 44, 53–54, 93, 101–2, 201, 214, 226 industrial society, distinguished, 11 “likes” and similar metrics, economy of, 30–39 platform monopolies and, 82–93, 101 digital industrialism, 13–16, 23–24, 101–2, 201 digital distributism compared, 226 diminishing returns of, 93 externalizing costs and, 14–15 growth agenda and, 14–15, 23–24 human data as commodity under, 44 income disparity and, 53–54 labor and land pushed to unbound extremes by, 214 “likes” economy and, 33 reducing bottom line as means of creating illusion of growth and, 14 digital marketplace, 24–30 early stages of e-commerce, 25–26 highly centralized sales platforms of, 29 initial treatment of Internet as commons, 25 “long tail” of widespread digital access and, 26 positive reinforcement feedback loop and, 28 power-law dynamics and, 26–29 removal of humans from selection process in, 28 digital transaction networks, 140–51 Bitcoin, 143–49, 150–51, 152 blockchains and, 144–51 central authorities, dependence on, 142 decentralized autonomous corporations (DACs) and, 149–50 PayPal, 140–41 theft and, 142 direct public offerings (DPOs), 205–6 discount brokerages, 176–78 diversification, 208, 211 dividends, 113–14, 208–10 dividend traps, 113 Dorsey, Jack, 191–92 Draw Something, 192, 193 Drexler, Mickey, 116 dual transformation, 108–9 dumbwaiter effect, 19 Dutch East India Company, 71, 89, 131 eBay, 16, 26, 29, 45, 140 education industry, 95–97 Eisenhower administration, 52–53, 63, 75 Elberse, Anita, 28 employee-owned companies, 116–18 Enron, 133, 171n Eroski, 220 eSignal, 178 EthicalBay, 221 E*Trade, 176, 177 Etsy, 16, 26, 30 expense reduction, and corporate growth, 78–79 Facebook, 4, 31, 83, 93, 96, 201 data gathering and sales by, 41, 44 innovation by acquisition of startups, 78 IPO of, 192–93, 195 psychological experiments conducted on users by, 32–33 factors of production, 212–14 Fairmondo, 221 Family Assistance Plan, 63 family businesses, 103–4, 231–32 FarmVille, 192 favor banks, 161 Febreze Set & Refresh, 108 Federal Reserve, 137–38 feedback loop, and positive reinforcement, 28 Ferriss, Tim, 201 feudalism, 17 financial services industry, 131–33, 171–73, 175 Fisher, Irving, 158 flash crash, 180 flexible purpose corporations, 119–20 flow, investing in, 208–10 Forbes,88, 173, 174 40-hour workweek, reduction of, 58–60 401(k) plans, 171–74 Francis, Pope, 227, 228, 234 Free, Libre, Open Knowledge (FLOK) program, 217–18 Free (Anderson), 33 free money theory, local currencies based on, 156–59 barter exchanges, 159 during Great Depression, 158–59 self-help cooperatives, 159 stamp scrip, 158–59 tax anticipation scrip, 159 Wörgls, 157–58 frenzy, 98–99 Fried, Jason, 59 Friedman, Milton, 64 Friendster, 31 Frito-Lay, 80 front running, 180–81 Fulfillment by Amazon, 89 Fureai Kippu (Caring Relationship Tickets), 162 Future of Work initiative, 56n Gallo, Riso, 103–4 Gap, 116 Gates, Bill, 186 General Electric, 132 General Public License (GPL) for software, 216 Gesell, Silvio, 157 GI Bill, 99 Gimein, Mark, 147 Gini coefficient of income inequality, 81–82, 92 global warming, 135, 227–28, 237 GM, 80 Goldman Sachs, 133, 195 gold standard, 139 Google, 8, 48, 78, 83, 90–91, 93, 141, 218 acquisitions by, 191 business model of, 37 data sales by, 37, 44 innovation by acquisition of startups, 78 IPO of, 194–95 protests against, 1–3, 5, 98–99 grain receipts, 128 great decoupling, 53 Great Depression, 137, 158–59 Great Exhibition, 1851, 19 Greenspan, Alan, 132–33 growth, 1–11 bazaars, and economic expansion in late Middle Ages, 16–18 central currency and, 126, 129–31, 133–36 digital industrialism, growth agenda of, 14–15, 23–24 highly centralized e-commerce platforms and, 29 startups, hypergrowth expected of, 187–91 as trap (See growth trap) growth trap, 4–5, 68–123 central currency as core mechanism of, 133–34 corporations as program and, 68–82 platform monopolies and, 82–93, 101 recoding corporate model and, 93–97 steady-state enterprises and, 98–123 guaranteed minimum income programs, 62–65 guaranteed minimum wage public jobs, 65–66 guilds, 17 Hagel, John, 76–77 Hardin, Garrett, 215–16 Harvard Business Review,108–9 Heiferman, Scott, 196–97 Henry VIII, King, 215, 229 Hewlett-Packard UK, 112 high-frequency trading (HFT), 179–80 Hilton, 115 Hobby Lobby case, 72 Hoffman, Reid, 61 Holland, Addie Rose, 205–6 holograms, 235 Homeport New Orleans, 121 housing industry, 135 Huffington, Arianna, 34, 35, 201 Huffington Post, 34, 201 human role in economy, 13–67 aristocracy’s efforts to control peasant economy, 17–18 bazaars and, 16–18 big data and, 39–44 chartered monopolies and, 18 decreasing employment and, 30–39 digital marketplace, impact of, 24–30 industrialism and, 13–16, 18–24, 44 “likes” economy and, 30–39 reevaluation of employment and adopting policies to decrease it and, 54–67 sharing economy and, 44–54 Hurwitz, Charles, 117 IBM, 90–91, 112 inclusive capitalism, 111–12 income disparity corporate model and, 81–82 digital technology as accelerating, 53–54 Gini coefficient of, 81–82, 92 growth trap and, 4 power-law dynamics and, 27–28, 30 public service options for reducing, 65–66 IndieGogo, 30, 199 individual retirement accounts (IRAs), 171 industrial farming, 134–35 industrialism, 18–24 branding and, 20 digital, 13–16, 23–24, 44, 53–54, 93, 101–2, 201, 214, 226 disempowerment of workers and, 18–19 human connection between producer and consumer, loss of, 19–20 isolation of human consumers from one another and, 20–21 mass marketing and, 19–20 mass media and, 20–21 purpose of, 18–19, 22 value system of, 18–19 inflation, 169 Instagram, 31 Intercontinental Exchange, 182 interest, 129–31 investors/investing, 70, 72, 168–223 algorithmic trading and, 179–84 bounded, 210–15 commons model for running businesses and, 215–23 crowdfunding and, 198–201 derivative finance, volume of, 182 digital technology and, 169–70, 175–84 direct public offerings (DPOs) and, 205–6 discount brokerages and, 176–78 diversification and, 208, 211 dividends and, 208–10 flow, investing in, 208–10 high-frequency trading (HFT) and, 179–80 in low-interest rate environment, 169–70 microfinancing platforms and, 202–4 platform cooperatives and, 220–23 poor performance of do-it-yourself traders and, 177–78 retirement savings and, 170–75 startups and, 184–205 ventureless capital and, 196–205 irruption, 98 i-traffic, 196 iTunes, 27, 29, 34, 89 J.

., 229 Circuit City, 90 Citizens United case, 72 Claritas, 32 click workers, 50 climate change, 135, 227–28, 237 coin of the realm, 128–29 collaboration as corporate strategy, 106–7 colonialism, 71–72 commons, 215–23 co-owned networks and, 220–23 history of, 215–16 projects inspired by, 217–18 successful, elements of, 216–17 tragedy of, 215–16 worker-owned collectives and, 219–20 competencies, of corporations, 79–80 Connect+Develop, 107 Consumer Electronics Show, 19 Consumer Reports,33 contracting with small and medium-sized enterprises, 112 cooperative currencies, 160–65 favor banks, 161 LETS (Local Exchange Trading System), 163–65 time dollar systems, 161–63 co-owned networks, 220–23 corporations, 68–82 acquisition of startups, growth through, 78 amplifying effect of, 70, 73 Big Shift and, 76 cash holdings of, 76, 77–78 competency of, 79–80 cost reduction, growth through, 79–80 decentralized autonomous corporations (DACs), 149–50 Deloitte’s study of return on assets (ROA) of, 76–77 distributive alternative to platform monopolies, 93–97 evaluation of, 69–74 extractive nature of, 71–72, 73, 74, 75, 80–82 growth targets, meeting, 68–69 income inequality and, 81–82 limits to corporate model, 75–76, 80–82 managerial and financial methods to deliver growth by, 77–79 monopolies (See monopolies) obsolescence created by, 70–71, 73 offshoring and, 78–79 personhood of, 72, 73–74, 90, 91 recoding of, 93–97, 125–26 repatriation and, 80 retrieval of values of empire and, 71–72, 73 as steady-state enterprises, 97–123 Costco, 74 cost reduction, and corporate growth, 79–80 Couchsurfing.com, 46 crashes of 1929, 99 of 2007, 133–34 biotech crash, of 1987, 6 flash crash, 180 Creative Commons, 215 creative destruction, 83–87 credit, 132–33 credit-card companies, 143–44 crowdfunding, 38–39, 198–201 crowdsharing apps, 45–49 crowdsourcing platforms, 49–50 Crusades, 16 Cumbrian Pounds, 156 Curitiba, Brazil modified LETS program, 164–65 Daly, Herman, 184 data big, 39–44 getting paid for our own, 44–45 “likes” economy and, 32, 34–36 in pre-digital era, 40 Datalogix, 32 da Vinci, Leonardo, 236 debt, 152–54 decentralized autonomous corporations (DACs), 149–50 deflation, 169 Dell, 115–16 Dell, Michael, 115–16 Deloitte Center for the Edge, 76–77 destructive destruction, 100 Detroit Dollars, 156 digital distributism, 224–39 artisanal era mechanisms and values retrieved by, 233–34 developing distributive businesses, 237–38 digital industrialism compared, 226 digital technology and, 230–31 historical ideals of distributism, 228–30 leftism, distinguished, 231 Pope Francis’s encyclical espousing distributed approach to land, labor and capital, 227–28 Renaissance era values, rebirth of, 235–37 subsidiarity and, 231–32 sustainable prosperity as goal of, 226–27 digital economy, 7–11 big data and, 39–44 destabilizing form of digitally accelerated capitalism, creation of, 9–10 digital marketplace, development of, 24–30 digital transaction networks and, 140–51 disproportionate relationship between capital and value in, 9 distributism and, 224–39 externalizing cost of replacing employees in, 14–15 industrialism and, 13–16, 23–24, 44, 53–54, 93, 101–2, 201, 214, 226 industrial society, distinguished, 11 “likes” and similar metrics, economy of, 30–39 platform monopolies and, 82–93, 101 digital industrialism, 13–16, 23–24, 101–2, 201 digital distributism compared, 226 diminishing returns of, 93 externalizing costs and, 14–15 growth agenda and, 14–15, 23–24 human data as commodity under, 44 income disparity and, 53–54 labor and land pushed to unbound extremes by, 214 “likes” economy and, 33 reducing bottom line as means of creating illusion of growth and, 14 digital marketplace, 24–30 early stages of e-commerce, 25–26 highly centralized sales platforms of, 29 initial treatment of Internet as commons, 25 “long tail” of widespread digital access and, 26 positive reinforcement feedback loop and, 28 power-law dynamics and, 26–29 removal of humans from selection process in, 28 digital transaction networks, 140–51 Bitcoin, 143–49, 150–51, 152 blockchains and, 144–51 central authorities, dependence on, 142 decentralized autonomous corporations (DACs) and, 149–50 PayPal, 140–41 theft and, 142 direct public offerings (DPOs), 205–6 discount brokerages, 176–78 diversification, 208, 211 dividends, 113–14, 208–10 dividend traps, 113 Dorsey, Jack, 191–92 Draw Something, 192, 193 Drexler, Mickey, 116 dual transformation, 108–9 dumbwaiter effect, 19 Dutch East India Company, 71, 89, 131 eBay, 16, 26, 29, 45, 140 education industry, 95–97 Eisenhower administration, 52–53, 63, 75 Elberse, Anita, 28 employee-owned companies, 116–18 Enron, 133, 171n Eroski, 220 eSignal, 178 EthicalBay, 221 E*Trade, 176, 177 Etsy, 16, 26, 30 expense reduction, and corporate growth, 78–79 Facebook, 4, 31, 83, 93, 96, 201 data gathering and sales by, 41, 44 innovation by acquisition of startups, 78 IPO of, 192–93, 195 psychological experiments conducted on users by, 32–33 factors of production, 212–14 Fairmondo, 221 Family Assistance Plan, 63 family businesses, 103–4, 231–32 FarmVille, 192 favor banks, 161 Febreze Set & Refresh, 108 Federal Reserve, 137–38 feedback loop, and positive reinforcement, 28 Ferriss, Tim, 201 feudalism, 17 financial services industry, 131–33, 171–73, 175 Fisher, Irving, 158 flash crash, 180 flexible purpose corporations, 119–20 flow, investing in, 208–10 Forbes,88, 173, 174 40-hour workweek, reduction of, 58–60 401(k) plans, 171–74 Francis, Pope, 227, 228, 234 Free, Libre, Open Knowledge (FLOK) program, 217–18 Free (Anderson), 33 free money theory, local currencies based on, 156–59 barter exchanges, 159 during Great Depression, 158–59 self-help cooperatives, 159 stamp scrip, 158–59 tax anticipation scrip, 159 Wörgls, 157–58 frenzy, 98–99 Fried, Jason, 59 Friedman, Milton, 64 Friendster, 31 Frito-Lay, 80 front running, 180–81 Fulfillment by Amazon, 89 Fureai Kippu (Caring Relationship Tickets), 162 Future of Work initiative, 56n Gallo, Riso, 103–4 Gap, 116 Gates, Bill, 186 General Electric, 132 General Public License (GPL) for software, 216 Gesell, Silvio, 157 GI Bill, 99 Gimein, Mark, 147 Gini coefficient of income inequality, 81–82, 92 global warming, 135, 227–28, 237 GM, 80 Goldman Sachs, 133, 195 gold standard, 139 Google, 8, 48, 78, 83, 90–91, 93, 141, 218 acquisitions by, 191 business model of, 37 data sales by, 37, 44 innovation by acquisition of startups, 78 IPO of, 194–95 protests against, 1–3, 5, 98–99 grain receipts, 128 great decoupling, 53 Great Depression, 137, 158–59 Great Exhibition, 1851, 19 Greenspan, Alan, 132–33 growth, 1–11 bazaars, and economic expansion in late Middle Ages, 16–18 central currency and, 126, 129–31, 133–36 digital industrialism, growth agenda of, 14–15, 23–24 highly centralized e-commerce platforms and, 29 startups, hypergrowth expected of, 187–91 as trap (See growth trap) growth trap, 4–5, 68–123 central currency as core mechanism of, 133–34 corporations as program and, 68–82 platform monopolies and, 82–93, 101 recoding corporate model and, 93–97 steady-state enterprises and, 98–123 guaranteed minimum income programs, 62–65 guaranteed minimum wage public jobs, 65–66 guilds, 17 Hagel, John, 76–77 Hardin, Garrett, 215–16 Harvard Business Review,108–9 Heiferman, Scott, 196–97 Henry VIII, King, 215, 229 Hewlett-Packard UK, 112 high-frequency trading (HFT), 179–80 Hilton, 115 Hobby Lobby case, 72 Hoffman, Reid, 61 Holland, Addie Rose, 205–6 holograms, 235 Homeport New Orleans, 121 housing industry, 135 Huffington, Arianna, 34, 35, 201 Huffington Post, 34, 201 human role in economy, 13–67 aristocracy’s efforts to control peasant economy, 17–18 bazaars and, 16–18 big data and, 39–44 chartered monopolies and, 18 decreasing employment and, 30–39 digital marketplace, impact of, 24–30 industrialism and, 13–16, 18–24, 44 “likes” economy and, 30–39 reevaluation of employment and adopting policies to decrease it and, 54–67 sharing economy and, 44–54 Hurwitz, Charles, 117 IBM, 90–91, 112 inclusive capitalism, 111–12 income disparity corporate model and, 81–82 digital technology as accelerating, 53–54 Gini coefficient of, 81–82, 92 growth trap and, 4 power-law dynamics and, 27–28, 30 public service options for reducing, 65–66 IndieGogo, 30, 199 individual retirement accounts (IRAs), 171 industrial farming, 134–35 industrialism, 18–24 branding and, 20 digital, 13–16, 23–24, 44, 53–54, 93, 101–2, 201, 214, 226 disempowerment of workers and, 18–19 human connection between producer and consumer, loss of, 19–20 isolation of human consumers from one another and, 20–21 mass marketing and, 19–20 mass media and, 20–21 purpose of, 18–19, 22 value system of, 18–19 inflation, 169 Instagram, 31 Intercontinental Exchange, 182 interest, 129–31 investors/investing, 70, 72, 168–223 algorithmic trading and, 179–84 bounded, 210–15 commons model for running businesses and, 215–23 crowdfunding and, 198–201 derivative finance, volume of, 182 digital technology and, 169–70, 175–84 direct public offerings (DPOs) and, 205–6 discount brokerages and, 176–78 diversification and, 208, 211 dividends and, 208–10 flow, investing in, 208–10 high-frequency trading (HFT) and, 179–80 in low-interest rate environment, 169–70 microfinancing platforms and, 202–4 platform cooperatives and, 220–23 poor performance of do-it-yourself traders and, 177–78 retirement savings and, 170–75 startups and, 184–205 ventureless capital and, 196–205 irruption, 98 i-traffic, 196 iTunes, 27, 29, 34, 89 J.


pages: 717 words: 150,288

Cities Under Siege: The New Military Urbanism by Stephen Graham

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airport security, anti-communist, autonomous vehicles, Berlin Wall, call centre, carbon footprint, clean water, congestion charging, creative destruction, credit crunch, DARPA: Urban Challenge, defense in depth, deindustrialization, digital map, edge city, energy security, European colonialism, failed state, Food sovereignty, Gini coefficient, global supply chain, Google Earth, illegal immigration, income inequality, knowledge economy, late capitalism, loose coupling, market fundamentalism, mass incarceration, McMansion, megacity, moral panic, mutually assured destruction, Naomi Klein, New Urbanism, offshore financial centre, one-state solution, pattern recognition, peak oil, planetary scale, private military company, Project for a New American Century, RAND corporation, RFID, Richard Florida, Scramble for Africa, Silicon Valley, smart transportation, surplus humans, The Bell Curve by Richard Herrnstein and Charles Murray, urban decay, urban planning, urban renewal, urban sprawl, Washington Consensus, white flight, white picket fence

Meanwhile, amid the turmoil of collapsing finance systems, ‘most of the world watches the great binge on television’.18 On the other hand, and not surprisngly, social inequalities are also rising rapidly within nations, regions and cities. Many economists would concur with Giovanni Andrea Cornia when he argues that ‘most of the recent surge in income polarization [within nations] would appear to be related to the policy drive towards domestic deregulation and external liberalization.’19 This has tended to concentrate wealth within social classes, corporations and locations that are capable of profiting from privatization and the extension of finance capital, while undermining wages, wealth and security for more marginalized people and places. In the US, for example, the Gini coefficient – the best measure of social inequality – rose from an already high level of 0.394 in 1970 to 0.462 in 2000.

As the world’s pre-eminent ‘penal democracy’,22 the US, with 5 per cent of the world’s population, held fully 24 per cent of the world’s prisoners (more than two million people) in 2007.23 The UK, meanwhile, is now the most polarized nation in Western Europe apart from Italy. Its income inequality – again measured by the Gini coefficient – has risen dramatically since the early 1960s, with the remodelling of the economy through radical re-regulation, privatization and neoliberalization (Figure 1.3). For the richest 10 per cent of the UK population, incomes rose in real terms by 68 per cent between 1979 and 1995. Their collective income now matches that of the nation’s poorest 70 per cent. During the same period, incomes for the poorest 10 per cent of UK households actually fell by 8 per cent (not considering housing costs). This rapidly reversed reductions in inequality achieved during the post-war Keynesian boom in the UK. After housing costs, the UK’s richest 10 per cent increased their share of the nation’s marketable wealth from 57 per cent in 1976 to 71 per cent in 2003.

After housing costs, the UK’s richest 10 per cent increased their share of the nation’s marketable wealth from 57 per cent in 1976 to 71 per cent in 2003. At the same time, according to Philip Bond in the Independent, ‘the speculative capital that could be deployed or invested by the bottom 50 per cent of the British population fell from 12 per cent to just 1 per cent’.24 1.3 Radical growth in income inequality in the UK between 1961 and 2002/3 for income before housing costs (BHC) and after housing costs (AHC), as measured by the Gini coefficient. The imposition of market fundamentalism had particularly spectacular effects on the ex-Communist Comecon block after the collapse of communism in the late 1980s. Not only did this create a handful of billionaires and oligarchs but, at the same time, it increased the number of people living in poverty and deep insecurity from three million in 1988 to 170 million in 2004.25 Globally, by 2007, well over a billion people – a third of all urban dwellers – were leading a highly precarious existence in fast-growing slums and informal settlements.26 Increasingly, the developing world has come to be dominated by immiserized shanty-town populations whose daily insecurities encourage a receptivity to radical, violently anti-Western ideologies and movements.


pages: 309 words: 86,909

The Spirit Level: Why Greater Equality Makes Societies Stronger by Richard Wilkinson; Kate Pickett

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basic income, Berlin Wall, clean water, Diane Coyle, epigenetics, experimental economics, experimental subject, Fall of the Berlin Wall, full employment, germ theory of disease, Gini coefficient, God and Mammon, impulse control, income inequality, Intergovernmental Panel on Climate Change (IPCC), knowledge economy, labor-force participation, land reform, Louis Pasteur, meta analysis, meta-analysis, Milgram experiment, moral panic, offshore financial centre, phenotype, Plutocrats, plutocrats, profit maximization, profit motive, Ralph Waldo Emerson, statistical model, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, ultimatum game, upwardly mobile, World Values Survey, zero-sum game

2 There are lots of ways of measuring income inequality and they are all so closely related to each other that it doesn’t usually make much difference which you use. Instead of the top and bottom 20 per cent, we could compare the top and bottom 10 or 30 per cent. Or we could have looked at the proportion of all incomes which go to the poorer half of the population. Typically, the poorest half of the population get something like 20 or 25 per cent of all incomes and the richest half get the remaining 75 or 80 per cent. Other more sophisticated measures include one called the Gini coefficient. It measures inequality across the whole society rather than simply comparing the extremes. If all income went to one person (maximum inequality) and everyone else got nothing, the Gini coefficient would be equal to 1. If income was shared equally and everyone got exactly the same (perfect equality), the Gini would equal 0.

The most common values tend to be between 0.3 and 0.5. Another measure of inequality is called the Robin Hood Index because it tells you what proportion of a society’s income would have to be taken from the rich and given to the poor to get complete equality. To avoid being accused of picking and choosing our measures, our approach in this book has been to take measures provided by official agencies rather than calculating our own. We use the ratio of the income received by the top to the bottom 20 per cent whenever we are comparing inequality in different countries: it is easy to understand and it is one of the measures provided ready-made by the United Nations. When comparing inequality in US states, we use the Gini coefficient: it is the most common measure, it is favoured by economists and it is available from the US Census Bureau.

In a study with his colleague Bo Rothstein, Uslaner shows, using a statistical test for causality, that inequality affects trust, but that there is ‘no direct effect of trust on inequality; rather, the causal direction starts with inequality’.28, p. 45 Uslaner says that ‘trust cannot thrive in an unequal world’ and that income inequality is the ‘prime mover’ of trust, with a stronger impact on trust than rates of unemployment, inflation or economic growth.27 It is not average levels of economic wellbeing that create trust, but economic equality. Uslaner’s graph showing that trust has declined in the USA during a Figure 4.3 As inequality increased, so trust declined.27, p. 187 period in which inequality rapidly increased, is shown in Figure 4.3. The numbers on the graph show for each year (1960–98) the relation between the level of trust and inequality in that year. Changes in inequality and trust go together over the years.


pages: 515 words: 142,354

The Euro: How a Common Currency Threatens the Future of Europe by Joseph E. Stiglitz, Alex Hyde-White

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bank run, banking crisis, barriers to entry, battle of ideas, Berlin Wall, Bretton Woods, capital controls, Carmen Reinhart, cashless society, central bank independence, centre right, cognitive dissonance, collapse of Lehman Brothers, collective bargaining, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, currency peg, dark matter, David Ricardo: comparative advantage, disintermediation, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial innovation, full employment, George Akerlof, Gini coefficient, global supply chain, Growth in a Time of Debt, housing crisis, income inequality, incomplete markets, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour market flexibility, labour mobility, light touch regulation, manufacturing employment, market bubble, market friction, market fundamentalism, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, neoliberal agenda, new economy, open economy, paradox of thrift, pension reform, pensions crisis, price stability, profit maximization, purchasing power parity, quantitative easing, race to the bottom, risk-adjusted returns, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, sovereign wealth fund, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, trickle-down economics, Washington Consensus, working-age population

These data suggest that indeed, many are facing hardship. In Spain, for instance, in the years before the crisis, inequality had been coming down, but by 2014, the Gini coefficient, a standard measure of income inequality, was about 9 percent over its 2007 level. In the case of Greece, the Gini coefficient increased by 5 percent from just 2010 to 2014. It usually takes years and years to move the Gini coefficient by a few percentage points. Data on poverty reinforce the conjecture that those in the middle and bottom have suffered particularly from the crisis. In virtually every country in the eurozone there has been an increase in poverty, especially childhood poverty. By 2012, according to Oxfam, a third of Greeks were below the poverty line and 17.5 percent of the population, more than one million, of those between 18 and 60 lived in households with no income at all.19 From 2008 to 2012, according to a UNICEF measure, the proportion of Greek children in poverty increased from 23 percent to 40.5 percent.20 THE EURO, THE EURO CRISIS, AND LONGER-TERM PERFORMANCE It is now abundantly clear that Europe’s economy has not been performing well—and has not been performing well at least since the onset of the crisis.

But, as the International Commission on the Measurement of Economic Performance and Social Progress has emphasized, GDP provides an inadequate measure of overall economic performance. It does not, for instance, take into account the distribution of the benefits of growth: even in Germany, large fractions of the population have seen stagnation or even decreases in their incomes.26 From 1992 to 2010, the income share of the top 1 percent increased by about 24 percent;27 and from the mid-1980s until the mid-2000s, Germany’s Gini coefficient and poverty rates climbed steadily—the latter ultimately exceeding the average for the OECD countries.28 Germany’s success in achieving competitiveness came partly at the expense of those at the bottom, though it does a much better job of protecting those at the bottom than the United States does.29 While Germany is hardly the success that it would like to claim for itself, its modest success does not even provide a template for others.

There are large distributive consequences. Indeed, central banks may have played an important role in increasing inequality. INCREASING INEQUALITY Today, in most countries around the world, inequality is viewed as one of the greatest threats to future prosperity. At Davos, where the world’s economic leaders come together every January, recent surveys of global risks have consistently placed inequality at or toward the top of the list.20 Inequality is important because divided societies don’t function well; it leads to a lack of cohesiveness that has political, economic, and social consequences. In my book The Price of Inequality, I explained the mechanisms by which greater inequality leads to poorer economic performance—lower growth and more instability. Since then, a wealth of studies at the IMF and elsewhere has corroborated this perspective.21 Unfortunately, central banks everywhere, and especially the ECB, have largely ignored their role in creating inequality.


pages: 297 words: 89,206

Social Class in the 21st Century by Mike Savage

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call centre, Capital in the Twenty-First Century by Thomas Piketty, Clapham omnibus, Corn Laws, deindustrialization, deskilling, Downton Abbey, financial independence, gender pay gap, Gini coefficient, income inequality, liberal capitalism, Mark Zuckerberg, megacity, moral panic, New Urbanism, Occupy movement, old-boy network, precariat, psychological pricing, Sloane Ranger, The Spirit Level, unpaid internship, upwardly mobile, very high income, winner-take-all economy, young professional

Simply noting that Britain is highly unequal, and getting more so, is not enough to put a handle on how people experience these inequalities in their own lives and how they understand the divisions they see around them. We can see lots of different forces at play even from these few vignettes. People do not want to show off. Nor do they want to recognize the shame and stigma of being at the bottom. Yet, despite people’s hesitancies about identifying themselves economically, we will insist on the centrality of such inequalities in shaping people’s lives. The power of income inequalities Income inequalities in Britain are very high, and have been rapidly increasing. In their highly influential book The Spirit Level, Richard Wilkinson and Kate Pickett use the standard metric to measure inequality between countries – the Gini coefficient – in the fifteen states who were members of the European Union prior to its major enlargement in 2004 and also the major industrial English-speaking countries of Australia, Canada and the USA.2 Figure 2.1 gives an indication of the inequalities within nations as they reflect the relative differences between countries in terms of earnings.

John Hills, Good Times, Bad Times: The Welfare Myth of Them and Us (Bristol: 2015), p. 37. 2. The Gini coefficient measures household income within a nation and reports a score between 0 (perfect equality) and 100 (complete inequality). For precise definition, see http://www.ons.gov.uk/ons/guide-method/method-quality/specific/social-and-welfare-methodology/the-gini-coefficient/index.html. 3. For overviews, see Peter Nolan, ‘Shaping the Future: The Political Economy of Work and Employment’, Industrial Relations Journal, 35(5), 2004, 378–87, and ‘The Changing World of Work’, Journal of Health Services Research and Policy, 9(suppl. 1), 2004, 3–9. 4. See, more generally, Mark Williams, ‘Occupations and British Wage Inequality, 1970s–2000s’, European Sociological Review, 29(4), 2013, 841–57. 5. These findings also conform with those of Mark Williams, who shows that although much of the increasing variation in income levels can be mapped on to the NS-SEC classes, it is the gap between those in class 1 (professionals and managers) and the rest which explains most of this variance. 6.

In their highly influential book The Spirit Level, Richard Wilkinson and Kate Pickett use the standard metric to measure inequality between countries – the Gini coefficient – in the fifteen states who were members of the European Union prior to its major enlargement in 2004 and also the major industrial English-speaking countries of Australia, Canada and the USA.2 Figure 2.1 gives an indication of the inequalities within nations as they reflect the relative differences between countries in terms of earnings. The UK is a country of high gross income inequalities between households, coming second only to Ireland in the list of eighteen nations. Figure 2.1 shows also that those inequalities increased between 2008 and 2010 in the UK, as indeed they did in the vast majority of countries surveyed by the Organization for Economic Cooperation and Development (OECD). This clearly points to the impact of the financial crisis in exacerbating inequalities within the UK and across the globe. Why is income inequality so intense in Britain? There is clearly a gulf between those wealthy households benefiting from Britain’s centrality in global trading, corporate, professional and financial networks, when compared to poor households, which have been affected by the decline of manufacturing jobs and the proliferation of poorly paying jobs at the lower ends of the service economy.


pages: 165 words: 45,129

The Economics of Inequality by Thomas Piketty, Arthur Goldhammer

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affirmative action, basic income, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, conceptual framework, deindustrialization, endogenous growth, Gini coefficient, income inequality, low skilled workers, means of production, moral hazard, Pareto efficiency, purchasing power parity, Simon Kuznets, The Bell Curve by Richard Herrnstein and Charles Murray, very high income, working-age population

See also Taxes Flat tax, on capital, 64–65 France: attitudes toward inequality, 99; average and marginal rates of redistribution, 102, 102f; capital and labor shares of value added, 41t; effective minimum wage, 110–111; Generalized Social Contribution, 34, 38; household income sources, 6t; income inequality, 12–15, 12t, 24–25; income inequality (1870–1994), 16–17, 16t; income inequality, historical evolution of, 18–19, 22; minimum wage, 91; percentage of obligatory taxes, 101; profit share in, 49–55, 50t; social charges, 46–48; taxes receipts as percent of GDP, 44; unions in, 91–92; wage inequality, 8–11, 11t, 72–73 Freeman, Richard, 87–88 Friedman, Milton, 1, 3, 112 Generalized Social Contribution (CSG), in France, 34, 38 Geographic mobility, wage inequality and human capital, 96 Germany: employment, 24, 25; income inequality, 14; percentage of obligatory taxes, 101; profit share, 53; unions, 91–92; wage inequality, 10, 91, 99 Gini coefficient, 10 Globalization: market integration, 59–60; wage inequality, 73–74 Goolsbee, Austen, 107 Grameen Bank, 63 Grenelle Accords (1968), 49 Gross operating surplus (GOS), 42 Guaranteed basic income, 3, 23, 104, 112–113 Hamermesh, Daniel, 49 Health insurance: adverse selection and, 115; justifications for compulsory, 115–117; as percentage of social charges in 1966 France, 103 Herrnstein, Richard, 82, 87 Hidden underemployment, 25 Household size, income and, 12, 14, 22 Human capital: elasticity of supply of, 78–79, 82–83, 87, 107; measuring types of productivity and, 98; unequal distribution of, 58–60; wage inequality and, 88–89, 92–99 Human capital, structural causes of inequality, 78–79; affirmative action versus fiscal transfers, 86–88; discrimination in labor market and, 85–86; efficiency and, 79–81; inefficient social integration and, 83–84; role of family and education expenses, 81–83 Human capital theory, 66–68; globalization and wage inequality, 73–74; historical inequalities and, 68–69; rise of wage inequality since 1970, 70–71; skill-biased technological change and, 71–73, 76–77, 92; supply and demand and, 69–70 Incentives: basic income and, 113; credit markets and, 60, 62, 114; effects of redistribution on, 105–110; of households to save and invest, 35; human capital and investments, 78–88, 90, 93; of owners to accumulate capital and invest, 28–29 Income: distribution by deciles and centiles, 5–8, 6t; household size and, 12; inequality of, 12–16, 12t, 15t; inequality of, historical evolution, 17–25, 19f, 21t; left-right debate about inequality of, 1–3; types and distribution of, 5–8, 6t.

These figures represent monthly wages excluding bonuses net of social charges (and CSG/CRDS) for full-time, private-sector workers. Source: DADS (Annual declaration of social data), INSEE, 2002, p. 10. Other indicators are also used in order to capture the overall inequality of the distribution and not just the gap between the extreme deciles: for instance, the Gini coefficient or the Theil and Atkinson indices (Morrisson, 1996, pp. 81–96). Nevertheless, interdecile indicators (such as P90/P10, D10/D1, P80/P20, etc.) are by far the simplest and most intuitive. The P90/P10 indicator has the merit of being available in reliable numbers for many countries, hence it will be cited frequently in this chapter. For a more complete view of wage inequality, one would need to include figures for public-sector wages in addition to private-sector wages. In France, the 4.1 million full-time employees of the public sector earn slightly more on average than private-sector workers, and public-sector wages are significantly less widely dispersed: for example, the P90/P10 ratio for civil-service workers was 2.6 (INSEE, 1996d, p. 55).

See also Self-employment compensation Norway: historical evolution of inequality, 22; income inequality, 14; wage inequality, 10 OECD countries: evolution of shares of profits and wages, 49–53, 50t; historical evolution of inequality, 21; income inequality, 14–15, 15t; wage inequality, 10–11, 11t Panel Study of Income Dynamics (PSID), 83 Pareto efficiency, 2–3, 57, 79 Part-time work, income inequality and, 25 Pay-as-you-go (PAYGO) pension systems, 117–118 Payroll taxes. See Social charges Pension plans: private, 118; public, 115–119 Phelps, Edmund, 85 Poverty traps, human capital and, 108, 110, 113 P ratios: income inequality, 12–14, 12t, 15t, 16–17, 23–25, 76–77; inequality’s historical evolution, 20–23, 21t; minimum wage, 91; P defined, 7; sources of household income and, 6t; wage inequality, 8–11, 77 Price system: allocative role of, 30–33, 37–40, 100; elasticity of substitution and, 32–40; housing and educational outcomes, 84; role in capital-labor share of total income, 27–30, 32; social justice and, 106 Primary distribution, 28 Prison population, underemployment and, 24 Private sector jobs, unemployment and fiscal redistribution, 111–112 Profit share: constancy of, 41t, 45–46; historical and political time and, 49–53; in US and UK, 53–55 Progressive estate tax, 19, 64 Progressive income tax, 19, 48, 64, 102–103, 106 Public investment banks, as possible intervention in credit market, 62–63 Public-sector jobs: pensions and, 115–119; unemployment and fiscal redistribution, 111–112; wages, 10 Purchasing power, of workers: changes in twentieth century, 45, 50–51, 68–69, 91, 96, 111; inequality in time and space, 16–17, 16t; redistribution of, 120–121 Pure redistribution, 32, 55, 67; absence of redistribution between workers, 102–104; average and marginal rates of redistribution, 100–102, 102f; Earned Income Tax Credit, in US, 108–109; fiscal redistribution to reduce unemployment and, 109–112; fundamental purposes of, 105–106; high taxes and revenue, 106–108; negative income tax and basic income, 112–113; Pareto efficiency and, 2–3; U-shaped curve of marginal rates, 104–105, 109 Rawls, John, 2, 35, 106 Redistributive policy, left-right conflict about, 1–3.


pages: 261 words: 86,905

How to Speak Money: What the Money People Say--And What It Really Means by John Lanchester

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asset allocation, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, blood diamonds, Bretton Woods, BRICs, Capital in the Twenty-First Century by Thomas Piketty, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collective bargaining, commoditize, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Dava Sobel, David Graeber, disintermediation, double entry bookkeeping, en.wikipedia.org, estate planning, financial innovation, Flash crash, forward guidance, Gini coefficient, global reserve currency, high net worth, High speed trading, hindsight bias, income inequality, inflation targeting, interest rate swap, Isaac Newton, Jaron Lanier, joint-stock company, joint-stock limited liability company, Kodak vs Instagram, liquidity trap, London Interbank Offered Rate, London Whale, loss aversion, margin call, McJob, means of production, microcredit, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, negative equity, neoliberal agenda, New Urbanism, Nick Leeson, Nikolai Kondratiev, Nixon shock, Northern Rock, offshore financial centre, oil shock, open economy, paradox of thrift, Plutocrats, plutocrats, Ponzi scheme, purchasing power parity, pushing on a string, quantitative easing, random walk, rent-seeking, reserve currency, Richard Feynman, Richard Feynman, Right to Buy, road to serfdom, Ronald Reagan, Satoshi Nakamoto, security theater, shareholder value, Silicon Valley, six sigma, South Sea Bubble, sovereign wealth fund, Steve Jobs, survivorship bias, The Chicago School, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, trickle-down economics, Washington Consensus, wealth creators, working poor, yield curve

Canada Speaking purely for myself, quite a few places high on the left-hand list are places I have no desire to live, which probably reflects the fact that the per capita GDP figures are skewed towards small countries that either are rich in resources or are tax havens. Gini coefficient A numeric technique for measuring a society’s inequality. It’s used to measure income inequality in particular. A Gini coefficient of 0 would mean perfect equality, in which everyone had the same income; a Gini coefficient of 1 would be perfect inequality, in which one person had all the money and everybody else had nothing. Here are the top ten least-equal countries in the world, as measured by the CIA, with the most unequal at the top:39 1. Lesotho 2. South Africa 3. Botswana 4. Sierra Leone 5. Central African Republic 6.

They will oppose any regulation of banks that restricts profits, even if it helps those who cannot cover their mortgages or protects the public against predatory lending, deceptive advertising, or even a repetition of the financial crash. To worry about these consequences of extreme inequality has nothing to do with being envious of the rich and everything to do with the fear that rapidly growing top incomes are a threat to the wellbeing of everyone else.85 This issue just isn’t going to go away, and I would add that it is a problem not just for the Western world but for the emerging world too, perhaps especially for China, which had historically gone a long way towards abolishing inequality, at what must be admitted was a very high price, but has now taken a long stride towards prosperity, at the cost of greatly increasing inequality. The danger facing China comes from the fractures caused by that inequality. We already see rising tensions between this new urban workforce, the new Chinese middle class, and the rural poverty it’s leaving behind.

In a free-market system, the rich will always accumulate capital and income faster than the poor; it’s a law as basic as that of gravity. The promise of neoliberalism is that that doesn’t matter, as long as the poor are getting richer too. A rising tide lifts all boats, as the cliché has it. It lifts the rich boats quicker, but in the neoliberal scheme of things that’s not a problem. Inequality isn’t just the price you pay for rising prosperity; inequality is what makes rising prosperity possible. The increase in inequality therefore isn’t just some nasty accidental side effect of neoliberalism; it’s the motor driving the whole economic process. During the third of a century in which neoliberalism has been the dominant economic model, almost nobody has been willing to face this reality about the philosophical underpinnings of the system. Margaret Thatcher is almost the only politician to have spelled it out with total candor: “Nations depend for their health, economically, culturally and psychologically, upon the achievement of a comparatively small number of talented and determined people.” ¶ Her frankness did not set an example, probably with good reason.


pages: 364 words: 104,697

Were You Born on the Wrong Continent? by Thomas Geoghegan

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Albert Einstein, American Society of Civil Engineers: Report Card, banking crisis, Berlin Wall, Bob Geldof, collective bargaining, corporate governance, cross-subsidies, dark matter, David Brooks, declining real wages, deindustrialization, ending welfare as we know it, facts on the ground, Gini coefficient, haute cuisine, income inequality, John Maynard Keynes: Economic Possibilities for our Grandchildren, knowledge economy, knowledge worker, labour market flexibility, laissez-faire capitalism, low skilled workers, Martin Wolf, McJob, minimum wage unemployment, mittelstand, offshore financial centre, Paul Samuelson, payday loans, pensions crisis, Plutocrats, plutocrats, purchasing power parity, Ralph Waldo Emerson, Robert Gordon, Ronald Reagan: Tear down this wall, Saturday Night Live, Silicon Valley, The Wealth of Nations by Adam Smith, Thorstein Veblen, union organizing, Wolfgang Streeck, women in the workforce

One can look it up online: “Globalization and Income Inequality: A European Perspective.” Generally, from the late 1970s to the early 2000s, Harjes found that on the Continent—in contrast to the U.S. and the UK—“inequality rose modestly or even declined.” The Gini coefficient, which measures inequality, has actually dropped in many advanced European countries as globalization of production has increased. For example, in France, even in the past few years, inequality has not gone up; over the last twenty years, it’s even dropped—yes, dropped through the storm of globalization. Meanwhile, in the same twenty years, in the U.S. and the UK inequality has soared. In the UK, for example, which has almost as much “labor flexibility” as the U.S., the Gini coefficient has shot up 30 percent. And even in these countries, modestly well-to-do people like Barbara do not have high savings rates: when there is huge inequality, such people have to maintain their relative position by spending, not saving.

Army occupation and reading works councils German model of social democracy (jobs/employment) high-skill jobs and high-end precision goods manufacturing workforce percent of adults holding an associate degree percent of adults self-employed public-sector civil service jobs skilled-labor shortage subsidies for artists unemployment German model of social democracy (labor and industry) export sales “globalization” thesis high-skill jobs and high-end precision goods industry and social democracy labor costs labor markets market flexibility postwar economic recovery (the “German miracle”) public spending/consumer spending levels services and “virtuous growth” voices of the left on the labor crisis voices of the right on the labor crisis wage moderation and “wage costs” wage-setting by unions worker control German model of social democracy (unions and labor movement) decline of labor and organizing after the Krise foreign-born union membership and postwar U.S. Army strikes union resorts/ex-spas unionization rates in the manufacturing sector wage-setting and works councils youth membership The Germans (Craig) Gerschenkron, Alexander Ghilarducci, Teresa Gibbon, Edward Gibbons, James Gini coefficient Giscard d’Estaing, Valery Glass-Steagall Act globalization and German capitalism and labor market flexibility “Globalization and Income Inequality” (Harjes) “Glühwein Festival” (Hamburg) Goethe-Institute Goldman Sachs Gordon, Robert Gramm, Phil Grass, Günter Green Party and European social democracies German coalition government and Agenda 2010 German coalition government and wages/unemployment German coalition government and welfare German coalition government and works councils Germany green technology Greenspan, Alan Guardian (UK) gun ownership Guns, Germs, and Steel: The Fates of Human Societies (Diamond) Gutteres, António Habermas, Jürgen Halliburton Hamburg, Germany Harjes, Thomas health care spending Heine, Heinrich Heinz (retired German labor leader) Hemingway, Ernest Herodotus Hesbaugh, Ted Hitler, Adolf Hitler’s Willing Executioners (Goldhagen) Hobsbawm, Eric Holocaust hours worked and GDP leisure time and standard-of-living How to Lie with Statistics (Huff) Huff, Darrell human capital Humboldt University (Berlin) IBZ Guest House (Berlin) IG Metall (German union) and CDU’s 2009 victory over SDP foreign-born members Frankfurt May Day parade (2001) works councils youth membership “Incentive for Working Hard” (Conference Board, May 2001) income equality/inequality An Inconvenient Truth (film) International Labor Organization (ILO) International Monetary Fund Iraq war Jesuits and papal social democracy jobs/employment artists big business employees cross-subsidies European social democracies and German unemployment Germany high-skill jobs and high-end precision goods manufacturing workforce and percent of adults holding an associate degree public employees (public-sector civil service jobs) self-employment skilled-labor shortage small business employees types of jobs available unemployment rates for college graduates U.S.

And even skewed by all this U.S-type inequality, we understate what Europeans at the “middling” level are able to get for free, i.e., public goods like education, health care, cities like banks of violets. Even apart from the grotesque U.S. inequality, the net purchasing power disparity after we toss in the public goods is not so great. Then I look at the table on page 14 and I’m in despair. Aren’t the Europeans coming near us with one hand tied behind their backs? AVERAGE ANNUAL HOURS WORKED Source: EPI, OECD 2007 data. 2000 2006 U.S. 1,841 1,804 Germany 1,473 1,436 Denmark 1,554 1,577 France 1,591 1,564 Netherlands 1,372 1,391 Switzerland 1,685 — Remember, you’re looking not at a median but an “average.” I stress that because, in the U.S., there is also huge inequality in hours. The people who survive in the U.S. are putting in far, far more than the “average”—lawyers like me, kids working three shifts at McDonald’s.


pages: 372 words: 107,587

The End of Growth: Adapting to Our New Economic Reality by Richard Heinberg

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3D printing, agricultural Revolution, back-to-the-land, banking crisis, banks create money, Bretton Woods, carbon footprint, Carmen Reinhart, clean water, cloud computing, collateralized debt obligation, computerized trading, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, David Graeber, David Ricardo: comparative advantage, dematerialisation, demographic dividend, Deng Xiaoping, Elliott wave, en.wikipedia.org, energy transition, falling living standards, financial deregulation, financial innovation, Fractional reserve banking, full employment, Gini coefficient, global village, happiness index / gross national happiness, I think there is a world market for maybe five computers, income inequality, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Kenneth Rogoff, late fees, liberal capitalism, mega-rich, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, naked short selling, Naomi Klein, Negawatt, new economy, Nixon shock, offshore financial centre, oil shale / tar sands, oil shock, peak oil, Ponzi scheme, post-oil, price stability, private military company, quantitative easing, reserve currency, ride hailing / ride sharing, Ronald Reagan, short selling, special drawing rights, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, trade liberalization, tulip mania, working poor, zero-sum game

In the world currently, Gini coefficients for income within nations range from approximately 0.23 (Sweden, with the lowest level of economic inequality) to 0.70 (Namibia, with the highest). The US weighs in at 0.45 — between Cote d’Ivoire at 0.446 and Uruguay at 0.452 (some agencies arbitrarily shift the decimal point two places to the right for all scores, giving the US a score of 45 instead of 0.45). Inequality among nations can also be tracked with the Gini coefficient; it turns out that, in recent decades, the richest countries have pulled ahead while the poorest countries fell further behind, with a few in the middle (including China and India) playing a rapid game of catch-up. However, “catching up” has meant increasing wealth inequality within those “developing” nations. Current research shows that global income inequality peaked in the 1970s when there was little overlap between “rich” and “poor” countries.

The Post-Growth Struggle Between Rich and Poor If current levels of wealth inequality among the world’s nations cannot be maintained in a non-growing, energy-starved economy, that doesn’t necessarily mean that we are headed toward a future of perfect equity. Rather, the end of growth is likely to lead, in many instances, to a sharply heightened struggle between rich and poor for control of the world’s vanishing wealth. As GDP per capita has increased during the past two centuries, so has inequality in the distribution of wealth, both among nations and often within nations as well. These trends will not be abandoned without a fight. The most widely used metric of economic inequality is the Gini coefficient, developed by Italian statistician Corrado Gini in 1912. A value of 0 reflects total equality, while a value of 1 shows maximal inequality. In the world currently, Gini coefficients for income within nations range from approximately 0.23 (Sweden, with the lowest level of economic inequality) to 0.70 (Namibia, with the highest).

The bottom half of the world adult population owns barely one percent of global wealth.50 The reasons for change in wealth inequality within and among nations are varied: tax policies, capital investment, culture, education, natural resources, trade, and history all play roles. Moreover, there is controversy between those who say inequality within nations is good because it stokes more growth (governments should aim for equality of opportunity, not equality in incomes, according to free-market advocates), and those who say too much income inequality is inherently unfair and tends to become structural and to foreclose economic opportunity for the majority of the world’s people. The end of growth will no doubt alter the prospects of both rich and poor, in both absolute and relative terms. Those with privilege will no doubt struggle to maintain it, while the poor, driven to desperation by generally worsening economic conditions, may in increasing numbers of instances organize or even revolt in order to increase their share of a shrinking pie.

Crisis and Dollarization in Ecuador: Stability, Growth, and Social Equity by Paul Ely Beckerman, Andrés Solimano

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banking crisis, banks create money, barriers to entry, capital controls, Carmen Reinhart, carried interest, central bank independence, centre right, clean water, currency peg, declining real wages, disintermediation, financial intermediation, fixed income, floating exchange rates, Gini coefficient, income inequality, income per capita, labor-force participation, land reform, London Interbank Offered Rate, Mexican peso crisis / tequila crisis, microcredit, money: store of value / unit of account / medium of exchange, offshore financial centre, old-boy network, open economy, pension reform, price stability, rent-seeking, school vouchers, seigniorage, trade liberalization, women in the workforce

The ensuing currency and full-blown banking crisis led to an economic collapse, with GDP per capita falling by more than 9 percent in 1999. Poverty and inequality increased substantially during the crisis. The poverty headcount Suhas Parandekar is an Education Economist at the World Bank. Rob Vos is Deputy Rector and Professor of Finance and Development at the Institute of Social Studies, The Hague, and Professor of Economics at the Free University of Amsterdam. A consultant at the World Bank, Donald Winkler is affiliated with Inter-American Dialogue. 127 128 CRISIS AND DOLLARIZATION IN ECUADOR increased by 12 percentage points between 1995 and 1998 and by another 9 percentage points during 1999. The Gini coefficient of income inequality increased from 0.52 to 0.54 during the same period.1 The bottom quintile’s share of total consumption decreased from 5.3 percent in 1995 to 5.0 percent in 1999.2 Using a consumption-based poverty measure for 1999, the extreme poor—those who fall below the food poverty line— accounted for 20 percent of the total population, or 2.2 million people, and the poor accounted for 55 percent of the population, or 5.9 million people.

Although Latin America as a whole has extremely high income inequality compared with other regions of the world, especially Europe and East Asia, Ecuador’s record is unenviable even within Latin America. Moreover, unlike some other Latin American countries, which combine high inequality with relatively high per-capita income, Ecuador’s inequality is accompanied by low per-capita income. As noted above, Ecuador’s Gini coefficient has worsened in recent years. Table 4.1 indicates that the headcount index of extreme poverty increased from 12 percent in 1995 to 17 percent in 1998, peaking at 21 per- ECUADOR: CRISIS, POVERTY, AND SOCIAL PROTECTION 131 cent in 1999. A household was classified as being extremely poor if the total consumption expenditure of the household was lower than the food poverty line. Although the headcount index is not sensitive to changes in the distribution of expenditures below the food poverty line, measures of the poverty gap and poverty severity, which overcome this shortcoming, show the same trends.3 Table 4.1 shows that the poverty gap increased between 1995 and 1999, as did the severity of poverty.

Unemployment has fallen heavily on the poorest groups: Among the poorest 20 percent of the population, the unemployment rate in November 1998 was 21 percent, which was almost double the then national average. In real terms, the income of a typical worker earning the minimum wage in the formal sector declined 10 percent from March 1998 to March 1999. Inequality also increased in a country that already had one of the highest levels of inequality in Latin America. The Gini coefficient increased more than 4 percentage points from 0.42 in 1994–95 to 0.47 in 1998 (Coraggio, Larrea, and Sánchez Maria Correia is a Lead Specialist on gender issues at the World Bank. The author gratefully acknowledges Wendy Cunningham and Maria Elena Ruiz Abril, both of the World Bank, for providing valuable unputs and feedback. 177 178 CRISIS AND DOLLARIZATION IN ECUADOR 2000).


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The Vanishing Neighbor: The Transformation of American Community by Marc J. Dunkelman

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Affordable Care Act / Obamacare, Albert Einstein, assortative mating, Berlin Wall, big-box store, blue-collar work, Bretton Woods, Broken windows theory, call centre, clean water, cuban missile crisis, dark matter, David Brooks, delayed gratification, double helix, Downton Abbey, Edward Glaeser, Fall of the Berlin Wall, Filter Bubble, Francis Fukuyama: the end of history, George Santayana, Gini coefficient, glass ceiling, global supply chain, global village, helicopter parent, if you build it, they will come, impulse control, income inequality, invention of movable type, Jane Jacobs, John Markoff, Khyber Pass, Louis Pasteur, Marshall McLuhan, Martin Wolf, McMansion, Nate Silver, Nicholas Carr, obamacare, Occupy movement, Peter Thiel, post-industrial society, Richard Florida, rolodex, Saturday Night Live, Silicon Valley, Skype, Steve Jobs, telemarketer, The Chicago School, The Death and Life of Great American Cities, the medium is the message, Thomas L Friedman, Tyler Cowen: Great Stagnation, urban decay, urban planning, Walter Mischel, War on Poverty, women in the workforce, World Values Survey, zero-sum game

Between 1979 and 2007, the disposable income of the top 1 percent rose three times over, while the figure for the bottom fifth of income earners rose only 40 percent.35 Just as jaw-dropping: the top 1 percent of Americans saw their share of national income grow from 10 to 20 percent between 1980 and 2012, while the share going to the top .01 percent of American families grew from 1 to 5 percent.36 Nobel-laureate economist Joseph Stiglitz drove the point home recently when he wrote that beginning roughly during the Reagan era, “those with low wages (in the bottom 90 percent) have seen a growth of only around 15 percent in their wages, while those at the top 1 percent have seen an increase of almost 150 percent and the top .01 percent of more than 300 percent.”37 And this has wildly skewed the figures designed to measure economic inequality: the so-called Gini coefficient rose by almost a third between 1980 and 2012, after having reached a postwar low in the mid-1970s.38 The trend hasn’t been uniform across the decades: it attenuated by several measures during the Clinton years. But the effect over the long term, as many have noted, has been to hollow out America’s middle class. Between 1971 and 2012, those making between two-thirds and double the national median income shrank from 61 to 51 percent of the adult population.

As Stiglitz recently argued, Americans today are more likely to remain at the status they were born into—whether rich, poor, or in between—than the citizens of every other advanced economy.42 And that argues for the sorts of public empowerment—massive investments in public education, for example—that are staples of the progressive agenda. Fortunately, the march of economic inequality isn’t the whole story, and American mobility isn’t defined exclusively by our ability to jump from lower to middle to upper class and back. In fact, changing the economics of American mobility has been accompanied by an even more momentous shift: the removal of many of the limitations that once precluded Americans from going where they wanted to go, being who they wanted to be, and doing what they wanted to do. Indeed, much as it may be harder today to jump from one class to another, it’s gotten significantly easier to make all sorts of other leaps. So whatever the dire state of America’s Gini coefficient, the nation’s social mobility, properly understood, has grown in ways most Americans have come to treasure.43 Nothing speaks more powerfully to the expansion of American mobility than the civil rights movement.

., 15, 50, 56, 187, 190 Chinatown Bus effect and, 47 gerrymandering and, xvi, 182–87, 189 of 2012, 7, 37–38, 184–85 Elks Lodges, 44, 116 e-mail, xi, 8, 109–10, 125, 145 End of History, The (Fukuyama), 230–31 England, xii, 81, 82, 157, 158, 166–67, 179, 194 entrepreneurialism, 82, 164 ethnicity, 32, 79, 147, 148, 231, 237 ethnic tensions, 4, 39 Europe, 81, 226, 230, 232 evangelism, 42, 71 evolution, 90–91 expectations, 30, 60, 70–71, 82 Facebook, 37–38, 45, 48, 108, 114, 124–25, 140, 145, 148–49, 152, 190, 194, 219 faith, loss of, xv, xvii, xviii, 14, 181–82, 193, 195 family, 70, 119, 125, 129, 139, 194 affirmation and, 104–7 extended (traditional), 12, 15, 16, 26–27, 68, 97, 106 health care and, 201, 210 income inequality and, 21–22 nuclear, 16, 26, 32, 84, 145 in Saturn model, 95, 96 single-parent, 26, 30–31, 43, 105, 216 Farmer, Paul, 64 fathers, 12, 106, 131 of author, 132–33, 134, 240 fax machines, 16, 35, 74 fear, 71, 84, 119, 128, 157, 233, 235 of hitchhiking, 133, 134, 135 homosexuality and, 42 quality of life and, 50–52, 55–57, 60 Federal Express, 147–48 Ferguson, Niall, 229 Fiddler on the Roof (musical), 69–70 filibuster, xvi, 182, 185, 188, 191, 248n Filter Bubble, The (Pariser), 37 Fiorina, Morris, 139 First Wave society, 16, 20, 31–32, 233 Fischer, Claude, 87, 88, 105, 106, 128–29, 237–38 Fishkin, James, 192–93 Florida, Richard, 83, 175 food, 51, 58, 62, 79, 136–37, 202 brain and, 90–91 see also agriculture Ford, Gerald, 47 Fortune, 4–5, 14 Fowler, James, 96 Fox News, 184, 187–88 France, 80 Franklin, Rosalind, 161 Freakonomics (Levitt and Dubner), 7, 133–34 freedom, 25, 26, 43, 49, 52, 60, 67, 82, 102, 161, 207 French and Indian War, 157 Friedman, Thomas, xiv, 17–21, 24, 141–42, 151–52, 240 friends, 8, 12, 24, 25, 91, 95, 99–100, 101, 119, 120, 122, 124, 152, 194 affirmation from, 102–3, 104, 107, 110, 111 agreement of, 148–49 health care and, 201, 210 Fukuyama, Francis, 230–31 Galbraith, John Kenneth, 52 Gans, Herbert, 144–45 Gates, Bill, 10 gay marriage, 42, 50, 69 GDP (gross domestic product), 17, 53, 99, 180, 198, 227, 230 gemeinschaft, 86 General Social Survey, 105, 119–20, 260n–61n generational succession, 135 genetics, 160–62 genius, 159, 160, 162 Genovese, Kitty, 84–85 Georgetown University, 118 gerrymandering, xvi, 182–87, 189 ghettos, 128 Gingrich, Newt, 14, 15 Gini coefficient, 22, 23 Girls (TV show), 30 Gladwell, Malcolm, 6, 91–92 globalization, 17–18, 20, 50, 138, 141, 152, 221 global village, 16, 142–43 Google, 37, 194 government, U.S., xii–xviii, 52, 67, 200, 234 dysfunction of, 181–90 French government compared with, 80 health care and, 201–5 public frustration with, xiv–xvii, 181–83, 195 urban decay and, 127 Graduate, The (movie), 4, 28, 30, 248n Granovetter, Mark, 168–69, 266n Great Depression, 60, 68, 85, 202–6, 210, 226 Greatest Generation, 51, 70 Great Migration, 40–41, 43, 137 Great Recession, xv, 54, 55, 62, 106 Great Society, 210, 255n Gresens, Mr., 220–22, 225 grit, 5, 6, 216–25 Grove, Andy, 10 Guest, Avery, 118 Gutenberg, Johann, 162 “habits of the heart,” 81, 89, 115, 138, 258n Habits of the Heart (Bellah), 65–66, 141, 258n Hampton, Keith, 118–19 Harlem Children’s Zone (HCZ), 222, 224 health, health care, 101, 197–211 costs of, 198–200, 204–5, 206, 209–10 public, 197, 199, 204 quality of life and, 31, 51, 52, 57–60, 204 Hearst, William Randolph, 188 heart attack, 58, 200, 207 Heckman, James, 223 helicopter parent, 106 Henry, Peter Blair, 179–81 history, 51, 59, 67, 68, 230–34 affirmation and, 109, 110 of American community, 79–89 Dunbar’s number and, 94 Tofflers’ view of, 15–16 hitchhiking, 132–35 Hoffman, Dustin, 28 homogeneity, 46–47, 135, 147–48, 189, 191 homophobia, 42, 43, 51 homosexuality, 42–43, 87, 88 hospitals, 197, 199–204, 206–7 House of Representatives, U.S., xvi, 182, 184–85, 186 Hout, Mike, 237–38 Hughes, Charles Evans, 187 Hunter, James Davison, 69 hunter-gatherers, 16, 92, 142, 144–45 Hussein, Saddam, 67 Hutterites, 94 identity, 20, 42, 74, 130, 146 immigrants, 79, 82–83, 88, 232 income, xv, 21, 147, 180, 216, 227 discretionary, 55 inequality and, 21–24, 31 national, 21–22, 54 online communities and, 250n working women and, 27, 28 independence, 28–29, 30, 52, 57, 60, 106, 138, 151 of elderly, 197, 203, 207, 208–9 individualism, 65–66, 73, 74, 102 networked, 111 industrial paradigm, 14–15, 26, 82, 84–87, 170–71, 233 Industrial Revolution, xiii, 4, 16, 85, 86, 127, 138, 166, 201 inequality, economic, 21–24, 26, 31 information, 6–8, 18, 21, 26, 138, 260n brought together in a new way, 159–66, 209 Chinatown bus effect and, 35–38 information technology, 13, 16, 125, 141–43, 187, 209 affirmation and, 103–4, 108, 109–10 online communities and, 114–15 infrastructure, xiv, xv, xvi, 11, 25, 45, 194, 236 decay of, 229, 230 health, 200–201, 203–4, 206, 210 Inglehart, Ronald, 67–69, 73 inner directedness, 5–7 inner-ring relationships, see intimate relationships innovation, xiii, xvii, xviii, 158–75, 209 intellectual cross-fertilization, 158–68 interdependence, 17, 85–86 intermarriage: educational, 43–44 racial, 68 Internet, 10, 18, 36, 37, 121, 125, 146, 250n interracial marriage, 68 intimate relationships (inner-ring relationships), 92, 93, 96, 119–20, 137, 138–39, 145, 238 affirmation and, 103–7, 110, 112, 115 Chinatown Bus effect and, 42–46 health care and, 201, 204, 210 see also marriage iPhones, 160, 231 Iraq, 67 isolation: intellectual, 176 social, 73, 87, 113, 115, 118–19, 122, 127, 149, 207 Issacson, Walter, 164 Italy, 17, 163 It Gets Better Project, 43 Jackson, Kenneth, 40 Jacobs, Jane, 85–88, 127, 166–68, 170, 176 Jamaica, 179–81, 191 James, LeBron, 8–9 Japan, 226, 233 Jews, Orthodox, 98–99 jobs, 18–20, 23, 24, 27, 29, 30, 131, 139, 170–71, 235–36, 260n–61n affirmation and, 104–5, 107 assembly line, 53, 85 exporting of, 197–98 service, 18–19, 53, 132, 138, 236 Jobs, Steve, 10, 64, 160, 164–65 Johansson, Frans, 163, 168, 172 Johnson, Lyndon B., 127, 187, 210 Johnson, Steven, 159 Kahneman, Daniel, 13 Kelling, George, 150 Kelly, Mervin, 164 Kennedy, Robert, 206 Kenner, Edward, 158, 159 Kentucky, 147–48 Kerry, John, 47 Keynes, John Maynard, 53 Khrushchev, Nikita, 56 King, Martin Luther, Jr., 24, 46, 108–9, 128, 238 King, Stephen, 123 Kiwanis Club, 44, 45, 116 “Knowledge Is Power Program” (KIPP), 222, 223, 224 Koestler, Arthur, 158–60, 162, 166 Krebs cycle, 220–22 Ku Klux Klan, 111, 146 labor, labor unions, 14, 19, 20, 23, 53, 180, 181 leadership, xv, xvii, 23, 101, 108–9, 182, 186, 191 Leave It to Beaver (TV show), 34–35, 51 legislative districts, manipulation of (gerrymandering), xvi, 182–86, 189 Lehigh Valley, 170, 171 leisure, 53, 104–5, 139 Levin, David, 223 Levitt, Steven, 133–34 Lexus and the Olive Tree, The (Friedman), 141, 151–52 LGBT rights, 24, 42–43 libraries, 18, 36, 37 lifespan, longevity, 17, 31, 57–60, 62, 199, 204–5 Lincoln, Abraham, 228 Ling, Richard, 122–23 Lipset, Seymour Martin, 231 LISTSERVs, 114, 151 Little House on the Prairie (TV show), xii, 247n lobbyists, 183, 187, 229 Locke, Richard, 165, 172 Lonely Crowd, The (Riesman), 5–6, 7, 65, 141 Loose Connections (Wuthnow), 239 Lorain, Ohio, 79–80, 135 “lord of the manor” community, xii–xiii, 81 Lowery, Rev.


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Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup by Andrew Zimbalist

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airline deregulation, carbon footprint, East Village, en.wikipedia.org, full employment, Gini coefficient, income inequality, New Urbanism, principal–agent problem, race to the bottom, selection bias, urban planning, young professional

They also present an aesthetic issue, for they are ultramodern facilities surrounded by a sea of parking lots anomalously situated in open areas or in communities with older, more modest construction. These massive sports facility and infrastructure expenditures are taking place against a backdrop of sharp income inequality, a relatively low level of economic development, poor social services, increasing prices, and rising expectations. At $11,300, Brazil's per capita income is approximately one-fifth that of the United States. Measured by the Gini coefficient, Brazil's income distribution is roughly 40 percent more unequal than in the United States.28 Approximately 20 percent of Brazil's 200 million-plus people live in poverty. The Brazilian GDP, which grew at close to 6 percent per year during 2000–10, slowed to a 2 percent rate during 2011–13.

For historical background on the favelas and the recent eviction process, see Theresa Williamson and Mauricio Hora, “In the Name of the Future, Rio is Destroying Its Past,” New York Times, August 12, 2012. 26. Batista is under investigation by the federal police for alleged financial wrongdoings. His $60 billion EBX empire, including interests in oil, mining, and logistics, crumbled in 2013. See SportsPro Magazine, June 2014, p. 31. 27. Panja, “Brazil's Flamengo Won't Make ‘Stupid’ Deal.” 28. The Gini coefficient measures actual inequality relative to perfect equality. It ranges from 0 to 1, with lower numbers representing more equality. 29. Aragão and Maennig, “Mega Sporting Events,” p. 18. 30. More precisely, the housing deficit was calculated by the João Pinheiro Foundation at 522,607 units in 2008. See Aragão and Maennig, “Mega Sporting Events,” p. 12. On the callousness of the eviction process and its connection to private profit, see Williamson and Hora, “In the Name of the Future.” 31.

In light of the recent trend for developing countries, in particular the BRICS (Brazil, Russia, India, China, and South Africa), to host the Olympics and World Cup—countries where resources are scarcer, the fiscal balance is more fragile, hosting costs are far greater, and the income distribution is more lopsided—the potential for explosive protests seems imminent. While hosting a sport mega-event is hardly a seminal force behind a country's inequality, there is little question that it contributes to and reinforces existing patterns of inequality. That the Olympics and World Cup are so heavily publicized and so visible only increases the likelihood that wasteful spending will catch the attention and scorn of the population. With Olympics bidding, the typical pattern is for a country's National Olympic Committee (NOC) to call for bids from prospective host cities eleven years before the games.


pages: 577 words: 149,554

The Problem of Political Authority: An Examination of the Right to Coerce and the Duty to Obey by Michael Huemer

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Cass Sunstein, Chelsea Manning, cognitive dissonance, cuban missile crisis, Daniel Kahneman / Amos Tversky, en.wikipedia.org, Eratosthenes, experimental subject, framing effect, Gini coefficient, illegal immigration, impulse control, Isaac Newton, Julian Assange, laissez-faire capitalism, Machinery of Freedom by David Friedman, Milgram experiment, moral hazard, Phillip Zimbardo, profit maximization, profit motive, Ralph Nader, RAND corporation, rent-seeking, Ronald Coase, The Wealth of Nations by Adam Smith, unbiased observer, uranium enrichment, WikiLeaks

For an excellent introduction to microeconomics, see David Friedman’s (1990) textbook, available at http://www.daviddfriedman.com/Academic/Price_Theory/PThy_ToC.html. 17 See Huemer ‘Why People Are Irrational about Politics’ (n.d.) and Caplan 2007b. 18 It is also unclear how equal communist societies in the twentieth century actually were. Vinokur and Ofer (1987, 193) estimate the Gini coefficient for the Soviet Union in 1973 at 0.31. For the United States, the Gini coefficient was approximately 0.38. The Gini coefficient is a standard measure of inequality, where 0 represents perfect equality, and 1 represents the most extreme possible inequality (that is, one person’s receiving all the income). The Jamestown experience discussed in the text represents a much purer communism. 19 The account in the text is based on Schmidtz 2008, Contoski 2010, Wadhwa 2005, and Smith 1986. Quotations from Smith are from the Generall Historie of Virginia, New England, and the Summer Iles, book 4, originally published by Captain John Smith in 1624.

Filburn, 224 court packing, 225 courtrooms, 118, 119–20 courts costs of using, 282 delays, 282 privatization of, 325–6 and wrongful convictions, 270, 276, 278–80 see also arbitration Cowen, Tyler, 258–9 credit reporting, 270–1 crime attitudes of victims toward, 275 exonerations, 278–80 government protection from, 81–2 uncompensable, 273–4 criminal justice system, prospects for reform, 284–6 criminal record reporting, 270–1, 273–4 criminals character of, 277 protected by government, 240 unprofitability of protecting, 239 Cthulhu, 92 culture, 115 death penalty, 324 defense, societal, 82, 144 see also military; war deliberative democracy defined, 60–1 as fantasy, 61–4 irrelevance of, 64–5 Delli Carpini, Michael, 211 DeLue, Steven, 101n2 democracy advantages of, 79, 185, 228–9 and legitimacy, 77–9 problems of, 208–13, 219–21 not supported by obedience, 70–1 spread of, 321–2, 330 democratic law, 65 democratic peace, 303–5 deterrence, 306–10 developing world, as target for social programs, 152–4 diffidence, 198, 201 diminishing marginal utility, 150 disagreement, sources of, 49–50 diseconomies of scale, 255–6 disobedience and acceptance of punishment, 164–6 justified, 163–4 as threat to social order, 83–4, 91, 173–4 dissenters, 91–3 distance, emotional, 122–3 distributive justice, see social welfare programs doing/allowing distinction, 142–3 drug laws, 89, 139–40, 172, 173–4, 330 effect on organized crime, 248 Duane, James, 168n36 Dugard, Jaycee Lee, 124 duty to do good, 83–4 Dworkin, Ronald, 37n2 economies of scale, 254–5 Edmundson, William, 9n6, 128n48 egalitarianism, 148–9, 192–3, 244 egoism, ethical, 176 egoism, psychological, see selfishness Egypt, 293–4 elections influences on, 218, 242–3 probability of tie, 210 see also democracy; voting Ellsberg, Daniel, 216 emigration, 252 eminent domain, 29 emotional distance, 122–3 equal advancement of interests, 67–70 equality and argument for authority, 65–7 incompatible with coercion, 75–7 interpretation of, 71–3 of judgment, 74–5 of power, 202 Eratosthenes, 103n6 Estonia, 293, 330 ethics, 14–15 knowledge of, 170–1, 172–3 necessary conditions for reliability, 55–7 principles independent of government, 84 procedural versus substantive constraints, 54–5 progress in, 332 sufficient conditions for reliability, 52–5 examples Abel, 200–1, 205, 206 Alastair, 55 Amnesty International, 78–9 Archer Midland, 142 bar tab, 59, 64–5, 75–7 board meeting, 22, 25–6, 26–7 cabin in the woods, 160 car sale, 51 car theft, 94, 95 charitable tax-evader, 93 Charity Case, 69–70 charity mugging, 154–9 child-beating chauffeur, 161–2 child retrieving cat, 187–9 cigarette prohibition, 139–40 class lottery, 23 cold child, 152 diamond, 51 disrespecting colleagues, 78 dog hit by car, 183–4 drowning child, 83, 84–5, 149, 154–9 gardener, 175–6 Gumby and Pokey, 98–9 examples – continued homophobic gang, 166, 169 incompetent bystander, 149–50 landmines on lawn, 316 lifeboat, 87–8, 90–1, 92, 94–5, 97, 98 Lindsey Lohan, 217 lost keys, 54 man on ship, 28 mom against drunk driving, 184 overworked philanthropist, 157 painter, 42 party, 26 private party hostile to foreign government, 301 private security failure, 219 prostitution, 138–9 protection cartel, 259 reasonable employment offer, 44, 51 restaurant, 22–3, 26, 27 Sally’s widgets, 257–8, 268 Sam’s gang, 163–4 self-flagellation, 90–1 shipwreck, 44–5 Sneaku ad agency, 93–4 soldier/unjust war, 171 starving Marvin, 142–3 stealing from company, 170 suicide, 140 Superior/Inferior election, 217–9 Tannahelp/Murbard, 250–2 Target return, 269 Tax Case, 69–70 traffic violation, 9 unconscious patient, 37–8 vigilante, 3–4, 7–8, 144 exonerations, 278–80 extortion, 249–53 extremism, 337 fairness, 51–2 and argument for authority, 171 and argument for political obligation, 86–93 conditions for obligation based on, 87–8 farm bill, 212–13, 214–15 fixed costs, 255 food crisis, 213 force, see coercion foreign policy, 209, 312–13 foreigners, 209, 237 Freud, Anna, 126n45 Friedman, David, 192n16, 200n6, 250n25, 251n26 Friedman, Milton, 191n14 Gandhi, Mohandas K., 292 Gaus, Gerald, 42n12 gay marriage, 96, 208 generality, 12 genocide, 207 gerrymandering, 72–3 Gini coefficient, 193n18 gladiators, 323 glory, 198 Goodin, Robert, 154n22 Gorbachev, Mikhail, 293 government benefits of, 18, 81–3 differentiated from anarchy, 232–3 functions of, 4, 20, 45, 197 has incentives to fail, 220, 285 lack of competition, 262 private, 261n44 as threat to human species, 318–19 government leaders, motives, 237 Grenada, 308–9 Gross, Samuel, 278–9 Grossman, Dave, 235 guerilla warfare, 289–91 gulags, 132 Habermas, Jürgen, 61, 64 Hamas, 314 Hamilton, Alexander, 221n39 Harsanyi, John, 46n15, 51n28, 56n35 Hearst, Patricia, 123–4 Hitler, Adolf, 108–10, 297, 300–1 Hobbes, Thomas, 20n1, 198–200 Hoffman, Elizabeth, 190n9 homeowners associations, 261–2 Hong Kong, 330 Honoré, Tony, 101n1 horses, 277 Huckabee, Mike, 216 Huemer, Michael, 50n26 human nature, 187–94, 241, 242 humanity, history of, 321–2 Hume, David, 21–2, 28, 102n3, 102n5 hypothetical consent, 36 conditions for validity of, 37–9 invalidity of, 38–9, 43–5, 51–7, 64 and reasonableness, 39–40 unattainability of, 40–3, 48–50, 64 hypothetical examples, see examples idealization, 191–2 ideas, as agents of social change, 331–4 identification with the aggressor, 126, 128 identification with government, 128n47 ideology, 191–2 ignorance, 189 illusions, 135–6 immigration, 96, 142–3, 209 imprisonment, 283–4 Indian independence movement, 292 indigenous people, 91 individualism, 83 insurance for arsonists, 239 intergovernmental disputes, 299–302 interstate commerce, 223, 224–5 investment, affected by wealth distribution, 151 Iran, 317 Iran-Iraq War, 297, 298, 300, 302 Iraq-U.S.

Even if inequality in the distribution of crime is an independent injustice, this does not obviously favor government over anarchy, since large inequalities in the distribution of crime occur in all state-based societies as well, where the wealthy are much better protected than the poor. To take a contemporary example, Americans with incomes below $7500 per year are three and a half times more likely to suffer personal crimes than those with incomes over $75,000 (see Figure 10.1), despite that the wealthy might initially seem a more attractive target for most crimes.19 Though this is not the only possible explanation, it is plausible to hold that this inequality is at least partly due to inadequate protection offered by the state to the poor. Whether an anarchist system would have more or less inequality in the distribution of crime remains a matter for speculation. 10.7 The quality of protection How well would private protection agencies protect their clients, in comparison with police under the status quo?


pages: 262 words: 66,800

Progress: Ten Reasons to Look Forward to the Future by Johan Norberg

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agricultural Revolution, anti-communist, availability heuristic, Bartolomé de las Casas, Berlin Wall, British Empire, business climate, clean water, continuation of politics by other means, Daniel Kahneman / Amos Tversky, demographic transition, desegregation, Donald Trump, Flynn Effect, germ theory of disease, Gini coefficient, Gunnar Myrdal, Haber-Bosch Process, Hans Island, Hans Rosling, Ignaz Semmelweis: hand washing, income inequality, income per capita, indoor plumbing, Isaac Newton, Jane Jacobs, John Snow's cholera map, Kibera, Louis Pasteur, Mahatma Gandhi, meta analysis, meta-analysis, Mikhail Gorbachev, more computing power than Apollo, moveable type in China, Naomi Klein, open economy, place-making, Rosa Parks, sexual politics, special economic zone, Steven Pinker, telerobotics, The Wealth of Nations by Adam Smith, transatlantic slave trade, very high income, working poor, Xiaogang Anhui farmers, zero-sum game

One result of the rapid growth in the developing world is a historically unique reduction in global inequality. Since 1820, when the Western world began to grow, the gaps between countries expanded. But since poor countries now grow faster than rich, we see convergence for the first time in modern economic history. A study from the Peterson Institute tries to measure inequality between all the world’s citizens, by looking at inequality both between countries and within countries. Their conclusion is that global income inequality started to decline significantly at the turn of the century. According to their estimates, the Gini coefficient, a measure where 0 means everyone has the same wealth and 1 means one person has all the wealth, fell from 0.69 in 2003 to 0.65 in 2013. It is still extremely unequal, on a par with domestic inequality in South Africa, perhaps the most unequal country on the planet.

Index abolitionism 146–7 abortion 176–7 acid rain 111 adultery 171–2, 176 Afghanistan 83, 101, 102, 136, 156 Africa 25, 52, 154 and child labour 193, 195 and education 133–4 and HIV/AIDS 59, 60 and homosexuality 187 and malnutrition 21, 23–4 and poverty 79–80, 81 and slavery 140, 142, 143–4, 145 and water 38–40 and women 179 African Americans 162, 163, 167–9 agriculture 13, 14–16, 17–19, 20, 21, 89 and children 190–1 and China 27–9 and land use 22–3, 112 and water 38 Albert, Prince Consort 32 alcohol 31 algae 15 Algerian War of Independence 94 Amazon rainforest 112 American Civil Liberties Union (ACLU) 182–3, 185 American Revolution 149 ammonia 14, 15 An Lushan Revolt 95 Ancient Greece 31–2, 44, 84, 140–1, 183 Angell, Norman 103 Angola 21, 83 anti-Semitism 162 antibiotics 2, 50 apartheid 153 Arab Spring 155, 156 Argentina 133 artificial fertilizers 14–15, 18, 22–3, 108 Asal, Victor 170 Asia 67–70, 133, 187, 195 Auld, Hugh 137, 138 Australia 114 Ausubel, Jesse 112 authoritarianism 156 Bacon, Francis 217 bad news 207–12 Bailey, Ronald 205 Bales, Kevin 148–9 Bangladesh 37, 81, 117 Barbary States 143–4 Basu, Kaushik 135 bathing 34, 47 Beccaria, Cesare 93 Bentham, Jeremy 172, 184 Berg, Lasse 68–9, 129, 130, 202–3, 214–15 Berlin Wall 152 Bible, the 84–5, 86, 140, 183 bigotry 188 bio-fuels 125 birth weight 11 Black Death 42 Blackstone, William 184 bloodletting 44, 47 Boko Haram 148 Bolling, Anders 211 Borlaug, Norman 17–19, 23–4 Bosch, Carl 14 Boschwitz, Rudy 23 Bosnia 102 Botswana 27 Brandt, Willy 151 Braudel, Fernand 9, 10, 63 Brazil 153 Britain, see Great Britain Buggery Act (1533) 184 Bure, Anders 132 bureaucracy 216 Burger, Oskar 45 Bush, George W. 187 Caesar, Julius 141 calories 12, 16, 19–20 Cambodia 38 Cameroon 21 Canada 105 cancer 58, 115 cannibalism 8, 10 capital punishment 93–4, 185, 197–8 capitalism 66–7 carbon dioxide 119, 120, 123–4, 127 cardiovascular disease 58 Carter, Jimmy 24 caste system 72–3 Ceauşescu, Nicolae 153 censorship 157 Chad 83 Charlemagne 216 Charta 77: 151 chemical warfare 15 childbirth 4, 48, 49, 53–4, 197 children 11, 12 and education 133–4 and labour 189–96 and malnutrition 22 and mortality 32, 39–40, 45–6, 51, 53, 56 Chile 132, 153 China 27–9, 112, 200, 216–17 and child labour 193 and governance 153, 158 and homosexuality 187 and pollution 117, 119 and poverty 67–8, 69–71, 81 and slavery 148 and war 95, 104 and women 171, 177 chlorine 36–7 cholera 32, 35–6, 45, 55, 197 Churchill, Winston 163 civil rights movement 167–9 civilians 100–1 Clean Air Act (1956) 114 climate change 108, 119–21 Club of Rome 110, 115, 116 codes of honour 91–2 Cold War 99, 182 colonialism 103, 163 combine harvesters 16 communism 25, 26, 28, 102, 151–3, 182 Condorcet, Marquis de 172 Congress of Vienna (1815) 145 contraception 176, 177 crime 93, 207–8, 211 Cronin, Audrey 103 crop failure 7–8, 18 Cuba 132 Czechoslovakia 151, 152 dalits 72–3, 129 Darwin, Charles 45 De Gaulle, Gen Charles 161 ‘dead zones’ 15 death penalty 93–4, 185 Deaton, Angus 12, 52, 61 Declaration of Independence 144–5 Defoe, Daniel 192 deforestation 111–12 dehydration 54–5 democracy 26–7, 104–5, 150–7 Democratic Republic of Congo 26, 81 Dempsey, Gen Martin 2 Denmark 105 diarrhoea 32, 37–8, 54–5 Dickens, Charles 173 dictatorships 150–1, 153, 154, 155, 158 Diderot, Denis 143 discrimination 167–70, 173 Disraeli, Benjamin 36 Divine Comedy (Dante) 183–4 divorce 176 domestic violence 179 Douglass, Frederick 137–8, 139–40, 174 Dublin, Louis 60 dysentery 40 East Germany 152 Ebola 53, 209–10 Economic Freedom of the World 157–8 economics 67–9, 79, 165–6 education 17, 38–9, 135–7, 173, 197; see also literacy Egypt 133, 155, 156 Eisenhower, Dwight D. 168, 182 Eisner, Manuel 90 Ekman, Freddie 208 Elizabeth I, Queen 33, 34 energy 123–8 Engels, Friedrich 165–6 Enlightenment, the 4, 13, 66, 93, 184 and slavery 142–3 and women 172 environment, the 23–4, 108–12, 113–17 and climate 119–20 and energy 123–8 and poverty 117–19, 120–3 equality 143, 178–9, 188; see also inequality Equatorial Guinea 37 Ethiopia 24 ethnic minorities 161–71 Europe 216, 217–18 extinctions 112–13 extreme poverty 75–8, 79, 80–1 Factory Acts 193 famine 7–10, 13, 14, 17, 25–7, 46, 197 farming, see agriculture fascism 102 female genital mutilation 179 feminism 173 fertility rates 16–17, 24–5, 56 First World War 14, 15, 99, 104 fish stocks 112 Fitzhugh, George 147 Fleming, Alexander 50 flying toilets 39–40 Flynn Effect 164–5 food 2, 10–14, 13, 16, 17, 19; see also famine Food and Agricultural Organization (FAO) 20–1 forests 111–12 fossil fuels 108 France 9–10, 11–2, 42–3, 63–4, 161–2, 184 Francis, Pope 2 Frederick II, Emperor 32 Free the Slaves 148 freedom 138, 157–9 Friedan, Betty 183 Friedman, Benjamin 166 Friedman, Milton 158–9 Gandhi, Mahatma 168 Garrison, William Lloyd 146 Gates Foundation 52, 125 Gay Pride 185–6 gay rights 181–8 GDP (gross domestic product) 22, 56–7, 64, 67, 74–5 gender gap 178–9 genetically modified crops 23 genocide 101–2 George V, King 104 germ theory 48–9 Germany 114, 152, 183 Gini coefficient 82 globalization 4, 5, 45, 57, 74–5, 82, 218 Glorious Revolution 149 Golden Bull 149 Gorbachev, Mikhail 151 governance 90–1, 92; see also democracy graphene 126 Gray, John 2 Great Ascent 67 Great Britain 12, 114, 145, 192–4 and homosexuality 184, 185, 186 Great Powers 98–9 Great Smog 107–8, 114 ‘Great Stink, The’ 36 Green Revolution 17–20, 22, 23, 24 greenhouse gases 119 Guan Youjiang 29 Guangdong 70–1 H1N1 virus 59 Haber, Fritz 14, 15 Hagerup, Ulrik 208 Haiti 38, 57, 81, 114 Hans Island 105 happiness 199 Harrington, Sir John 33 Harrison, Dick 140 hate crimes 170 Havel, Václav 151, 152 height 16, 21–2 Helvétius, Claude Adrien 172 Hesiod 213–14 Hilleman, Maurice 54 Hitler, Adolf 94, 95 HIV/AIDS 52–3, 59, 60 Hobbes, Thomas 213 Holocaust, the 102, 170 homicide 85, 89, 90 homosexuality 181–8 Honecker, Erich 152 Hong Kong 67, 70 hookworm 40 human rights 142 human sacrifice 88–9 humanitarianism 93 Hungary 149, 151–2 hunter-gatherers 88 Hutcheson, Francis 143 hygiene 48, 49 India 10, 18–19, 27, 37, 38, 67–9 and child labour 193, 195 and governance 151, 154 and literacy 129–30, 133, 135 and pollution 117, 119 and poverty 71–3, 81 and slavery 145 and war 104 individualism 92 Industrial Revolution 2, 4, 66, 82 inequality 81–2, 178–9 influenza 58–9 Inglehart, Ronald 166–7 inoculation 47–8 intelligence 164–5 International Labour Organization (ILO) 195–6 International Union for the Conservation of Nature 112–13 Iraq 83, 102 irrigation 18, 22, 38 IS 148 Islamists 216 Italy 184, 193 Jang Jin-sung 25–6 Japan 21, 68, 180–1 Japanese Americans 163 Jefferson, Thomas 144, 145, 147 Jenner, Edward 48 Jews 162 Jim Crow laws 162 John, King 149 Johnson, Lyndon B. 169 Kant, Immanuel 201 Karlsson, Stig 68–9, 129, 202–3, 214–15 Kenny, Charles 134 Kenya 39–40 Kibera 39–40 King, Martin Luther, Jr. 168, 181 Klein, Naomi 2 knights 88 knowledge 200–2, 216–18 Korean War 94, 98 Ku Klux Klan 163, 169 land use 22 Las Casas, Bartolomé de 142–3 Latin America 150, 177, 187 law, the 90–1, 92 Lecky, William E.

Globally, almost ninety-six per cent of the gap in health outcomes between men and women has closed, and ninety-five per cent of the gap in educational attainment. But only fifty-nine per cent of the economic outcomes gap and twenty-three per cent of the political outcomes gap have been closed.19 The influence that wealth and development has on equality can be glimpsed from the Gender Inequality Index, which is the United Nations Development Programme’s way of measuring inequality between men and women in health, literacy, politics and the labour market. Countries with ‘very high human development’ – the Western world, basically – have an index of 0.197 (where 0 means that men and women fare equally). By contrast, countries with ‘high human development’ have 0.315; those with ‘medium human development’ have 0.513; and those with ‘low human development’ – mostly countries in sub-Saharan Africa – stand at 0.587.20 In some regions, very little progress has been made.


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Hard Times: The Divisive Toll of the Economic Slump by Tom Clark, Anthony Heath

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Affordable Care Act / Obamacare, British Empire, Carmen Reinhart, credit crunch, Daniel Kahneman / Amos Tversky, debt deflation, deindustrialization, Etonian, eurozone crisis, falling living standards, full employment, Gini coefficient, hiring and firing, income inequality, interest rate swap, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labour market flexibility, low skilled workers, mortgage debt, new economy, Northern Rock, obamacare, oil shock, Plutocrats, plutocrats, price stability, quantitative easing, Right to Buy, Ronald Reagan, science of happiness, statistical model, The Wealth of Nations by Adam Smith, unconventional monetary instruments, War on Poverty, We are the 99%, women in the workforce, working poor

Full text at: www.guardian.co.uk/politics/2010/nov/23/nick-clegg-hugo-young-text 66. The White House Great Gatsby Curve interactive is at: www.whitehouse.gov/blog/2013/06/11/what-great-gatsby-curve 67. For the elasticity estimates, see Miles Corak, ‘Inequality from generation to generation: The United States in Comparison’, in Robert Rycroft (ed.), The Economics of Poverty, Inequality and Discrimination in the 21st Century, ABC-CLIO, Santa Barbara, CA, 2013, pp. 107–25, Table 2. For the Gini coefficients, see OECD, ‘An overview of growing income inequalities in OECD countries: Main findings’, in OECD, Divided We Stand: Why inequality keeps rising, OECD, Paris, 2011, pp. 21–45, at: www.oecd.org/els/soc/49499779.pdf The underlying data is at: http://dx.doi.org/10.1787/888932535185 68. ‘MP Jesse Norman defends Eton school's dominance in government’, Guardian, 27 April 2013, at: www.guardian.co.uk/education/2013/apr/27/jesse-norman-eton-school-uk-government 69.

It happens, but not often.64 Through an innovation he christened the ‘Great Gatsby Curve’, Krueger also attempted to nail one particular lie – peddled by, among others, Nick Clegg, the Liberal Democrat deputy prime minister in Britain's Coalition – that rough justice about who gets what today will be righted by equal opportunities for the future.65 The Great Gatsby Curve (in reality more of a straight line) traces the connection across different countries between, on the one hand, historic inequality, and on the other, class rigidity. The former is measured by a summary statistic (the Gini coefficient) of the gap in household incomes in 1985; the latter by the strength of the link between what a father earns and what his son goes on to bring home – the so-called ‘elasticity’ of intergenerational income. The graph opposite plots the two things together and reveals that, in countries where income is more unequally spread, the next generation enjoys less mobility; it also shows that Britain is a rare western country where opportunities are almost as unequal as in the US.

The precise BSA question asked what the government should do when forced ‘to choose between the three options’: ‘Reduce taxes and spend less on health, education and social benefits’; ‘Keep taxes and spending on these services at the same level as now’; ‘Increase taxes and spend more on health, education and social benefits’. The proportions preferring the last option rose from 54% to 63% between 1990 and 1994. 39. See statistics collated by the Institute for Fiscal Studies at: www.ifs.org.uk/fiscalFacts/povertyStats Using an ‘After Housing Costs’ income definition, all summary measures of inequalityGini coefficient, mean log deviation, coefficient of variation, and the 90/10, 50/10 and 90/50 percentile ratios – increased between the start of the 1990 downturn and 2008/09; the same is true if the peak of unemployment in 1993 is compared with that in 2011/12. 40. The exact BSA question asked is: ‘Opinions differ about the level of benefits for unemployed people. Which of these two statements comes closest to your own view?’


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Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland

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activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, assortative mating, banking crisis, barriers to entry, Basel III, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Branko Milanovic, Bretton Woods, BRICs, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial innovation, Flash crash, Frank Gehry, Gini coefficient, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, John Markoff, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, liberation theology, light touch regulation, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, short selling, Silicon Valley, Silicon Valley startup, Simon Kuznets, Solar eclipse in 1919, sovereign wealth fund, stem cell, Steve Jobs, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tony Hsieh, too big to fail, trade route, trickle-down economics, Tyler Cowen: Great Stagnation, wage slave, Washington Consensus, winner-take-all economy, zero-sum game

They should charge users and sell [the highways] to the private sector.” a study by Mexican and American political scientists Isabel Guerrero, Luis-Felipe López-Calva, and Michael Walton, “The Inequality Trap and Its Links to Low Growth in Mexico,” in No Growth Without Equity: Inequality, Interests, and Competition in Mexico, ed. Santiago Levy and Michael Walton (World Bank, 2009). “When it came to spectrum” “All Lines Are Busy,” Outlook, November 29, 2010. “India has been overwhelmed” CF interview with Kiran Bedi, November 11, 2011. “Corruption is endemic” CF interview with Rajiv Lall, November 13, 2011. “The Gini coefficient” CF interview with Arun Maira, November 13, 2011. “The tendency is that people” CF interview with Kris Gopalakrishnan, November 12, 2011. According to Hurun, the seventy richest members of the NPC “China’s Billionaire People’s Congress Makes U.S.

“Corruption is endemic,” Rajiv Lall, the chief executive officer of the Infrastructure Development Finance Company, a partly state-owned financial institution, and the official who invited Rajan to give his Bombay Chamber of Commerce lecture, told me. “I don’t think anybody here is pretending that there’s no corruption in the country. And corruption can take on a new dimension, especially in this time of great transformation.” “The Gini coefficient [an economic measure of income inequality] always rises whenever growth takes off,” Arun Maira, a former industrialist and now a member of the country’s influential planning commission, told me. “When you open more opportunity, like more free markets and the opportunity for people to do their own thing, those who already have some capital, or they have some education, or they have access to people in power so that they could help get access to the new opportunities more easily, they will first grow themselves, their own wealth.

But China’s legal culture thrives on the principle of ‘killing the chicken to scare the monkeys.’ Mr. Zhou . . . was a conspicuous potential chicken.” — The dramatic denouement of the March 2012 NPC is that now the biggest monkey is directly in the state’s sights, too. Bo Xilai, the charismatic former chief of the thirty-four-million-strong Yangtze River megalopolis of Chongqing, was one of the leading elite critics of China’s rising inequality: on the eve of the NPC he told reporters in Beijing that the country’s Gini coefficient had exceeded 0.46 (it is 0.45 in the United States) and warned: “If only a few people are rich, then we’ll slide into capitalism. We’ve failed. If a new capitalist class is created then we’ll really have turned into a wrong road.” But at the same time, Bo was a princeling—his father was Bo Yibo, one of the Eight Immortals of the Communist Party—and the patriarch of a clan with wealth as well as political power.


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The Great Surge: The Ascent of the Developing World by Steven Radelet

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Admiral Zheng, agricultural Revolution, Asian financial crisis, bank run, Berlin Wall, Branko Milanovic, business climate, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, clean water, colonial rule, creative destruction, demographic dividend, Deng Xiaoping, Dissolution of the Soviet Union, Doha Development Round, Erik Brynjolfsson, European colonialism, F. W. de Klerk, failed state, Francis Fukuyama: the end of history, Gini coefficient, global supply chain, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), invention of the steam engine, James Watt: steam engine, John Snow's cholera map, Joseph Schumpeter, Kenneth Arrow, land reform, low skilled workers, M-Pesa, megacity, Mikhail Gorbachev, off grid, oil shock, out of africa, purchasing power parity, race to the bottom, randomized controlled trial, Robert Gordon, Second Machine Age, secular stagnation, Simon Kuznets, South China Sea, special economic zone, Steven Pinker, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, women in the workforce, working poor

It is true that within some countries, inequality has gotten worse—such as in China—but inequality has improved in others—such as in Brazil. For the majority of developing countries, income inequality hasn’t changed much at all, even alongside the acceleration in growth. There are around seventy-five developing countries for which decent data on income distribution are available over several decades (measured by the Gini coefficient, a widely used index of inequality that measures the extent to which income distribution deviates from perfect equality). In about half, inequality hasn’t changed much either way. In slightly more than one-quarter, inequality has improved somewhat. In slightly less than one-quarter, inequality has worsened. In China, inequality has deteriorated steadily, to a large extent along geographical lines.

How much it has been shrinking and when it started depend on a debated question: In measuring intercountry inequality, should all countries count the same, or should large countries count more? In the first system, China and India count the same as Burundi and Belize; in the second, China and India count for a lot, and Burundi and Belize don’t count much. It matters (or at least it used to) which you choose. Figure 3.5, constructed by economist Branko Milanovic, depicts both stories.23 The bottom line shows intercountry inequality based on unweighted averages (every country counts the same), and the top line represents the weighted average (proportional to population size). Each measures inequality using the Gini coefficient in which 0 means perfect equality and 1 means perfect inequality. The two lines show very different patterns—at least until around 2000.

., 293, 294 Gang of Four, 185 Gap, 164 garments, 56, 59 gas, 44, 139 Gates, Bill, 83–84, 213, 217 Gates, Robert, 20 Gdańsk, 103 Gelb, Alan, 205 General Agreement on Tariffs and Trade (GATT), 156, 258 General Electric, 159 genetically modified foods (GMOs), 171–73 genocide, 142 Georgia, 50, 143 growth in, 128, 238 Germany, 250, 298 germ theory, 77 Gerring, John, 129, 248 Getting Better (Kenny), 93 Ghana, 37, 127 aid to, 223 coastal vs. isolated areas in, 201 data entry firms in, 178 democracy in, 106, 122, 188–90 growth in, 6, 7, 22, 45, 50, 128, 261 oil exported by, 53 reforms in, 192 trade encouraged by, 155 Gill, Indermit, 261 Gini coefficient, 66, 70 glasnost, 134 Global Alliance for Vaccines and Immunizations (GAVI), 95, 161 global financial crisis, 12, 52–53, 113, 191, 233, 235, 257, 264, 269, 295, 305 global food crisis, 12, 280–81 Global Fund to Fight AIDS, Tuberculosis and Malaria, 95, 212 Global Health 2035 Commission, 91, 245, 267, 284, 306 global integration, 52 globalization, 17, 19, 131, 150, 158–61, 160, 162, 163–66, 183, 200, 207, 264, 287–88 technology and, 166 Global Malaria Eradication Program, 211–12 gold, 139, 152, 206 Golden Rice, 172 Gorbachev, Mikhail, 133, 134, 143 Gordon, Robert, 257–58 governance, 4, 5, 8, 17, 184, 197–99, 199, 201, 292–93, 294, 304, 307, 309 aid and, 214 and poverty traps, 15 and resource curse, 206 see also democracy Great Britain, 47, 68 colonialism of, 140 Zimbabwe’s independence from, 180 Great Depression, 126, 146 Great Famine, 284 Great Leap Forward, 35, 81, 128, 153 Greece, 105 Green Bay, Wisc., 60 Greenland, 280 Green Revolution, 38, 79, 170–73, 204, 214, 215, 274, 302 Guatemala, 18, 36 coup in, 100 war in, 145 Guinea: demonstrations in, 281 Ebola in, 82 health system in, 266 violence in, 206 Guinea-Bissau, 49, 50 guinea worm, 214 Guns, Germs, and Steel (Diamond), 13 Guntur, 31 H1N1 flu, 20, 82, 267, 269 Hafizibad, 178–79 Haiti, 8, 10, 11, 49, 50, 185, 213 aid to, 224 child mortality in, 82 and democracy, 248 demonstrations in, 281 dictatorship in, 100, 114, 127, 141, 222 earthquake in, 224 health improvements in, 93 lack of growth in, 50 poor governance in, 106, 114 Hansen, Henrik, 226 Harris, Gardiner, 270 Hartwick’s rule, 62 Havel, Václav, 143, 149, 184 Haves and the Have-Nots, The (Milanovic), 65 health, 3, 4, 5, 6, 7–8, 16, 17, 24, 94–96, 154, 161, 164, 166, 178, 232, 233, 234, 245–46, 248, 258, 260–61, 262, 266–69, 303, 306, 307 aid and, 226 in Asia, 201 in Brazil, 187 in China, 201 conflict and, 118–19 education and, 89–93, 205 and poverty traps, 15 technology and, 173–75, 179, 293 health care, 86 health services, 248 Heath, Rachel, 59 He Fan, 298 Henry, O., 97 Hindu nationalists, 287 Hitler, Adolf, 127, 146 HIV/AIDS, 20, 75, 81–82, 83, 94, 95, 173, 174–75, 182, 205, 214, 221, 246, 266 Hobbes, Thomas, 24 Honduras: coup in, 97–98 crime in, 264 war in, 145 Hong Kong: British control of, 153 and globalization, 155 growth in, 147 hookworm, 205 housing, 24, 307 humanitarian relief, 213 human rights groups, 110 Hungary, 7, 143 illiberalism in, 255, 263 protests in, 134 trade encouraged by, 155 Huntington, Samuel, 104, 105, 112, 121, 122, 146, 197, 265, 296 Hussein I, King of Jordan, 187 illiberal democracy, 264 immunization, 94, 178 income, 3, 5, 8, 17, 25, 31, 32, 40, 77, 94, 294 in Africa, 12 in China, 201 climbing, 240–41, 240 doubling of, 4, 5–6, 44 education, health and, 89–93 falling, 11, 49 income inequality, 65–71 between countries, 69–71, 70 within countries, 65–69 incubators, 175 independence from colonialism, 140–43 India, 3, 7, 22, 32–33, 37, 127, 159, 203, 289, 292, 297 colonialism in, 140 data entry firms in, 178 demand in, 53 as democracy, 98, 122, 123, 126 economic reforms in, 192 emigration from, 284 floods in, 281 future of, 234 growth in, 6, 8–9, 17, 21, 45, 50, 71, 128, 235, 237 inequality in, 69–70 infrastructure financing in, 259–60 innovation in, 302 malaria in, 211 natural capital in, 63 Pakistan’s wars with, 141, 145 poverty reduction in, 244 slowdown in growth of, 237, 255, 257, 262 software companies in, 56 terrorism in, 287 trade encouraged by, 155 universities in, 247 water demand in, 279 Zheng He’s trip to, 152 Indian Institute of Technology, 247 Indonesia, 10, 36, 124, 127, 184, 289 agriculture in, 58–59, 204 aid for schools in, 216 aid to, 214, 223 benign dictatorship in, 126 child mortality in, 85 colonial legacy in, 136–40 demand in, 53 democracy in, 106, 112, 114, 115, 122, 123, 124, 250 demonstrations in, 281 as dictatorship, 99, 122 factories in, 201 fertility rates in, 85, 85 growth in, 6, 7, 22, 38–39, 50, 71, 125–26, 128, 147, 233, 238, 242, 262 healthcare in, 95 individual leadership in, 187 Nikes from, 56 population growth in, 85 rice yields in, 215–16 terrorism in, 286 timber, 223 Zheng He’s trip to, 152 industrial equipment, 165 industrial revolution, 24, 25, 77, 135, 166, 300 industry, 45, 56, 260 inequality, 258 infant mortality, 92, 118, 175, 306 in South Africa, 183 infectious diseases, 92 inflation, 11, 192 in Africa, 12 information, 166, 234 information revolution, 175–79, 176 infrastructure, 164, 201, 207, 262 aid projects for, 216 Inkatha Freedom Party, 182, 185 innovation, 234, 258, 292, 294 in China, 236 Institute of World Economics and Politics, 298 institutions, 200, 294, 297–98, 303–4 and resource curse, 206 insurance companies, 241 insurance markets, 305 interest rates, 233, 305 Intergovernmental Panel on Climate Change (IPCC), 282 International Maize and Wheat Improvement Center (CIMMYT), 171 International Monetary Fund (IMF), 102, 235, 237, 239, 258, 259, 260, 298, 309 International Rice Research Institute (IRRI), 171, 215–16 internet, 162, 175, 233, 300 investment, 6, 20, 22, 52, 156, 157, 166, 301, 304–5, 306 in Africa, 12 in technology, 234, 246 Iran, 114, 124 coup in, 100 Zheng He’s trip to, 152 Iraq, 8, 114, 118, 124, 285 US invasion of, 8, 118, 124, 146 Ireland, 284 iron, 25, 53, 159 Islam, 124 fundamentalist, 265 Islamabad, 287 Israel, 106, 285 Istanbul, 201, 206 Istanbul Technical University, 247 Italy, 47, 104 ivory, 152, 206 Jakarta, 137 Jamaica, 49, 50 Jamison, Dean, 246 Japan, 19, 20, 21, 146, 167, 201, 288, 290, 292, 298, 300 as democracy, 122, 123, 126, 250, 296 colonialism in Indonesia, 137 industrialization of, 25–26 leadership needed by, 234 post–World War II boom in, 262 reforms in, 295 slowing of progress in, 250, 255, 257 Jarka, Lamine Jusu, 104 Java, 152, 204 Jensen, Robert, 177 job training, 38 Johannesburg, 58 Johnson, Simon, 13 Johnson Sirleaf, Ellen, 3, 120, 184, 185, 209, 217 Jordan, 285 growth in, 45 individual leadership in, 187 life expectancy in, 78 poverty in, 36 JSI Research and Training Institute, 173 Kabila, Laurent, 185 Kagan, Robert, 253 Kampala, 177 Kaplan, Robert, 11 Kapstein, Ethan, 198 Karimov, Islam, 8, 127, 144, 185 Kathmandu, 203, 206 Kazakhstan, 36, 106, 115, 285 Kelly, James, 254 Kenny, Charles, 11, 93 Kenya, 18, 169 accounting firms in, 56 data entry firms in, 178 horticulture in, 169 Zheng He’s trip to, 152 Kerekou, Mathieu, 144 Kharas, Homi, 240–41, 261 Khatun, Jahanara, 270, 272 Khmer Rouge, 114 Khrushchev, Nikita, 250 Kim, Jim Yong, 231, 242 Kim Il Sung, 100, 144, 184 Kirkpatrick, Jeanne, 124 Kissinger, Henry, 271 Kodari, 203 Kolkata, 203 Korean War, 81, 100, 141, 145 Kosovo, and democracy, 248 Kotler, Steven, 300 Kraay, Aart, 65 Kufuor, John, 189–90 Ku Klux Klan, 124, 265 Kurlantzick, Josh, 263 Kuwait, 47 Kuznets, Simon, 66 KwaZulu-Natal, 182 Kyrgyzstan, 205, 285 labor unions, 102 Lancet, 91, 245, 267, 284, 306 Landes, David, 13 Laos, 184 Latin America, 11, 36, 146 colonialism in, 140 economic growth in, 255 growth in, 50, 141 inequality in, 67–68 megacities in, 277 reforms in, 192 Latvia, growth in, 128 Laveran, Alphonse, 211 leadership, 16, 17–18, 131, 184–87, 200, 201, 234, 303–4 Lebitsa, Masetumo, 57 Lee, Jong-Wha, 87 Lee Kuan Yew, 7, 121, 122, 123, 125, 127 Lensink, Robert, 226 Lesotho, 57, 103 Levine, Ruth, 214 Levi Strauss & Co., 165 Lewis, Arthur, 66 Liberia, 3, 11, 18, 159, 184, 185, 285 aid to, 217 democracy in, 106, 145 Ebola in, 82 growth in, 7, 50 health system in, 266 infrastructure investment in, 216 violence in, 120, 145, 146, 206, 209, 217 Libya, 115 life expectancy, 78–79, 79, 92, 93, 232, 266, 271, 294 Lipset, Seymour Martin, 121 literacy programs, 161, 162, 176, 178–79 literacy rates, 87 Liu Yingsheng, 153 London, 24, 201 Lord’s Resistance Army, 287 Lukashenko, Alexander, 85 Maathai, Wangari, 18 McAfee, Andrew, 166, 300 Macapagal-Arroyo, Gloria, 264 McLean, Malcolm, 167 Madagascar, 49, 50, 263 Mahbubani, Kishore, 241 malaria, 6, 10, 14, 73, 75, 92, 94, 205, 209–13, 221, 246, 302 Malawi, 103, 122, 175, 208 Malaysia, 136 benign dictatorship in, 126 and democracy, 248, 250 forest loss in, 280 malaria in, 211 Zheng He’s trip to, 152 Maldives, 152, 284 Mali, 206 child mortality in, 84 coup in, 114, 264–65 democracy in, 103, 108, 122, 123, 263 economic problems in, 255 as landlocked, 205 poverty in, 122 malnutrition, 73, 80 Malthus, Thomas, 270, 273–74, 275 Mandela, Nelson, 17, 149, 180, 182–83, 184, 198, 309 released from jail, 103, 143, 148 Mandelbaum, Michael, 11 manufacturing, 25, 37–39, 45, 56, 67, 156, 260, 261–62 in China, 235–36 Mao Tse-tung, ix, 35, 81, 102, 123, 127, 134, 185 Maputo, 44 Marcos, Ferdinand, 11, 100, 103, 104, 109, 127, 141, 143, 148, 222 Mariam, Mengistu Haile, 144 Marrakesh, 206 Marshall Islands, 284 Maseru Tapestries and Mats, 57 Massmart Holdings Ltd., 46 Matela Weavers, 57 maternal mortality rates, 246 Mauritania, 281 Mauritius: aid to, 216 child mortality in, 84 as democracy, 98 growth in, 5, 37, 50, 126, 128 Mbasogo, Teodoro Obiang Nguema, 184 Mearsheimer, John, 290–91 measles, 92, 94, 161 Mecca, Zheng He’s trip to, 152 medical equipment, 20, 165 medicine, 21, 31 megacities, 277 Meiji Restoration, 25–26, 146 Melaka, 136 Menchú Tum, Rigoberta, 18 Mexico, 159, 162 default by, 101–2 democracy strengthening in, 115 demonstrations in, 281 emigration from, 284 growth in, 235 Micklethwait, John, 295 middle class, 20, 240–41 Middle East, 36, 184, 256, 265 conflict in, 146 democracy and, 265 financing in, 259 growth in, 50 life expectancy in, 82–83 oil from, 201 trade and, 159 middle-income trap, 261 Milanovic, Branko, 65, 70 Millennium Challenge Corporation, 216 Millennium Development Goals (MDGs), 18, 30–31, 95, 217, 242 Millennium Summit, 217 Mills, John Atta, 189 minerals, 22, 152, 205–6 Ming China, 151–53 minimum wage, 165 mining, 278 Ministry of Finance, Gambia, The 190 Mitteri Bridge, 203 Mobarak, Mushfiq, 59 Mobile Alliance for Maternal Action (MAMA), 178 mobile devices, 47 mobile phones, 157, 175–78, 176 Mobilink-UNESCO, 179 Mobutu Sese Seko, 11, 100, 127, 141, 143, 145, 222 Moi, Daniel Arap, 103 Moldova, 6, 7, 36, 143 Mongolia, 108 aid to, 223 coal and iron ore exported by, 53 democracy in, 104, 122, 123, 144 growth in, 6, 7, 45, 128 Moran, Ted, 164–65 Moreira, Sandrina Berthault, 226 Morocco: demonstrations in, 281 growth in, 6, 50 individual leadership in, 187 inequality in, 67 poverty in, 36 Morrisson, Christian, 25, 27, 28 mosquitoes, 212 Moyo, Dambisa, 12 Mozal aluminum smelter, 44 Mozambique, 11, 18, 43–45, 159 aid to, 214, 216 aluminum exported by, 53 and democracy, 248 demonstrations in, 281 growth in, 6, 50, 261 inequality in, 67 infrastructure investment in, 216 reforms in, 192 state-owned farms in, 195 war in, 100, 145 M-Pesa, 47 Mubarak, Hosni, 113, 125, 185 Mugabe, Robert, 8, 106, 113, 127, 144, 181, 182, 185, 221 Mumbai, 287 Museveni, Yoweri, 112, 187 Musharraf, Pervez, 113 Mussolini, Benito, 104, 146 Myanmar, 9, 22, 112, 144, 184, 208, 263 child mortality in, 82 cyclones in, 281 health improvements in, 93 Namibia, ix, x, 37 democracy in, 135 growth in, 50 life expectancy in, 266 war in, 100, 145 National Academy of Sciences, US, 172 National Constituent Assembly, Tunisia, 124 National Institutes of Health, US, 302 natural capital, 62–63 Natural Resource Governance Institute, 306 Nazarbayev, Nursultan, 106 Nazism, 124, 146, 265, 309 Ndebele tribe, 180 Nepal, 37, 174, 203–4, 208 democracy in, 107, 122, 123 demonstrations in, 281 as landlocked, 202, 205 poverty in, 122 Netherlands, 47 Indonesian colonialism of, 136–37, 138, 139 New Development Bank, 259 New Orleans, La., 201 New York, N.Y., 201, 277 New York Times, 104, 176–77, 270 New Zealand, 25, 78, 167, 202, 231 Nicaragua, 11, 36 democracy in, 104 war in, 100, 145 Niger, 208 agriculture in, 204 democracy in, 124, 263 as landlocked, 202, 205 mobile phones in, 177–78 Nigeria, 115, 159, 243, 245, 287 dictatorship in, 99, 113 health technology in, 175 oil in, 285 per capita wealth in, 62 Nike, 165, 202 Nkomo, Joshua, 181 noncommunicable diseases (NCDs), 268 non-governmental organization (NGOs), 110, 221 Noriega, Manuel, 144 North Africa, 36 growth in, 50 life expectancy in, 82–83 trade and, 159 North American Free Trade Agreement (NAFTA), 156, 162 North Korea, 8, 9, 100, 144, 184, 192, 208, 243 nutrition, 232 Obama, Barack, 297 Obama administration, 297 O’Hanlon, Michael, 299 oil, 44, 53, 62, 67, 114–15, 201, 205, 285 in Equatorial Guinea, 223 in Indonesia, 138, 139 oil crises, 10 open markets, 131 Opium Wars, 153 oral rehydration therapy (ORT), 94, 173, 215 overfishing, 61 overtime regulations, 165 Paarlberg, Rob, 172 Pakistan, 37, 162, 243, 245, 285–86 conflict in, 118, 119 coup in, 113 and democracy, 263 emigration from, 284 factories in, 58 India’s wars with, 141, 145 terrorism in, 287 violence in, 146 Panama, 9 growth in, 50, 128, 238 US invasion of, 144 Panama Canal, 211 Panasonic, 202 Papua New Guineau, 50, 213 Paraguay, 50, 280 Park Chung-hee, 99, 122 patents, 157 Peace Corps, 75, 90, 202 pensions, 38, 241 People Power Revolution, 186 Perkins, Dwight, 235 pertussis, 94, 161 Peru, 159, 185, 285, 287 agriculture in, 56–57 copper exported by, 53 demonstrations in, 281 pharmaceuticals, 20, 165 Philippines, 7, 11, 17, 18, 100, 103, 121, 127, 184, 185, 201, 222, 289, 290, 297 call centers in, 178 corruption in, 264 democracy in, 104, 106, 109, 122, 123, 250, 263 growth in, 242 inequality in, 67 nickel exported by, 53 rice yields in, 215–16 transcribers in, 56 Piketty, Thomas, 68–69 Pinker, Steven, 115 Pinochet, Augusto, 107–8, 122, 141, 143–44, 187 Plano Real (“Real Plan”), 187 Plundered Planet, The (Collier), 292 pneumonia, 73 Poland, 6, 18, 36, 103, 143, 184, 186 protests in, 134 trade encouraged by, 155 universities in, 247 polio, 94, 119, 161, 215 Polity IV Project, 107, 109 pollution, 302 Population Bomb, The (Ehrlich), 274 population growth, 21, 80–81, 84, 95, 233, 234, 272, 273–77, 276 Portfolios of the Poor (Collins et al.), 32, 33–34 Port of Cotonou, 216 Portugal, 105, 123, 136 poverty, 94, 294 definitions and terminology of, 26–27 democracy and, 121 as exacerbated by conflicts, 119, 119 as man-made, 180 poverty, extreme, 5, 8, 25, 26, 27–30, 30, 31–35, 36, 41, 42, 118, 231, 232, 240, 241–45, 244, 256, 271 in China, 35, 36, 242 in Indonesia, 136 in South Africa, 183 poverty, reduction of, 3, 4, 5, 8, 17, 21, 27–31, 28, 30, 34–35 in Africa, 12 in China, 201 after global food crisis (2007), 12 ignorance of, 10 lack of attention to, 10 poverty traps, 14–16 pregnancy, 178 press, freedom of, 198–99 Preston, Samuel, 92 Preston curves, 92 Pritchett, Lant, 89, 235, 262 Programa Bolsa Família, 38, 67 progress in developing countries, x, 3–5, 45–53, 46, 49, 229, 237–39, 238 democratization and, see democracy factors for, 16–19 future of, 21–23 as good for West, 19–21 income growth in, 240–41, 240 investment in, 238 and long historical perspective, 13 and microlevel studies, 13–14 middle class emergence in, 240–41 pessimism about, 9–12 possible stalling of, 255–56 possible tripling of incomes in, 277–78 and poverty traps, 14–16 reduction of poverty in, see poverty, reduction of threats to, 291–92 transforming production in, 262–63 property rights, 142, 303 protein, 280 Protestant work ethic, 120–21 Publish What You Pay, 305 Punjab, 178–79 Putin, Vladimir, 224, 255 Radelet, John, 60 Rahman, Ziaur, 271 Rajan, Raghuram, 225, 237 Rajasthan, 33 Ramos, Fidel, 103 Ramos-Horta, José, 184 Ravallion, Martin, 27, 29, 64, 227, 243 Rawlings, Jerry, 188–89 Rebirth of Education, The (Pritchett), 89 recession (1980s), 10, 191 Reebok, 164 religion, freedom of, 198–99 religious bodies, 110 Reserve Bank, Zimbabwe, 181 resource curse, 54, 163, 206 resource demand, 21, 233, 272, 281 resource extraction, 162–63 resources, 275 in Africa, 261 resource wars, 284–86 retail trade, 37, 45 Return of History and the End of Dreams, The (Kagan), 253 Reuveny, Rafael, 272 Rhodes, Cecil, 180 Rhodesia, 43 rice, 139, 215–16 rickshaw drivers, 32–33 Ridley, Matt, 11 rights, 131, 161, 198–99 rinderpest, 215 Rio de Janeiro, 46, 58, 159, 201 river blindness, 214 roads, 169, 233, 235 aid for, 216 in South Africa, 202 Robinson, James, 13, 140, 249 robotics, 261, 301 Rockefeller Foundation, 170 Rodrik, Dani, 261, 263 Roll Back Malaria Partnership, 212 Romania, 36, 50, 134, 143 Romero, Óscar, 100 Roosevelt, Franklin, 100 Roosevelt, Theodore, 169 Ross, Ronald, 211 Royal Economic Society, 226 Russia, 47, 146, 222, 256 democracy in, 113, 263, 264 infrastructure financing in, 259–60 slowing of progress in, 250, 264 Ukraine invaded by, 192, 233 US aid banned by, 224 Rutagumirwa, Laban, 176–77 Rwanda, 144, 159 aid to, 214, 216, 224 China’s example followed by, 266 growth in, 6, 7, 45, 50, 125, 128, 261 individual leadership in, 187 as landlocked, 207 Sachs, Jeffrey, 14–15, 175, 205, 210, 213, 219 Safaricom, 47 salinity, 171, 215 Sall, Macky, 114 Samoa, 202 sanitation, 73, 77, 216, 303 Sargsyan, Vazgen, 113 Saudi Arabia, 115 savings rate, 201 schistosomiasis, 205 Schlesinger, Arthur, Jr., 121 Schumpeter, Joseph, 249 Second Machine Age, The (Brynjolfsson and McAfee), 166, 300 secular stagnation, 257 seed drill, 25 seeds, 171 semiconductors, 20 Sen, Amartya, 19, 123, 127, 128 Sendero Luminoso, 287 Senegal, 7, 37 aid to, 223, 224 corruption in, 114 democracy in, 123, 124, 263 demonstrations in, 281 growth in, 261 inequality in, 67 Senkaku islands, 288 Seoul, 201 September 11, 2001, terrorist attacks of, 269 services, 67, 260, 261–62 severe acute respiratory syndrome (SARS), 82, 267 Seychelles, 284 Shanghai, 201 Shenzhen, 91 Sherpas, 203 Shikha, 33–34 Shinawatra, Thaksin, 254–55, 264 Shinawatra, Yingluck, 255 Shining Path, 287 shipping, 202 shipping containers, 167–68 shock therapy, 219 shoes, 56, 139, 162, 262 Sierra Leone, 220, 285 democracy in, 104, 107 Ebola in, 82 growth in, 50 health system in, 266 violence in, 146, 206 Silk Road, 206 silks, 152 silver, 152 Simon, Julian, 294 Sin, Jaime, 18, 103 Singapore, 7, 16, 184 benign dictatorship in, 126 and democracy, 122, 248, 250 and globalization, 155 growth in, 125, 139, 147 universities in, 247 Singh, Manmohan, 192 Six-Day War, 285 skills and capabilities, 16, 190–92 slavery, 142, 156, 180, 206 smallpox, 214, 215 Smith, Adam, 151, 156, 200–201 Smith, David, 43 Smith, Marshall, 178–79 SMS text messages, 47, 178 Snow, John, 77 social safety net, 38, 39, 68, 164, 307 Sogolo, Nicéphore, 144 soil, 171, 215 Solow, Robert, 165 Somalia, 8, 9, 99, 119, 213, 243 aid to, 224 power vacuum in, 184 Zheng He’s trip to, 152 Somoza García, Anastasio, 100, 127 Song-Taaba Yalgré women’s cooperative, 178 South Africa, 7, 17, 18, 20, 22, 37, 43, 46, 127, 143, 145, 155, 182–83, 207 aid to, 223 apartheid in, 44, 57, 68, 100, 103, 135, 141, 180, 182 banks in, 56 corruption in, 264 economic growth in, 183, 235, 262 future of, 234 HIV in, 174 inequality in, 68 infrastructure financing in, 259–60 life expectancy in, 266 political turmoil in, 57 roads in, 202 universities in, 247 South Asia, 37, 50 Southeast Asia, 5, 12, 167 colonialism in, 140 growth in, 141 Southern Rhodesia, 180 South Jakarta, 286 South Korea, 36, 127, 159, 184, 201, 288, 290 aid to, 214, 216 benign dictatorship in, 126 democracy in, 104, 122, 126, 250 as dictatorship, 99, 122 and globalization, 155 growth in, 7, 16, 29, 71, 125, 139, 147, 236, 262 individual leadership in, 187 inequality in, 68 lack of resources in, 205 land redistribution in, 68 Soviet Union, x, 50, 126, 133–34, 145, 148, 298, 309 Afghanistan invaded by, 134, 146 collapse of, 16, 81, 103, 131, 135, 142, 156, 250, 251 countries controlled by, 141 dictatorships supported by, 100 malaria in, 210 Spain, 105, 123, 140 speech, freedom of, 198–99 Spence, Michael, 86, 165 Spratly Islands, 289 Sputnik, 147, 250 Sri Lanka, 11, 37 economic problems in, 255 engineers from, 56 malaria in, 211 Zheng He’s trip to, 152 Stalin, Joseph, 127 state-owned farms, 195 Stavins, Robert, 297 steam engine, 25, 300 Steinberg, James, 299 Stern, Nicholas, 213, 292 Stiglitz, Joseph, 213, 227 stock exchanges, 241 Strait of Malacca, 201 student associations, 110 Subic Bay Naval Station, 201 Subramanian, Arvind, 225 Sudan, 114, 115, 185, 206, 208, 285 aid to, 224 China’s example followed by, 266 violence in, 285 Suharto, 99, 112, 122, 126, 138–39, 144 Sumatra, 152 Summers, Lawrence, 88, 227, 235, 246, 257 Sustainable Development Goals, 217 Swaziland, life expectancy in, 266 sweatshops, 58 Sweden, 159 Switzerland, 27, 202 Sydney, 201 Syria, 8, 285 aid to, 224 conflict in, 118, 119, 146, 233, 255 in Six-Day War, 285 Taiwan, 29, 153, 201, 289, 290 aid to, 216 benign dictatorship in, 126 democracy in, 122, 126, 250 and globalization, 155 growth in, 125, 139, 147, 236, 262 individual leadership in, 187 lack of resources in, 205 Tajikstan, 205, 208 Tanzania: aid to, 214, 216 and democracy, 248 fruit markets in, 58 growth in, 45, 50, 238, 240, 261 purchasing power in, 27 reforms in, 192 Zheng He’s trip to, 152 tariffs, 44, 102, 155, 167, 193, 263, 305 Tarp, Finn, 226 tax revenues, 241, 247 Taylor, Charles, 99, 145 technology, x, 17, 19, 22, 94–96, 135, 150, 151–79, 183, 200, 206–7, 234, 245, 258, 294, 301 for agriculture, 170–71 for banking, 175, 179 in China, 154–55, 236 for education, 178–79 globalization and, 156, 166 for health, 173–75, 179, 293 terrorism and, 287–88 telecommunications, 158 Terai, 211 terms-of-trade ratio, 54 terrorism, 19, 20, 21, 146, 286–88 tetanus, 94, 161 textiles, 25, 56, 139, 152 Thailand, 9, 22, 36, 253–55, 265 benign dictatorship in, 126 child mortality in, 84 corruption in, 254, 264 and democracy, 248, 253–54, 255, 263 growth in, 139, 147, 262 protests in, 255, 263 Zheng He’s trip to, 152 Theroux, Paul, 12 Things Fall Apart (Achebe), 72 think tanks, 110 Third Wave, The (Huntington), 121 Thomas, Brendon, 90–91 Tiananmen Square, 148 Tibet, 203 Tigris, 285 timber, 61, 139, 206, 223, 285 Timbuktu, 206 Timor-Leste, 36, 139, 144, 184, 220 aid to, 223 democracy in, 106, 122 infrastructure investment in, 216 poverty in, 122 tin, 139 Tokyo, 201, 277 totalitarianism, 10–11, 16 tourism, 45 toys, 56, 139 trade, x, 6, 17, 20, 22, 52, 156, 157, 162–63, 193, 203, 204–5, 234, 257, 303 in agriculture, 273 Asian economic miracle and, 170, 201 growth of, 157, 158–59, 160 sea-based, 200–201 shipping containers and, 167–68 trade unions, 110 transportation, 166, 261 Truth and Reconciliation Commission, 182 T-shirts, 159, 164 Tuareg, 265 tuberculosis, 75, 94, 161, 205, 214 Tull, Jethro, 25 Tunisia: democracy in, 7, 106, 124, 255, 263 growth in, 50, 238 Turkey, 36, 127, 285 aid to, 223 authoritarian rule in, 255 demand in, 53 democracy in, 106, 123, 124, 263 future of, 234 growth in, 6, 7, 22, 235, 238 protests in, 263 trade encouraged by, 155 universities in, 247 Turkmenistan, 114, 266, 285 Tutu, Desmond, 18, 103, 185 Uganda, 106, 112, 144, 159, 287 aid to, 216 and democracy, 263, 264 growth in, 50 horticulture producers in, 169 individual leadership in, 187 inequality in, 67 infrastructure investment in, 216 mobile phones in, 176–77 Ukraine, 143, 192, 233 Ultimate Resource, The (Simon), 294 unemployment benefits, 38, 164 United Fruit Company, 223 United Nations, 79, 212, 217, 258, 275, 298, 309 United Nations’ International Labour Organization, 57 United States, 19, 47, 68, 148, 231, 292, 300 China’s relationship with, 298–99 countries controlled by, 141 coups supported by, 100 democracy criticized in, 126 democracy in, 112, 296 and dictatorships, 139, 222 Iraq invasion by, 8, 118, 124, 146 leadership needed by, 234 natural capital in, 63 Panama invaded by, 144 post–World War II boom in, 262 protection provided by, 289–90 in World War II, 137 universities, 247 urbanization, 4, 22, 233, 268, 276–77, 279 US Agency for International Development (USAID), 95, 170, 171, 216, 308 Uyuni Sal Flat, 205 Uzbekistan, 8, 145, 185, 281, 285 vaccines, 77, 94, 161, 214, 233, 302 Velvet Revolution, 103 Venezuela, 22, 47, 106, 115 and democracy, 248, 263, 264 economic problems in, 255 natural capital in, 63 Vereenigde Oostindische Compagnie (VOC), 136–37 Vietnam, 36, 106, 144, 289 aid to, 214, 224 China’s example followed by, 266 growth in, 7, 45, 50, 125, 128, 147, 262 individual leadership in, 187 inequality in, 67 life expectancy in, 78 rice yields in, 215–16 textiles from, 56 Zheng He’s trip to, 152 Vietnam War, 100, 138, 141, 145, 289 Vincent, Jeffrey, 61 violence, 6, 20, 290 decline in, 4, 115–20, 116, 117, 119, 145–46 poverty deepened by, 119, 119 and poverty traps, 15 over resources, 284–86 Vitamin A deficiency, 173–74 Viviano, Frank, 152 Wade, Abdoulaye, 114, 224 Wałesa, Lech, 18, 103, 143, 149, 184, 186 Walls, Peter, 181 Walmart, 46 Wang Huan, 90–91 war, 5 attention to, 10 and poverty traps, 15 reduction of, 3, 4, 6 watchdog groups, 110 water, 77, 80, 161, 216, 275, 277–80, 307 water conservation, 233 water pollution, 8 water shortages, 22, 73 Watt, James, 25 Wealth and Poverty of Nations, The (Landes), 13 Wealth of Nations, The (Smith), 200–201 Weber, Max, 120 West Africa, 8, 10, 22, 205 colonialism in, 140 West Bengal, 31 Western Samoa, 75, 202 What We Know (AAAS report), 281–82 “When Fast Growing Economies Slow Down” (Eichengreen et al.), 236 White, Howard, 226 white supremacy, 124 “Why Isn’t the Whole World Developed?”


pages: 424 words: 115,035

How Will Capitalism End? by Wolfgang Streeck

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accounting loophole / creative accounting, Airbnb, basic income, Ben Bernanke: helicopter money, Bretton Woods, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, Clayton Christensen, collective bargaining, conceptual framework, corporate governance, creative destruction, credit crunch, David Brooks, David Graeber, debt deflation, deglobalization, deindustrialization, en.wikipedia.org, eurozone crisis, failed state, financial deregulation, financial innovation, first-past-the-post, fixed income, full employment, Gini coefficient, global reserve currency, Google Glasses, haute cuisine, income inequality, information asymmetry, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labour market flexibility, labour mobility, late capitalism, liberal capitalism, market bubble, means of production, moral hazard, North Sea oil, offshore financial centre, open borders, pension reform, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, post-industrial society, private sector deleveraging, profit maximization, profit motive, quantitative easing, reserve currency, rising living standards, Robert Gordon, savings glut, secular stagnation, shareholder value, sharing economy, sovereign wealth fund, The Future of Employment, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transaction costs, Uber for X, upwardly mobile, Vilfredo Pareto, winner-take-all economy, Wolfgang Streeck

The second, associated with the first, is an equally persistent rise in overall indebtedness in leading capitalist states, where governments, private households and non-financial as well as financial firms have, over forty years, continued to pile up financial obligations (for the U.S., see Figure 1.2). Third, economic inequality, of both income and wealth, has been on the ascent for several decades now (Figure 1.3), alongside rising debt and declining growth. Figure 1.1: Annual average growth rates of twenty OECD countries, 1972–2010* *Five-year moving average Source: OECD Economic Outlook. Figure 1.2: Liabilities as a percentage of U.S. GDP by sector, 1970–2011 Source: OECD National Accounts. Figure 1.3: Increase in GINI coefficient, OECD average Source: OECD Income Distribution Database. Steady growth, sound money and a modicum of social equity, spreading some of the benefits of capitalism to those without capital, were long considered prerequisites for a capitalist political economy to command the legitimacy it needs.

CHAPTER 2 The Crises of Democratic Capitalism CHAPTER 3 Citizens as Customers: Considerations on the New Politics of Consumption CHAPTER 4 The Rise of the European Consolidation State CHAPTER 5 Markets and Peoples: Democratic Capitalism and European Integration CHAPTER 6 Heller, Schmitt and the Euro CHAPTER 7 Why the Euro Divides Europe CHAPTER 8 Comment on Wolfgang Merkel, ‘Is Capitalism Compatible with Democracy?’ CHAPTER 9 How to Study Contemporary Capitalism? CHAPTER 10 On Fred Block, ‘Varieties of What? Should We Still Be Using the Concept of Capitalism?’ CHAPTER 11 The Public Mission of Sociology Index Notes Index List of Figures 1.1Annual average growth rates of twenty OECD countries, 1972–2010 1.2Liabilities as a percentage of U.S. GDP by sector, 1970–2011 1.3Increase in GINI coefficient, OECD average 1.4Government debt as a percentage of GDP, 1970–2013 1.5Total tax revenue as a percentage of GDP, 1970–2011 1.6Top marginal income tax rates, 1900–2011 1.7The broken social contract, U.S., 1947 to present 2.1Inflation rates, 1970–2014 2.2Unemployment rates, 1970–2014 2.3Strike days per 1,000 employees, 1971–2007 2.4Fiscal consolidation and private debt, as percentage of GDP, 1995–2008 2.5Four crises of democratic capitalism in the U.S., 1970–2014 4.1Liabilities (excluding financial corporations) as a percentage of GDP, by sector, six countries, 1995–2011 4.2Long-term interest rates on government bonds, selected OECD countries, 1998–2014 4.3Total central bank assets A Note on the Text Apart from the Introduction, the chapters in this collection have all been previously published: five out of eleven in New Left Review, one as a discussion paper of the research institute of which I served as director for almost two decades, and the rest in various books and journals.

See also corruption freedom, empire of, 46 G Galbraith, John Kenneth, 95, 99 General Theory (Keynes), 250 German Economics Ministry, 154 Germany allocation economy of, 97 commitment to public expenditure cuts by, 92–3 inflation rates (1970–2014), 80f introduction of concept of capitalism in, 3 liabilities as percentage of GDP (1995–2011), 118f long-term interest rates on government bonds (1998–2014), 120f news watching in, 109 political parties in, 110–11 renaming of Arbeitsamt (Labour Office), 105 rise of anti-euro party (AfD) in, 133 television channels in, 104 unemployment rates (1970–2014), 80f workers’ co-determination in, 74 Gerth, Hans, 38 GINI coefficient, increase in, 48f global anarchy, 28, 65, 71–2 global governance, 23 global hegemony, 6 global inflation, 16, 47 globalization, 22, 23, 116, 121, 144 global mobility, 63 global political confrontation, 6 Goldman Sachs, 32, 144, 198 Goldscheid, Rudolf, 115 Goldthrope, John, 79 Gordon, Robert, 65, 66 Götterdämmerung, 57 governance, as not enough to keep capitalism from going too far and undermining itself, 25 government debt, 50, 53, 54f, 66, 88, 89, 91, 121, 137, 214 government goods, 95–6, 106, 107 governments, as increasingly perceived as not agent of citizens but agent of other states/international organizations, 92 Graeber, David, 234 Gramsci, Antonio, 36 Great Depression (1930s), 7–8, 62, 87, 90 Great Recession (2008), 8, 18, 73, 119.


pages: 482 words: 117,962

Exceptional People: How Migration Shaped Our World and Will Define Our Future by Ian Goldin, Geoffrey Cameron, Meera Balarajan

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Admiral Zheng, agricultural Revolution, barriers to entry, Berlin Wall, Branko Milanovic, British Empire, conceptual framework, creative destruction, demographic transition, Deng Xiaoping, endogenous growth, failed state, Fall of the Berlin Wall, Gini coefficient, global supply chain, guest worker program, illegal immigration, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), job automation, Joseph Schumpeter, knowledge economy, labor-force participation, labour mobility, Lao Tzu, life extension, low skilled workers, low-wage service sector, Malacca Straits, mass immigration, microcredit, Network effects, new economy, New Urbanism, old age dependency ratio, open borders, out of africa, price mechanism, purchasing power parity, Richard Florida, selection bias, Silicon Valley, Silicon Valley startup, Skype, spice trade, trade route, transaction costs, transatlantic slave trade, transatlantic slave trade, women in the workforce, working-age population

Although incomes in all countries have risen over the long term, economists have found that “virtually all of the observed rise in world inequality has been driven by widening gaps between nations.”23 Figure 7.2. Gini coefficient: unweighted intercountry inequality 1950-1998. Each country is one observation. Branko Milanovic. 2003. “The Two Faces of Globalization: Against Globalization as We Know It,” World Development 31(4): 667-683, p. 675, figure 3. © Elsevier Branko Milanovic, a World Bank economist, illustrates this phenomenon by applying the Gini coefficient measure of inequality to the GDP per capita for 144 countries between 1950 and 1998 (see figure 7.2). Each country is treated as one unit, so China is given equal weighting to Fiji. This approach illustrates how economic conditions and opportunities differ dramatically from one country to another. While inequality remained relatively stable between 1960 and the mid-1970s, it has risen by about 20 percent since 1978.

Gaps in average professional salaries, selected country pairs, 2002-2006 Figure 6.4. Share of temporary employment by birth status, 2007 Figure 6.5. Gains in schooling: comparing gross enrollments at origin and abroad Figure 6.6. Comparing the educational attainment of migrant fathers and their children in Canada, by source region, 2008 Figure 7.1. Falling tariffs in three regions, 1950-2000 Figure 7.2. Gini coefficient: Unweighted intercountry inequality, 1950-1998 Figure 7.3. Percentage of regional and world populations living in cities, 1950-2050 Figure 7.4. Long-term trend in size of the working-age population in sub-Saharan Africa by level of educational attainment, 1970-2050 Figure 7.5. Population aged 15-64, medium variant projections, 1950-2050 Figure 7.6. Population growth and age distribution in South Africa and Nigeria Figure 7.7.

While inequality remained relatively stable between 1960 and the mid-1970s, it has risen by about 20 percent since 1978. Whereas for much of history, inequality was greatest within countries, today inequality between countries is far more significant. As a corollary of rising intercountry inequality, wages are higher in rich countries than in poor ones. Millions of Europeans left for the Americas in the late nineteenth century to seek, among other things, wages that were two to four times higher than those at home. Today, migrants stand to earn as much as fifteen times more by moving to another country to work. In a study comparing the wages for migrant workers in the United States to what they could have earned at home, the average migrant worker (the mean across forty-two countries) would make more than five times as much in the United States than at home.24 Some of the individual country wage ratios are presented in table 7.1.


pages: 411 words: 114,717

Breakout Nations: In Pursuit of the Next Economic Miracles by Ruchir Sharma

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3D printing, affirmative action, Albert Einstein, American energy revolution, anti-communist, Asian financial crisis, banking crisis, Berlin Wall, BRICs, British Empire, business climate, business process, business process outsourcing, call centre, capital controls, Carmen Reinhart, central bank independence, centre right, cloud computing, collective bargaining, colonial rule, corporate governance, creative destruction, crony capitalism, deindustrialization, demographic dividend, Deng Xiaoping, eurozone crisis, Gini coefficient, global supply chain, housing crisis, income inequality, indoor plumbing, inflation targeting, informal economy, Kenneth Rogoff, knowledge economy, labor-force participation, labour market flexibility, land reform, M-Pesa, Mahatma Gandhi, Marc Andreessen, market bubble, mass immigration, megacity, Mexican peso crisis / tequila crisis, new economy, oil shale / tar sands, oil shock, open economy, Peter Thiel, planetary scale, quantitative easing, reserve currency, Robert Gordon, Shenzhen was a fishing village, Silicon Valley, software is eating the world, sovereign wealth fund, The Great Moderation, Thomas L Friedman, trade liberalization, Watson beat the top human players on Jeopardy!, working-age population, zero-sum game

Three out of four young blacks in rural areas have no job. Meanwhile urban professionals have no unemployment problem at all (0.4 percent). The income gap is just as wide today as it was when the ANC finally toppled the apartheid government nearly two decades ago; the standard measure of inequality, the Gini coefficient, is still stuck at 0.7 percent—one of the highest rates in the world. (At zero on the Gini scale, everyone has the same income, and at 1, just one person has all the income.) Few other countries, including Zimbabwe and Namibia, have a Gini coefficient of more than 0.6. Thus the surreal calm of South Africa grows more difficult to explain every year. The Indian Honeymoon The peace and quiet defies the momentum of an age when the Internet is accelerating the pace of social revolts, even in repressive dictatorships.

Kospi,” 153, 164 drug cartels, 74, 79–80 Dubai, 188, 214, 218–19 Dubai World, 214 Dubrovnik, 97 Dun Qat refinery, 201 DuPont, 9 “Dutch disease,” 179, 220 earnings, corporate, 3 East African Community (EAC), 208–9 East Asia, 8, 10, 46, 131–32, 146, 196–97, 208, 245 “East Asian tigers,” 8, 10, 146 “easy money,” 5–6, 11, 13–14, 38, 105, 133, 176–77, 182–83 economic transformation program (ETP), 151 economies: agrarian, 9, 17–18, 21, 22, 27 business cycles in, 2, 5–6, 11, 223 command-and-control, 29–30, 39, 156, 199–200 commodity, 133–34, 137–38, 223–39 counter-cyclical, 120–21 developing, see developing countries diversified, 165–66 emerging markets in, vii–x, 2–11, 37–38, 47, 64, 94, 185–91, 198–99, 242–49, 254–55, 259–62 forecasting on, x, 1–14, 17, 18, 31–32 global, 1–2, 4–5, 6, 7–8, 9, 12, 14, 18–19, 37, 38, 51–52, 68–71, 153–55, 158–59, 161, 167–69, 170, 176, 178, 183–91, 222–24, 228–31, 233–36, 241–42, 249–54 growth rates in, 8–11, 185–91, 244–49, 254–55 historical trends in, ix–x, 2, 9, 10–11 knowledge, 236–37 parallel, 79–80 recessions in, 5–6, 9, 11, 18, 34, 80, 101, 109, 131, 132, 144, 225, 244, 249–51 “tiger,” 8, 10, 46 volatility of, 249–51 see also specific countries Economist, 207 education, x, 5, 12, 22, 63, 65, 76, 121, 168–69, 206, 218, 220 efficiency, 63–64 “efficient corruption,” 135–37 Egypt: author’s visit to, ix corruption in, 217 economic reform in, 27, 28, 126–27, 217–18 as emerging market, 204, 235 foreign investment in, ix, 92 inflation rate in, 88 revolts in, 127, 216 stock market of, 190 Eighth Malaysian Plan, 151 Einstein, Albert, 238 El Beblawi, Hazem, 128 el dedazo (“the big finger”), 76–77 election cycles, 2 electromagnetic radiation, 17 “electronic wallet,” 208 Elle, 53 emerging markets, vii–x, 2–11, 37–38, 47, 64, 94, 185–91, 198–99, 242–49, 254–55, 259–62 energy efficiency, 226–27 energy sector, 5, 13, 51–52, 67–68, 82, 125, 170, 212–13, 215, 223, 224–29 English language, 37, 52–53, 141, 196, 203–4 entrepreneurship, 38, 43, 58, 96, 144, 166, 186, 225 entry point projects (EPPs), 151 environmental issues, 17, 135 Equatorial Guinea, 210 Erbakan, Necmettin, 114–15 Erdogan, Recep Tayyip, 111, 112, 113–14, 116–18, 123, 124–28, 210, 245 “errors and omissions,” 150 Eskom, 177 Estonia, 109 euro, 100, 105, 107, 108 Eurocentrism, 206 Europe: agriculture in, 231–32 banking system of, 12 Central and Eastern, 8, 11, 97–110, 121, 170, 203, 247 debt levels in, 57, 97, 100, 121–22, 252 economy of, 7, 12, 107–8, 230, 241, 245 foreign investment by, 2, 7, 20, 100, 104–8 foreign trade of, 145, 159 GDP in, 20, 100 government deficits in, 100 growth rate of, 6, 241, 242 manufacturing sector of, 247 political unity of, 11, 49, 53, 97–98, 208–9 recessions in, 101, 132 unemployment in, 101, 126 welfare states in, 63 see also specific countries European Community (EC), 208–9 European Union (EU), 11, 97–98, 101, 105, 106–8, 109, 115–16, 118, 121–22, 159, 253–54 Eurozone, 11, 99–100, 105, 106–8, 109, 121–22, 254 expatriate workers, 219 Facebook, 41 factories, 17–18, 22–23, 28, 43, 67, 68, 132, 230 “fairness creams,” 54 family enterprises, 125–26, 134–38, 155, 160, 161–63, 167–69, 254 “farmhouses,” vii–viii fast-food outlets, 53 Federal Palace Hotel, 212 Federal Reserve Board, 5–6, 222 feeder ships, 200 Femsa, 75 Fiat, 120 fiber-optic cables, 207–8 Fidesz Party, 104–5 Fiji, 4 film industry, 44, 47, 167, 186, 211 “financialization of commodities,” 227–28 Finland, 238, 251 First Coming, 243 fishing industry, 193 five-year plans, 20, 27, 150–51 Forbes, 47, 91 “forced listing,” 188 Ford, 75, 120 foreign investment, vii–x, 2, 7–8, 9, 18, 20, 32, 35–36, 37, 43–44, 49–50, 59, 63, 64, 66, 68–72, 86, 87, 91–94, 100, 104–8, 118, 119–20, 133–35, 137, 139, 140–41, 144, 146–50, 151, 183–84, 198–200, 201, 203–5, 206, 225 foreign trade, vii, x, 6, 7, 13, 18, 20–21, 23, 26, 28, 29, 31, 32–33, 43, 59, 61, 62, 67–68, 72, 75, 80, 83, 85, 86, 90, 117, 120, 122, 132, 133–34, 144–45, 147, 148, 157, 158–59, 162, 178, 183, 196–97, 198, 206, 220, 223, 226, 232, 233–34 Four Seasons Hotel, 111, 232, 233 Four Seasons Index, 232, 233 “$4,000 barrier,” 7–11 Fourth World, 185–91, 204–9, 220, 221 Fox, Vicente, 77 Fraga, Arminio, 72 France, 63, 100, 121, 123–24 Franklin, Benjamin, 214 Freedom House, 205 “free float,” 188 free markets, x, 8–9, 96, 104 French, Patrick, 47 French Riviera, 59–61 frontier markets, 89, 185–91, 213, 261–62 Fujian Province, 164 futures contracts, 5 Gandhi, Indira, 55 Gandhi, Rahul, 48 Gandhi, Sanjay, 55 Gandhi, Sonia, 39 Gandhi family, 39, 47–48, 55, 57 gas, natural, 13, 85, 179, 214, 215, 217, 225, 235 gasoline, 126, 215 GaveKal Dragonomics, 229 Gaziantep, 125 General Electric, 9 generators, electric, 212–13 Germany: billionaires in, 45 economy of, 103 as EU member, 107, 121 GDP of, 247 low-context society of, 40 manufacturing sector in, 157, 158–59, 247 population of, 37 public transportation in, 16 South Korea compared with, 168–69 Germany, East, 102 Gertken, Matthew, 29 Ghana, 187 Gibson, Mel, 129 Gini coefficient, 173 Girl’s Generation, 167 glass manufacturing, 221 Globo, 61 GM, 75, 163 “go-go stocks,” 3 gold, 3, 141, 176, 178, 179–80, 192, 202, 205, 224, 229–30 “Goldilocks economy,” 4, 5–6 gold shares, 179–80 gold standard, 178 Goldstone, Jack, 217 Goodhart, Charles, 11 Goodhart’s law, 11 Google, 41, 237–38 Gorbachev, Mikhail, 103 “Goulash Communism,” 101 government paper, 116 government spending, 41–42, 63, 65, 66–67, 70–71, 72, 86, 87–88, 109, 133, 181–83, 190 government transformation program (GTP), 151 graft, 43–44 see also corruption Great Britain: auto industry in, 31 empire of, 49, 118, 192 foreign investment by, 206 government of, 89 labor force of, 100 public transportation in, 16 socialism in, 150 Great Depression, 101, 109, 252–53 Great Moderation, 250–51 Great Recession (2008), 5–6, 9, 59, 66, 76, 80–81, 88, 92–93, 100, 101, 102, 103, 109, 119, 122, 131, 144, 180, 189, 225, 243, 247–49, 250, 254 Greece, 11, 27, 30, 99, 100, 107–8, 121, 181, 252 green revolution, 231–32 Greenspan, Alan, 6 gross domestic product (GDP), 1, 3–4, 6, 17, 18, 20, 26, 32, 43, 49, 57, 63, 65, 66, 67, 72, 85, 92, 100, 107, 110, 116, 117, 119, 120, 121, 131, 133, 139, 140, 141, 142, 144–45, 147, 149, 155, 157, 158, 159, 161, 165, 170, 173, 178–79, 180, 191, 206, 208, 210, 214, 215, 217, 218, 219, 228, 236, 243, 247, 252 Group of Twenty (G20), 215 growth corridors, 151 Gül, Abdullah, 118, 123–24, 127 Gulf States, 214–21, 244, 245 see also specific states Gupta, Anil K., 237 Habarana, 196 Hall, Edward, 39–40 Hallyu, 167 Hambantota, 197 Hanoi, 198, 200 Han people, 53 Harmony Gold, 180 Harvard School of Public Health, 241 Havel, Václav, 111 Hayek, Friedrich, 109 Hazare, Anna, 42–43 headscarves, 123–24 health care, 63 helicopters, 60, 64, 72 herd behavior, 8, 228–31 high-context societies, 39–40, 41, 47 high-speed trains, 15–16, 20, 21 highways, 17, 20, 21, 65, 231 Hindi language, 52–53, 56 “Hindu rate of growth,” 174 Hindustan Times, 53 Hirsch, Alan, 178 Ho Chi Minh City, 200, 201, 203 Honda, 161 Hong Kong, 9, 141, 235 “Hopeless Continent,” viii Hotel Indonesia Kempinksi, 129 hotels, 12, 31, 59–61, 65, 111, 232, 233 “hot money,” 149–50 housing prices, 5–6, 16, 18, 24–25, 28–29, 31, 32, 61, 92, 103–4 HP, 158 Huang, Yukon, 28 Huang Guangyu, 46 Hu Jintao, 29 Humala, Ollanta, 66–67 human-rights violations, 193 Hungary: banking in, 105 as breakout nation, 99–100, 101 economic growth of, 99, 104–6, 109 as emerging market, 104–6 as EU candidate, 100, 105 foreign investment in, 104, 105 GDP of, 100 growth rate of, 244 income levels of, 8 industrial production in, 101 political situation in, 104–5, 109 population of, 106 post-Communist era of, 101, 104 welfare programs of, 106 Hussein, Saddam, 195 Huxley, Aldous, x hyperinflation, 39, 42, 62, 66 “hypermarkets,” 90–91 Hyundai, 90, 156, 158, 161–63, 168 identification cards, 213 immigration, 79, 82, 85, 95 income: national levels of, 4, 8, 11, 16–21, 24–25, 31–32, 38, 58, 61, 63, 72, 75, 83, 86–87, 88, 97–98, 113, 116, 121, 138, 139–40, 141, 144, 145, 148, 153–55, 157, 173, 176–77, 182–83, 204 per capita, ix, 7–8, 11, 13, 19–21, 41, 58, 61, 63, 72, 73–75, 76, 88, 97–98, 109, 116, 127, 131–32, 138, 148, 176–77, 204, 207, 216, 244, 245–46 taxation of, 44, 51, 63, 76, 86, 106, 126–27, 182, 214, 221 India, 35–58 agriculture of, 38, 44, 54, 57 auto industry of, 54, 161, 162, 173 baby-boom generation in, 37–38 billionaires in, viii, 25, 44–47, 79, 254 Brazil compared with, 10, 39–43, 61, 70 as breakout nation, 38–39, 49 capitalism in, 38–39, 42, 46–47, 49, 50–51, 58 China compared with, 1, 10, 19, 25, 36, 37–38, 41, 45, 47, 52, 53, 56, 57, 58 consumer prices in, 38, 39, 49, 52–54, 57 corruption in, 42, 43–44, 45, 46–47, 49–51, 58 credit market in, 38, 51 debt levels in, 57–58 democracy in, 30, 48–49, 50, 55–56, 58 “demographic dividend” for, 37–38, 55–56, 58 domestic market of, 36, 43 economic reforms in, 28, 38–39, 49 economy of, 28, 35–58, 174, 204 elections in, 48–49, 50, 55 “Emergency” period of, 55–56 as emerging market, 3–4, 10, 30, 35–39, 43, 49, 106, 253 English spoken in, 37, 52–53 entrepreneurship in, 38, 43, 58 film industry of (Bollywood), 44, 47, 167, 211 forecasts about, 35–36, 37, 39–40 foreign investment in, vii–viii, 7, 35–36, 37, 43–44, 49–50, 183, 225 foreign trade of, vii, 43, 157 Gandhi family in, 39, 47–48, 55, 57 GDP of, 1, 3–4, 43, 49, 57 as global economy, 1, 37, 38, 51–52 government of, 30, 38–39, 41–43, 47–52, 55–58 government spending in, 41–42 growth rate of, 3–4, 9, 30, 35–58, 61, 64, 87, 88, 174, 241, 244 high-context society in, 39–40, 47 income levels of, 8, 19, 54, 58 independence of, 174, 175, 176 Indonesia compared with, 135, 136 inflation rate in, 39, 43–44, 248 infrastructure of, 10, 43, 51 investment levels in, 43–44, 49–50 labor market in, 38, 55 leadership of, 38–39, 41–42, 47–52, 57–58, 174 License Raj of, 38 middle class of, 42–43, 52–56 mining industry of, 44, 254 natural resources of, 51–52, 235 northern vs. southern, 49–52, 54, 58 outsourcing industry in, 141 parliament of, 43, 44, 47–49 political situation in, 30, 37, 38–39, 47–49, 50, 55–58, 174 population of, 19, 37–38, 52–56, 57, 58, 95 poverty in, 41–42, 52–53, 57–58 price levels in, 53 productivity in, 64 real estate market in, 44, 254 “rope trick” in, 35–36, 36, 37, 58 rural areas of, 38, 57 Russia compared with, 36–37, 44–45, 46, 87, 88, 95 social unrest in, 42–43, 55–56 Sri Lanka’s relations with, 196, 197 state governments of, 37, 44, 48–52 sterilization (vasectomy) program in, 55–56 stock market of, 36–37, 38, 70, 189, 243, 244 taxation in, 44, 51 technology sector of, 141, 166, 254 unemployment in, 41–42 wealth in, vii–viii, 25, 44–47, 57, 79 welfare programs of, 10, 41–42 India: A Portrait (French), 47 Indian Ocean, 197 Indonesia, 129–38 in Asian financial crisis, 131–35 banking in, 133–34, 135 billionaires in, 131–32 China compared with, 132–33, 135, 136 Chinese community in, 129 consumer prices in, 137–38, 232 corruption in, 134–35 currency of (rupiah), 131 economic reforms in, 132–38, 147 economy of, 28, 132–38, 147, 174, 254 elections in, 136–37 as emerging market, 133, 232 family enterprises in, 134, 138, 254 foreign investment in, 7, 133–35, 137 foreign trade of, 132, 133–34, 157, 159 GDP of, 131, 133 government of, 30, 132–37 growth rate of, 132–33, 136, 137, 245, 246, 254 income levels of, 8, 131–32, 138 India compared with, 135, 136 inflation rate of, 137–38, 249 labor market in, 23, 203 land development in, 135–36 national debt of, 134–35 natural resources of, 133–34, 159, 235 Philippines compared with, 132, 138, 140 political situation in, 129, 132, 133, 134, 135, 136, 137, 210 population of, 133, 136 Russia compared with, 137–38 urban decentralization in, 136–37 wealth of, 131–38 industrialization, 10, 67, 68, 101 inflation rate, x, 4, 5, 17, 22, 23, 24, 25, 31, 33, 39, 42, 43–44, 62, 66, 68–69, 88, 104, 115, 116, 118, 137–38, 176, 177, 179, 202, 226, 228, 247–49, 250, 254 Infosys, 37 infrastructure, x, 10, 15–16, 20–21, 43, 51, 61, 62, 64, 65, 69, 84–85, 88, 90–91, 116, 120–21, 199, 200–201, 239 inheritance taxes, 44 insider trading, 46, 187 Institutional Revolutionary Party (PRI), 76–78 Intel, 164, 203–4 intellectual property, 238 interbank loans, 150 interest rates, 6, 11, 62, 67, 68–70, 105, 106, 107, 115, 119, 120, 228–29, 247–49, 250 internal devaluation, 108, 109 International Finance Corporation, 214 International Monetary Fund (IMF), 101, 115, 160, 173, 208, 216–17 Internet, 2, 85, 173, 175, 177, 207–8, 220, 225, 230, 237–39 interregional exports, 206–7 investment, viii, x, 2–8, 19, 37, 90, 96, 131, 144, 146–50, 156, 160–61, 165, 190, 212–13, 220, 223–29, 231, 235, 236–38, 244 see also foreign investment Ipanema Beach, 21, 61, 65, 66 Iran, 10, 123, 189, 190 Iraq, 10, 122, 189, 195 iron, 51–52, 59, 67, 69, 180, 232 Iron Curtain, 101 Iskandar region growth agenda, 151 Islam, 111, 113–17, 119, 121, 122, 123–24, 127, 146, 162, 211, 219, 220, 246 Islamic Museum, 219 Israel, 122, 127 Istanbul, 111, 115, 122, 125, 146 Italy, 40, 99 Ivory Coast, 208 Izmir, 115, 124, 125, 146 Jaffna Peninsula, 193, 195 Jakarta, 129–31, 135, 136, 137, 232 Jalan Sudirman, 129 Japan: in Asian financial crisis, 155–56 auto industry of, 139, 144, 161 China compared with, 18, 20, 22, 24, 31, 32–33 currency of (yen), 32–33 democratic government of, 30 economic slowdown of, 22, 254 economy of, 8, 20, 22, 81, 90, 197, 230, 235, 242, 253, 254 foreign trade of, 7, 32–33, 144–45, 157, 159 GDP of, 144–45 growth rate of, 6, 32–33, 44, 235 income levels of, 20, 138, 144 inflation rate in, 31 manufacturing sector of, 157, 159, 170, 230, 235 pop culture in, 167 population of, 169 property values in, 24, 252 public transportation in, 20 real estate market in, 3 recession in, 109 research and development (R&D) in, 160–61, 237 social conformity in, 200 South Korea compared with, 153, 155–56, 157, 159, 160–61, 163, 164, 167, 168, 169, 170 stock market of, 156, 235 Taiwan’s relations with, 163–64 technology industry of, 160–61, 236–38 Thailand compared with, 139, 144–45 Java, 137 “Jeepneys,” 130, 138 Jews, 118, 149 Jharkhand, 46 Jiang Zemin, 29 Jobbik (Movement for a Better Hungary), 105 Jockey underwear, 54 Johannesburg, 181, 204 Jonathan, Goodluck, 209–11, 213 Jordan, 122 J-pop, 167 junk bonds, 228 “just-in-time” supply chains, 80 Kabila, Laurent, 205 Kagame, Paul, 206 Kano, 213 Kaohsiung, 136 Kapoor, Ekta, 41 Karachi, 190 Karnataka, 50, 51 Kashmir, 49, 50 Kasimpasa neighborhood, 125 Kayseri, 124 Kazakhstan, 30, 89, 93, 123, 212 Kazan, 85 Kennedy, John F., 129 Kenya, 191, 205, 209 Keynes, John Maynard, 109 KGB, 86 Khodorkovsky, Mikhail, 87 Kia, 161, 162–63 kidnappings, 78–79, 190–91 Kim Jong Il, 170 Kinshasa, 205 Kirchner, Cristina, 89 Kirchner, Nestor, 89 Klaus, Vaclav, 108 Koç family, 125 “Korea Discount,” 167–69 “Korean Wave,” 122, 167 KOSPI index, 70, 153, 155, 156, 164, 165 K-pop, 122, 154, 167 Kuala Lumpur, 147, 148, 151 Kumar, Nitish, 50–51 Kuwait, 187–88, 214, 216, 218, 219 Kuznets curve, 76 labor market, 7, 17, 21–23, 27, 32, 38, 47, 55, 64, 65, 76, 77, 102, 103, 104, 164, 169–70, 174–75, 179, 180–81, 199, 203–4, 246–47 Lada, 86 Lafarge, 213 Lagos, 211, 212, 213 landlines, 207 land-use laws, 25, 168 Laos, 188 laptop computers, 158, 164 large numbers, law of, 7 Last Train Home, The, 22–23 Latin America, viii, 40–41, 42, 73–75, 81, 89, 246 see also specific countries Latvia, 101 Lavoisier, Antoine, 235–36 law, rule of, x, 50–51, 89, 96, 127, 181–82 lead, 19 Leblon neighborhood, 61 Lee Kwan Yew, 118, 148, 193 Lehman Brothers, 164 Le Thanh Hai, 203 Lewis, Arthur, 21 “Lewis turning point,” 21 LG, 158, 163 “Liberation Tigers” of Tamil Eelam, 192–93, 197 Liberty, 178 Libya, 127, 216 Limpopo River, 171 Linux, 238 liquidity, 9, 228–30 liquor stores, 126 literacy rate, 52 Lithuania, 101, 109 Lixin Fan, 22–23 loans, personal, 12, 24, 116, 125, 150 long-run forecasting, 1–14 L’Oréal, 31 Louis Vuitton, 31 Lugano, 40 Lula da Silva, Inácio, 59, 61, 66, 70, 210, 226, 248 luxury goods, vii–viii, 12, 25, 31, 236 Macao, 201 macroeconomics, 7–8, 13, 66, 67, 145–46, 188 “macromania,” 7–8, 188 Made in America, Again, 246–47 “made in” label, 155, 246–47 Madhya Pradesh, 52 maglev (magnetic levitation) trains, 15–16, 231 Magnit, 90–91 Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), 41–42 Malaysia, 146–52 in Asian financial crisis, 18, 131–32, 146–47, 149–50 banking in, 146, 149–50, 151, 252 currency of (ringgit), 131, 146–47, 149 economic planning in, 150–52, 161 economy of, 18, 118, 150–52, 161, 235 electronics industry of, 147–48 as emerging market, 10, 45, 118, 149, 161, 235 foreign investment in, 146–50, 151 foreign trade of, 6, 144, 147, 157 GDP of, 145, 147, 149 government of, 146, 148–52 growth rate of, 9, 147–48, 149, 244 income levels of, 138, 148 manufacturing sector in, 147–48, 150 political situation in, 146–49 Singapore compared with, 118 stock market of, 131, 235 Thailand compared with, 144, 145, 147 wealth of, 148 Mali, 208 Malta, 30, 106 Malthus, Thomas, 225, 231–32 Mandela, Nelson, 171, 172, 176 Manila, 130, 138, 139, 140, 141 Manuel, Trevor, 176 manufacturing sector, 17–18, 22–23, 28, 43, 54, 75, 80, 88–89, 90, 110, 124, 132, 147–48, 150, 155, 157, 158–59, 160, 161–66, 168, 170, 180, 221, 230, 235, 246–47, 265 Maoism, 37, 47 Mao Zedong, 21, 27, 29 Marcos, Ferdinand, 138, 139, 210 markets: black, 13–14, 96, 126 capital, 69, 70–71; see also capital flows commodity, 12, 13–14, 223–39 currency, 4, 9, 13, 28 domestic, 36, 43, 183 emerging, vii–x, 2–11, 37–38, 47, 64, 94, 185–91, 198–99, 242–49, 254–55, 259–62 free, x, 8–9, 96, 104 frontier, 89, 185–91, 213, 261–62 housing, 5–6, 16, 18, 24–25, 28–29, 31, 32, 61, 92, 103–4 labor, 7, 17, 21–23, 27, 32, 38, 47, 55, 64, 65, 76, 77, 102, 103, 104, 164, 169–70, 174–75, 179, 180–81, 199, 203–4, 246–47 see also stock markets Mato Grosso, 232 Mayer-Serra, Carlos Elizondo, 78 MBAs, 225 Mbeki, Thabo, 176, 206 Medellín drug cartel, 79 Medvedev, Dmitry, 95–96 Mercedes-Benz, 86, 144 Merkel, Angela, 108 Mexican peso crisis, 4, 9 Mexico, 73–82 antitrust laws in, 81–82 banking in, 81, 82 billionaires in, 45, 47, 71, 78–80 Brazil compared with, 71, 75 China compared with, 80, 82 consumer prices in, 75–76 corruption in, 76–77 currency of (peso), 4, 9, 73, 80, 131 drug cartels in, 79–80 economy of, 4, 12, 28, 73–82, 178, 183 emigration from, 79, 82 foreign exports of, 6, 75, 80, 158 GDP of, 76, 77, 81 government of, 76–78 growth rate of, 73–82, 244 income levels of, 8, 73–75, 76, 113 labor unions in, 76, 77 national debt of, 76, 80–81 nationalization in, 77–78 oil industry of, 75, 77–78, 82 oligopolies in, 73, 75, 76–82, 178 parliament of, 76–77 political situation in, 76–78, 82 population of, 73 stock market of, 73, 75, 76, 81 taxation in, 76 U.S. compared with, 75, 79, 80 Mexico City, 75 micromanagement, 151 middle class, 10, 19–20, 33, 42–43, 52–56, 182, 211, 236 Middle East, 38, 65, 68, 113, 116, 122, 123, 125, 166, 170, 189, 195, 214–21, 234, 246 middle-income barrier, 19–20, 144–45 middle-income deceleration, 20 Miller, Arthur, 223 minimum wage, 29, 63, 126, 137 mining industry, 44, 93, 154, 175, 176, 178–80 Miracle Year (2003), 3–6 misery index, 248–49 Mittal, Sunil Bharti, 204–5, 206, 209 mobile phones, 53, 86, 204–5, 207–8, 212, 237 Mohammed, Mahathir, 146–47, 148, 151 Moi, Daniel arap, 205 monetization, 225 Money Game, The (Smith), 234 Mongolia, 191 monopolies, 13, 73, 75–76, 178–79 Monroe, Marilyn, 129 Monte Carlo, 94 “morphic resonance,” 185 mortgage-backed securities, 5 mortgages, 5, 92, 105–6 Moscow, 12, 83, 84, 90, 91, 96, 136, 137, 232 mosques, 111 Mou Qizhong, 46 Mozambique, 184, 194–95, 198, 206 M-Pesa, 208 MTN, 212–13 Mubarak, Gamal, 218 Mubarak, Hosni, 92, 127, 218 Mugabe, Robert, 176, 181 Multimedia Supercorridor, 151 multinational corporations, 53, 73, 75, 81, 151, 158–59, 160, 184, 230 Mumbai, 43, 44, 79, 214, 244 Murder 2, 167 Murphy’s law, 11 Muslim Brotherhood, 127 Mutual, 178 mutual funds, 178–79 Myanmar, 30 Myspace, 41 Naipaul, V.

But Mexican corporations are taking an even larger share of the Mexican pie—about 25 percent of GDP. Normally, rising inequality is a necessary but temporary downside of rapid development, but in Mexico the oligopoly culture is creating a self-perpetuating form of inequality. Mexico is a troubling outlier on the Kuznets curve, which shows that in the early stages of a country’s development, a rising tide normally lifts all boats, but it lifts incomes of the upper class much faster than those of the working class. There are a few nations, including Taiwan and South Korea, that managed to beat the curve and produce fast growth with growing equality for many decades. Mexico has produced high inequality with little growth: indeed the entrenched power and wealth of its elite are major impediments to growth. A rule of the road: strong companies and stock markets should—but do not necessarily—make for strong economies, so don’t confuse the two.


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The Verdict: Did Labour Change Britain? by Polly Toynbee, David Walker

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banking crisis, Big bang: deregulation of the City of London, Bob Geldof, call centre, central bank independence, congestion charging, Corn Laws, Credit Default Swap, decarbonisation, deglobalization, deindustrialization, Etonian, failed state, first-past-the-post, Frank Gehry, gender pay gap, Gini coefficient, high net worth, hiring and firing, illegal immigration, income inequality, Intergovernmental Panel on Climate Change (IPCC), knowledge economy, labour market flexibility, market bubble, mass immigration, millennium bug, moral panic, North Sea oil, Northern Rock, offshore financial centre, pension reform, Plutocrats, plutocrats, Ponzi scheme, profit maximization, purchasing power parity, Right to Buy, shareholder value, Skype, smart meter, stem cell, The Spirit Level, too big to fail, University of East Anglia, working-age population, Y2K

Without changing the basic distribution of wealth and income, they could never attain their stated ambition. Something was pulling incomes apart in all rich countries, except possibly France. Overall income inequality is measured by a standard called the Gini coefficient – the higher it is, the more unequal the society. On a scale of 100 in 2008, the US figure was 46.6. When Labour left office in 1979, the UK stood at 25. It rose during the 1980s, far more than in comparable countries, stabilizing at 34 in the early 1990s. From 1997 it rose two points to 36 – notably higher than Germany, Canada, France and the Scandinavian countries. This amounted to ‘some edging up of inequality under Labour’, but nothing like the big rise in the 1980s. It was largely accounted for by the richest 1 per cent of the population increasing their share of income.

(‘He’ because women had still to penetrate the upper reaches of the legal profession.) Income inequality had risen dramatically before 1997. To make a difference, Labour would have needed a much clearer understanding of trends than ministers could muster, especially the spread of rewards within private companies. Yet under Labour child poverty showed its sharpest fall for decades, and the UK showed the biggest drop in the EU. For the first time since the mid 1970s the figures were moving in the right direction. Labour certainly stopped things getting worse. Professor John Hills of the London School of Economics, an expert witness, even put a number on Labour’s impact. Child poverty would have been between 6 and 9 per cent higher if not for Labour’s measures. The Gini coefficient would have gone up three points rather than the two points it actually rose under Labour.

Brown too, despite using the words fair and fairness forty times in his 2008 conference speech. How much money people have relative to others is the touchstone of equity. Gender, race, disability and class can generate injustice, but income decides, binding children’s life chances to their home background. Labour tried but did not quite prevent income inequality getting worse in an already notably unequal country. But they slowed down the rise in inequality. Tax, benefits and spending changes ‘significantly redistributed income to the less well off’, the Centre for Economic Performance concluded. ‘Inequality would have been much higher otherwise.’ The 1997 campaign banned references to poverty as too redolent of Old Labour. So when Blair, having been prime minister for only a month, walked up a disinfected stairway on the Aylesbury estate in Peckham to make his first speech about the plight of the poor, he addressed ‘social exclusion’ instead.


pages: 831 words: 98,409

SUPERHUBS: How the Financial Elite and Their Networks Rule Our World by Sandra Navidi

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activist fund / activist shareholder / activist investor, assortative mating, bank run, barriers to entry, Bernie Sanders, Black Swan, Bretton Woods, butterfly effect, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, commoditize, conceptual framework, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversification, East Village, Elon Musk, eurozone crisis, family office, financial repression, Gini coefficient, glass ceiling, Goldman Sachs: Vampire Squid, Google bus, Gordon Gekko, haute cuisine, high net worth, hindsight bias, income inequality, index fund, intangible asset, Jaron Lanier, John Meriwether, Kenneth Arrow, Kenneth Rogoff, knowledge economy, London Whale, Long Term Capital Management, Mark Zuckerberg, mass immigration, McMansion, mittelstand, money market fund, Myron Scholes, NetJets, Network effects, offshore financial centre, old-boy network, Parag Khanna, Paul Samuelson, peer-to-peer, performance metric, Peter Thiel, Plutocrats, plutocrats, Ponzi scheme, quantitative easing, Renaissance Technologies, rent-seeking, reserve currency, risk tolerance, Robert Gordon, Robert Shiller, Robert Shiller, rolodex, Satyajit Das, shareholder value, Silicon Valley, sovereign wealth fund, Stephen Hawking, Steve Jobs, The Future of Employment, The Predators' Ball, too big to fail, women in the workforce, young professional

While college graduates are 8 times likelier to live in the upper-income tiers—though often with a debt-albatross around their necks—those without a degree have virtually no chance of improving their station in life.11 As a consequence, Americans have come to realize that the American dream has been just that, a dream, and their typically optimistic outlook has given way to gloom, with only 14 percent foreseeing a better life for their children.12 The life expectancy of American whites has been falling as suicide rates are on the rise.13 As evidenced by a recognized measure called the Gini coefficient, the level of inequality in many parts of the world is dismal.14 Globalization Winners versus Globalization Losers To make matters worse, many governments, together with central banks and the financial sector, have resorted to using “accommodative monetary policies”—meaning expanding the overall money supply, or what is commonly referred to as “printing money”—to reduce debts and stimulate demand.

See Wealth gaps Gates, Bill, 4, 70, 128 Geithner, Timothy AIG and, 183 appointment as U.S. treasury secretary, 188 background on, 45–46 at Bilderberg conference, 121 CEO relationships with, 174 Jamie Dimon and, 57 Larry Fink and, 30–31 in Lehman Brothers collapse, 172–173 Nouriel Roubini and, 47 personal relationships and, 11, 172 in public and private sectors, 165 relationship with Bernanke and Paulson, 11 Robert Rubin and, 168 Gekko, Gordon, 191, 210 Gender discrimination, 201 Gender gap, 147, 158–161 Genentech, 199 Generosity, 105 Geneva, Switzerland, 93 Gergiev, Valery, 116 Germany, 37, 39, 84, 116, 141–142, 174, 178, 190 Gini coefficient, 211 Give and Take, 104 “Givers,” 104–105 “Giving Pledge,” 70, 126 “Glass cliff,” 154 Glass-Steagall Act, 167, 188 Glencore, 171, 205 Global Competitiveness Report, 96 “Global corporate citizenship,” 63, 95 Global corporations, 178–179 Global Risk Report, 212 Globalization, xxvi, 8, 95, 97, 211, 213, 220 Goethe, 76 Goethe University Frankfurt, 142 Goldman Sachs, 23, 36, 44, 52, 76, 84, 88, 91, 121, 136, 151, 156, 165–166, 168, 184, 189, 217 Goodbye Gordon Gekko, 24 Google, 40, 114, 199 Gorbachev, Mikhail, 16 Gordon, Robert, 220 Gorman, James, 89 Grant, Adam M., 104 Great Britain, 9 Great Depression, 34, 36, 186, 219 Greece, 27, 110, 132, 177, 194 Greed, 220–221 Green, Michael, 128 Greenspan, Alan, 35–36, 42, 44, 220 Gregory, Joe, 182 Griffin, Kenneth, 76, 82, 87, 121 Grill Room, 124 Grímsson, Olafur Ragnar, 9 Gross, Bill, 53, 65–69 Gross domestic product debt versus, 210 finance as, 12 Group of Thirty, 105, 118, 222–224 Groupthink, 51 Guanxi, 103 Guardian, 87, 160 Guare, John, 18 H Haakon, Prince of Norway, 114 Haines, Stephen, 218 Haldane, Andrew, 214 “Halo effect,” 23 Hamilton, Alexander, 167 Hamilton Project, 168–169 Hamptons, 91 Hanauer, Nick, 13, 212 “Hard power,” 225 Harvard Business Review, 87, 152 Harvard Business School, 41, 57, 61, 199 Harvard Club, 195 Harvard Corporation, 168 Harvard Gay & Lesbian Caucus, 200 Harvard Kennedy School of Government, 96 Harvard Law School, 23, 199 Harvard University, 36, 47, 81–82, 153, 166, 174, 185, 187, 198 Hawking, Stephen, xxvi Hedge fund(s), 23–24, 27, 63, 70–71, 75, 82, 86–87, 111, 188 Hedge fund managers earnings by, 87–88 residences of, 90 women as, 149 Heffernan, Margret, 224 Henry Crown Fellowship Program, 200 Herrhausen, Alfred, 136 Heterophily, 147 Hierarchy creditworthiness and, 51 opposition to change by, 227 purposes of, 225 social, 22 status and, 22 at World Economic Forum, 114 Highbridge Capital Management, 90 “High-Level Conference on the International Monetary System,” 38 Hildebrand, Philipp, 30, 39, 43, 121 Homogeneity description of, 78–79 familiarity and, 102 hegemony of, 79–92 Homophily, 75–92 description of, 41 mentoring based on, 155 shared background and, 79 in spouse selection, 79–80 Hotel De Bilderberg, 120 Hubs definition of, 19 in financial system, 19 links to, 19 network efficiency affected by, 20 system failures caused by failure of, 20 Human capital, 26, 80 Human networks formation of, 98 homophily influences on, 76 position of individuals in, 21 social capital in, 25 Human relationships description of, 7–8, 105 links in, 19 Human thinking, 50, 218 Humor, 102 Hyperconnectivity, 214 I Iceland, 27 Ideologies, 63–64 IGWEL.

Meadows, Thinking in Systems: A Primer (Chelsea, VT: Chelsea Green Publishing), 3, Kindle edition. 10. Joseph E. Stiglitz, The Price of Inequality: How Today’s Divided Society Endangers Our Future (New York: W. W. Norton & Company, 2012), 121, Kindle edition. 11. Nick Hanauer, “The Pitchforks Are Coming... For Us Plutocrats,” Politico, July/August 2014, http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014.xhtml. 12. Julia La Roche, “Paul Tudor Jones: Income Inequality Will End in Revolution, Taxes, or War,” Business Insider, March 19, 2015, http://www.businessinsider.com/paul-tudor-jones-on-inequality-2015-3. 13. Alec Hogg, “As Inequality Soars, the Nervous Super Rich Are Already Planning Their Escapes,” The Guardian, January 23, 2015, http://www.theguardian.com/public-leaders-network/2015/jan/23/nervous-super-rich-planning-escapes-davos-2015.


pages: 576 words: 105,655

Austerity: The History of a Dangerous Idea by Mark Blyth

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accounting loophole / creative accounting, balance sheet recession, bank run, banking crisis, Black Swan, Bretton Woods, capital controls, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, deindustrialization, disintermediation, diversification, en.wikipedia.org, ending welfare as we know it, Eugene Fama: efficient market hypothesis, eurozone crisis, financial repression, fixed income, floating exchange rates, Fractional reserve banking, full employment, German hyperinflation, Gini coefficient, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, interest rate swap, invisible hand, Irish property bubble, Joseph Schumpeter, Kenneth Rogoff, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, Long Term Capital Management, market bubble, market clearing, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, Occupy movement, offshore financial centre, paradox of thrift, Philip Mirowski, price stability, quantitative easing, rent-seeking, reserve currency, road to serfdom, savings glut, short selling, structural adjustment programs, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, unorthodox policies, value at risk, Washington Consensus, zero-sum game

To put that into perspective, only Norway, Switzerland, Austria, the Netherlands, and Germany—none of which experienced a serious crisis—boast lower rates of unemployment.32 Finally, consider this bonus to the Icelandic experience of not bailing their banks. After initially falling quite rapidly, real wages have been rising at a brisk pace.33 This has helped reverse the trend of growing inequality witnessed between 1995 and 2007, when the after-tax Gini coefficient rose from 0.21 to 0.43, mostly because of the high incomes of top earners—a phenomenon seen in all highly financialized societies. By 2010, when capital income had collapsed and the tax code was reformed, the Gini coefficient was pushed back down to 0.245.34 Can we generalize from Iceland to elsewhere? After all, we previously argued that we should not generalize from the experience of the REBLLs to the much larger states of Southern Europe. So what’s different here? Although Iceland is the definition of tiny, what matters in this case is not the size of the country, or its population, but the size of the banks relative to the size of the economy, its bank-assets-to-GDP ratio.

After all, as Andrew Lo noted in a recent wickedly entitled essay called “Reading about the Financial Crisis: A 21-Book Review,” the crisis is both overexplained and overdetermined.2 The crisis is overexplained in that there are so many possible suspects who can be rounded up and accused of being “the cause” that authors can construct convincing narratives featuring almost any culprit from Fannie and Freddie to leverage ratios to income inequality—even though the meltdown obviously was a deeply nonlinear and multicausal process.3 The crisis is overdetermined in that, being a nonlinear, multicausal process, many of these supposed causes could be ruled out and the crisis could still have occurred. For example, three excellent books on the crisis stress, respectively, increasing income inequality in the run-up to the crisis, the captured nature of bank regulation, and the political power of finance. Each book certainly captures an important aspect of the crisis.4 But are these factors absolutely necessary to adequately explain it?

Alberto Alesina, “Tax Cuts vs. ‘Stimulus’: The Evidence Is In,” Wall Street Journal, September 15, 2010, Opinion; Carmen M. Reinhart and Kenneth S. Rogoff “Growth in a Time of Debt,” American Economic Review, 100, 2 (2010): 573–578. 28. Timothy Noah, “Introducing the Great Divergence,” Slate, September 3, 2010, Part of a series entitled “The United States of Inequality,” http://www.slate.com/articles/news_and_politics/the_great_divergence/features/2010/the_united_states_of_inequality/introducing_the_great_divergence.html. 29. See US Census Bureau website, http://www.census.gov/hhes/www/poverty/about/overview/index.html, accessed September 19, 2011. 30. Robert Wade in John Ravenhill (2010), Global Political Economy, 3rd ed. (New York: Oxford University Press), 396. 31. That is, while workers’ money wages have increased, when adjusted for inflation, they have remained stagnant.


pages: 119 words: 10,356

Topics in Market Microstructure by Ilija I. Zovko

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Brownian motion, computerized trading, continuous double auction, correlation coefficient, financial intermediation, Gini coefficient, information asymmetry, market design, market friction, market microstructure, Murray Gell-Mann, p-value, quantitative trading / quantitative finance, random walk, stochastic process, stochastic volatility, transaction costs

Journal of Finance, 38(5):1457–69, 1983. M. G. Daniels, J. D. Farmer, G. Iori, and E. Smith. Quantitative model of price diffusion and market friction based on trading as a mechanistic random process. Physical Review Letters, 90(10): Article no. 108102, 2003. H. Demsetz. The cost of transacting. The Quarterly Journal of Economics, 82:33–53, 1968. P. M. Dixon, J. Weiner, T. Mitchell-Olds, and R. Woodley. Bootstrapping the gini coefficient of inequality. Ecology, 68(5):1548– 1551, 1987. I. Domowitz and J. Wang. Auctions as algorithms: Computerized trade execution and price discovery. Journal of Economic Dynamics and Control, 18(1):29–60, 1994. D. Easley and M. O’Hara. Price, trade size, and information in securities markets. Journal of Financial Economics, 19(1):69–90, 1987. D. Easley, M. O’Hara, and G. Saar. How stock splits affect trading: A microstructure approach.

Copies available from: National Bureau of Economic Research, 1050 Massachusetts Avenue, Cambridge, MA 02138. K. Rock. The specialist’s order book and price anomalies, 1990. R. Roll. A simple implicit measure of the effective bid-ask spread in an efficient market. Journal of Finance, 39(4):1127–39, 1984. Y. Schwarzkopf and J. D. Farmer. Time evolution of the mutual fund size distribution. In preparation, January 2008. A. Sen. On Economic Inequality. Oxford Clarendon Press, 1973. D. J. Seppi. Liquidity provision with limit orders and a strategic specialist. Review of Financial Studies, 10(1):103–50, 1997. F. Slanina. Mean-field approximation for a limit order driven market model. Physical Review E, 64(5):Article no. 0561363, 2001. Part 2. B. F. Smith, D. A. S. Turnbull, and R. W. White. Upstairs market for principal and agency trades: Analysis of adverse information and price effects.


pages: 414 words: 119,116

The Health Gap: The Challenge of an Unequal World by Michael Marmot

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active measures, active transport: walking or cycling, Affordable Care Act / Obamacare, Atul Gawande, Bonfire of the Vanities, Broken windows theory, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, centre right, clean water, congestion charging, correlation does not imply causation, Doha Development Round, epigenetics, financial independence, future of work, Gini coefficient, Growth in a Time of Debt, illegal immigration, income inequality, Indoor air pollution, Kenneth Rogoff, Kibera, labour market flexibility, lump of labour, Mahatma Gandhi, meta analysis, meta-analysis, microcredit, New Urbanism, obamacare, paradox of thrift, race to the bottom, Rana Plaza, RAND corporation, road to serfdom, Simon Kuznets, Socratic dialogue, structural adjustment programs, the built environment, The Spirit Level, trickle-down economics, urban planning, Washington Consensus, Winter of Discontent, working poor

It was a reflection that there are things both glorious and not so glorious about India’s progress. They identify inequality in India as a cause of major unsolved problems. They do not, however, think that it is well captured by a simple measure of income inequality such as the Gini coefficient (in which everyone’s income is ranked from lowest to highest, and a calculation made of dispersion; if everyone had the same income the Gini would be 0; if one person had all the income the Gini would be 1; the greater the inequality the higher the Gini in the range 0 to 1). They write: First, when the income levels of the poor are so low that they cannot afford even very basic necessities, the gulf between their lives and those of the more prosperous has an intensity – indeed an outrageousness – that aggregate inequality indicators cannot capture . . . Second, measures of private incomes miss the role of public services, in such fields as education, health care, social facilities and environmental support.4 Banerjee and Duflo, whose work on poverty we met earlier, write that, in effect, the poor are being asked to bear too much responsibility.

The OECD is unequivocal on what the evidence shows: the greater the income inequality, the less the growth. Why? Because if the poor have little money, they can’t buy things. Further, the OECD emphasises that the negative effect on growth arises not just because of the low purchasing power of the bottom 10 per cent, but of the bottom 40 per cent. Of course, saying that we need to pay attention to the bottom 40 per cent, not only to the very poorest, moves towards the gradient. Music to my ears. Even were you concerned only with economic growth, greater equality makes sense, but as I have tried to make plain, exorbitant inequality damages our lives, and has impact on the social gradient in health. There are strong moral and practical reasons to be concerned. FIGURE 11.1: GINI COEFFICIENTS OF INCOME INEQUALITY, OECD COUNTRIES, MID-1980S AND 2011/12 If we turn from income to wealth, again we see enormous inequalities.

The gradient implies that the central issue is inequality, not simply poverty. As we will see, poverty still remains hugely important for health, but relief of poverty is conceptually simple, even if politically and practically difficult. Inequality, on the other hand, implies that not only is having enough to make ends meet important, but so too is what we have relative to others. Inequality puts us into entirely different terrain. In many countries, economic inequality has been seen as a good thing. Lowering taxes on the rich, for example, a policy that has the clear and predictable effect of increasing economic inequality, is justified as being good for the economy. Set the wealth producers free and we will all benefit, runs the argument. But what if such a policy made health inequality worse? In Britain, a senior Labour politician said that he was ‘intensely relaxed’ about how much the rich earned.12 Governments of the centre-right and centre-left have both contrived to do very little to reduce economic inequality.


pages: 566 words: 163,322

The Rise and Fall of Nations: Forces of Change in the Post-Crisis World by Ruchir Sharma

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3D printing, Asian financial crisis, backtesting, bank run, banking crisis, Berlin Wall, Bernie Sanders, BRICs, business climate, business process, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, colonial rule, Commodity Super-Cycle, corporate governance, creative destruction, crony capitalism, currency peg, dark matter, debt deflation, deglobalization, deindustrialization, demographic dividend, demographic transition, Deng Xiaoping, Doha Development Round, Donald Trump, Edward Glaeser, Elon Musk, eurozone crisis, failed state, Fall of the Berlin Wall, falling living standards, Francis Fukuyama: the end of history, Freestyle chess, Gini coefficient, hiring and firing, income inequality, indoor plumbing, industrial robot, inflation targeting, Internet of things, Jeff Bezos, job automation, John Markoff, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labor-force participation, liberal capitalism, Malacca Straits, Mark Zuckerberg, market bubble, mass immigration, megacity, Mexican peso crisis / tequila crisis, mittelstand, moral hazard, New Economic Geography, North Sea oil, oil rush, oil shale / tar sands, oil shock, pattern recognition, Paul Samuelson, Peter Thiel, pets.com, Plutocrats, plutocrats, Ponzi scheme, price stability, Productivity paradox, purchasing power parity, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, Ronald Coase, Ronald Reagan, savings glut, secular stagnation, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Simon Kuznets, smart cities, Snapchat, South China Sea, sovereign wealth fund, special economic zone, spectrum auction, Steve Jobs, The Future of Employment, The Wisdom of Crowds, Thomas Malthus, total factor productivity, trade liberalization, trade route, tulip mania, Tyler Cowen: Great Stagnation, unorthodox policies, Washington Consensus, WikiLeaks, women in the workforce, working-age population

The most rigorous statistical measures of inequality can offer a useful snapshot of the big picture, but they are updated too infrequently to provide the necessary warning signs of fast-shifting popular sentiment. The most common measure of income inequality, the Gini coefficient, scores a nation from one to zero: One represents a totally unequal society in which one person gets all the income, and zero represents a completely egalitarian society in which everyone has the same income. But the Gini score is derived from official data by academics, using a variety of methods, published on no particular schedule and for no consistent sample of countries. There is no more current source for cross-country comparisons than the World Bank, and as of mid-2015 its most recent Gini scores for Chile came from 2011, for the United States from 2010, for Russia from 2009, for Egypt from 2008, and for France from 2005.

“Mahatma,” 236 Garotinho, Anthony, 78 Gates, Bill, 104, 119, 124 GDP (gross domestic product): analysis of, 407 and civil wars, 142 and credit markets, 300, 301n, 302 and current account, 273, 296 and debt, 149, 216, 291, 300, 317, 320, 328 global, 2–3, 19, 243 and government spending, 135–39, 164 and inflation, 235, 238 and investment, 202–3, 204, 205–6, 217, 231–32 and leadership, 86–87 and manufacturing, 204–6, 214–15 per capita, 345–46, 347 and population growth, 30 rising, 8 and wealth gap, 107–10 Geographic Sweet Spot (Rule 5), 166–200, 402–3; see also location geopolitics, 172–75 Germany, 93, 138, 192, 208 billionaires in, 116, 121, 122, 388 currency in, 294 economic strength of, 286, 387–88, 391, 400 fall of Berlin Wall in, 215 Hartz reforms in, 215, 387 hype about, 335 and immigration, 45, 50, 53, 388 industrialization in, 144, 215 leadership in, 387, 388 and location, 388 per capita income in, 32 population growth rates in, 26, 45 retirement in, 37, 39, 45 slump in (1860s), 6 state bank in, 245, 388 workforce in, 19, 32, 37, 41, 55–56, 388 Ghana, 12, 87, 354 Giang Ho, 336 Gini coefficient, 99–100 global cities, 197–200 global economy: competition in, 17, 57, 68, 173–74, 193, 295 cycles in, 2, 3, 10, 172 protection measures, 172–73 global financial crisis (2007–2009): and debt, 300, 302–3, 327–28 effects of, vii, viii, xi–xii, 59, 69–70, 102, 253, 274–75, 279, 324–25, 328 and emerging markets, 146–48, 280 and global trade, 2, 172–75 and government spending, 146–47, 164 and new regulations, 276 onset of, 338 preceding events (BC), 1, 5, 13, 101, 102, 132, 177, 276, 358, 359 reality in years following (AC), 1, 5–6, 71, 134, 137, 173, 400 recovery from, 17, 23–24, 60, 93–94, 150 and state banks, 151–52, 276 as systemic crisis, 23 unexpectedness of, 5, 11, 337–38 globalization: and asset prices, 257–58 deglobalization, 274–77, 296, 394, 399 trends in, 1, 8, 199, 211, 295 and wages, 101 gold standard, end of, 252 Goldstone, Jack, 92 “golf course capitalism,” 331, 351 Good Billionaires/Bad Billionaires (Rule 3), 95–131 bad billionaires defined, 100, 105–6, 111, 121–22 billionaire lists, 100, 103–5, 111–12, 116–17, 120–21 and corrupt societies, 127–29 good billionaires defined, 104–5, 111 quality: good vs. bad, 110–15, 121–24 rise of billionaire rule, 129–31 see also wealth Goodhart’s Law, 13, 18 governments: key tasks of, 135 meddling, see Perils of the State too-small, 141–43 government spending, 135–41, 145–51, 164 Great Depression (1930s), 172, 173, 254, 258, 299, 325 Great Recession (2007–2009), see global financial crisis Greece, 5, 20 backsliding, 288, 346 corruption in, 137, 164 currency crisis in, 286, 293 debt crisis in, 51, 127, 137–38, 163–64, 300, 301, 327 economic cycle in, 88, 286 government collapse (2011), 80 tourism in, 288 Gref, German, 60, 67 Guericke, Konstantin, 49 guns versus butter, 158 Haiti, 346 Hanushek, Eric, 16 Harari, Yuval, 199 Henry I, king of England, 264 Hessler, Peter, 42 Hong Kong, 171, 176, 253, 254, 346 Huang, Yukon, 196 Humala, Ollanta, 76 Human Development Index (HDI), 10 Hungary, 151, 176, 320 Hussein, Jaffer, 246 Hussein, Saddam, 89 hype: applying the rules to, 351–55 of commodity economies, 340–42, 343 constant vigilance in, 344–47 on convergence myth, 338–41, 352 cover stories, 334–38, 347, 349–52 and disaster scenarios, 343–44 of emerging nations, 4, 8, 9, 333–34, 338–40 focus on one growth factor, 11, 14 indifference vs., 332, 333, 347–51 and media negativity, 349–50 of need for structural reform, 62–63 time differentiation in, 330, 335 Hype Watch (Rule 10), 329–55 Iceland, 88 immigration: anti-immigrant forces, 27, 44, 49, 53 and capital flight, 52–53 economic, 2, 48, 170 highly skilled, 48–54 and social services, 50 student visas, 49 and workforce, 28, 44–54 incremental capital output ratio (ICOR), 149 India, 157, 174, 283 bureaucracy in, 133, 162, 209 corruption in, 105–6, 112, 129, 164 economic cycle in, 8, 10, 62, 63, 94, 358, 375 GDP of, 4–5, 12, 175 and geopolitics, 172–73, 175 government spending in, 149, 150, 164 HDI ranking, 10 hype about, 4, 10, 333, 334, 336, 338, 345, 358, 370 and immigration, 50, 52 inflation in, 4, 236–38, 250–52, 374 infrastructure in, 374 international business in, 18, 375, 394 investment in, 205, 208–9, 231, 250, 374 leadership in, 70, 79, 81, 94, 350–51, 373–75 location of, 185, 374–75 manufacturing in, 208–10, 213 nationalism in, 81–82 population centers in, 195–97 population growth rates in, 26–27, 30, 31 prices in, 234–38 and regional alliances, 180–81, 375 service jobs in, 212–13, 218, 221 social unrest in, 4, 31, 70, 73, 74, 236 stagnation in, 6, 75 state banks in, 151–52, 153–54, 374 state intervention in, 135–36, 196 tax evasion in, 128–29 war with Pakistan, 97, 375 wealth gap in, 102, 105, 112, 116, 120, 129 workforce in, 32, 42–43, 44, 209 Indonesia, 116, 120, 326 and budget deficit, 148, 158, 163 closed economy of, 174, 178 commodities economy of, 227, 342, 376 currency of, 292, 293, 321 debt in, 320–23, 324, 325, 327 economic growth in, 82, 349 energy subsidies in, 157–58 financial deepening in, 327 GDP of, 175, 205 and hype, 330–31, 349 and international trade, 179–80, 293 leadership in, 59–60, 82, 93, 143 population growth rates in, 30 and regional alliances, 377 social unrest in, 70, 321 state banks in, 151, 320–23 industrialization, 98 and investment, 205 and population growth, 195 state assistance in, 144, 145–46 see also manufacturing Industrial Revolution, 6, 35, 255 inflation, 234–61 containment of, 21, 65 and currencies, 264–65, 292 and deflation, 5, 252–57 and economic growth, 238–40, 326, 365 and GDP, 235, 238 and government collapse, 242, 247 hyperinflation, 69, 97, 155, 239 and investment, 233, 238, 240 persistence of, 252 and prices, 237, 240–42, 257–61 stagflation, 64, 65, 240, 395 war on, 240–46 infrastructure, 10 and export trade, 207–8 inadequate, 141–43 investment in, 21, 135, 158, 175, 232–33 interest rates, 229, 235, 239, 240, 244, 260, 306, 335 International Monetary Fund (IMF): bailouts from, 5, 65, 68, 272, 280, 354, 372 on capital flight, 280 and debt, 299 on economic growth factors, 12, 152 forecasting record of, 336–38 on global debt crisis, 259, 324 global recession defined by, 2 and hype, 335–37 on inflation, 241 reforms required by, 68, 248, 372 WEO database of, 407 on women’s opportunities, 43 Internet, 1, 8, 221 censorship of, 308 “crowdfunding” sites on, 313 and global trade, 176, 197, 199 hype in, 334 information flow on, 1 service jobs for, 210, 211–13 shopping via, 257–58 investment: in commodities, 223–29 as economic indicator, 15, 202–3, 205–6, 233 in education, 16–18 by entrepreneurs, 158, 209, 226 and GDP, 202–3, 204, 205–6, 217, 231–32 good vs. bad, 203 ideal level of, 205–6 and inflation, 233, 238, 240 in infrastructure, 21, 135, 158, 175, 232–33 in manufacturing, 203–6, 232 and price shifts, 344 in real estate, 222–23, 229–31 shift from private to public, 149 speculation, 229–31, 313–14, 382 in technology, 218–21, 229, 233, 255 weak, 231–33 Iran, 174, 190 birth rate in, 26 economic cycle in, 87, 88, 346, 348 hype about, 346, 348 as Shiite theocracy, 170 trade with, 170–71 workforce in, 42 Iraq: economic cycle in, 87, 88, 89 hype about, 346, 348 leadership in, 89 refugees from, 2, 44 wars in, 167, 346 Ireland, 29, 288, 300, 346 Islam, Shiite-Sunni divide, 170 Israel, 175, 218–19 Italy, 83, 136, 192, 204 birth rate in, 26 debt in, 310, 385 internal devaluation in, 287 leadership in, 70, 81 wealth gap in, 102, 116–17, 121, 122 workforce in, 32, 39, 44 Jaitley, Arun, 106 Jamaica, 5, 66, 339 Japan, 26, 141, 190, 194 agriculture in, 384 bank crises in, 316, 319 billionaires in, 110, 116, 121 currency in, 294, 385 debt in, 300, 307, 316, 317, 318–19, 320, 384, 385 deflation in, 253–54, 256, 260 economic cycle in, 8, 57, 83, 93, 94, 175, 238, 308, 310, 317, 335 economic reform in, 384 and global trade, 176, 178, 184, 187, 294 hype about, 329–30, 334, 335, 348, 351 and immigration, 47, 50, 52, 384 industrialization in, 144, 178 insularity of, 46 investment in, 221, 238, 253, 318, 385 manufacturing in, 203, 212–13 and per capita GDP, 346 population decline in, 46, 383 reconstruction period in, 29 and regional alliances, 179, 183, 384 slump (1990s), 6, 258, 329, 335 technology in, 295 tourism in, 384–85 workforce in, 32, 37, 41, 43, 44, 55–56, 384, 385 “zombie companies” in, 318–19 Jim Yong Kim, 48 jobs: availability of, 32, 37, 55 in government or state-owned companies, 155–56 manufacturing as source of, 15 new, 57 replaced by machines, 16, 24, 101 and service sector, 202, 209–13, 221 Jobs, Steve, 49 Johnson, Simon, 176 Jonathan, Goodluck, 226, 352, 398 Jordan, 88, 206 Jordà, Òscar, 259 Jospin, Lionel, 34 Juncker, Jean-Claude, 80 Kahneman, Daniel, 56 Katz, Lawrence, 55 Kaunda, Kenneth, 96 Kenya, 31, 181–82, 190, 238, 354–55, 398–99 Kenyatta, Uhuru, 355, 399 Keynes, John Maynard, 149–50 Khan, Genghis, 8, 187 Khodorkovsky, Mikhail, 350 Kim Dae-jung, 66–67, 71 Kim Il-sung, 96 Kim Jong-il, 74, 86, 94 Kirchner, Nestor, 9, 64, 74, 76, 98 Kissinger, Henry A., 79 Kiss of Debt (Rule 9), 297–328 Zielinski play, 297–98, 299, 323 see also debt Kohler, Hans-Peter, 35 Koizumi, Junichiro, 335, 351 Kudrin, Alexei, 60, 67, 74 Kuznets, Simon, 101, 299 Lagarde, Christine, 58 Laos, 180 Latin America, 364–70 economic cycles in, 93, 291, 310, 342 infrastructure in, 186 and location, 177 regional alliances, 179, 182–83, 366 wealth gap in, 95–96, 97, 125–26 see also specific nations Lavagna, Roberto, 74 leadership: aging, 3, 59, 71–72, 75, 114 arrogance of, 59, 60, 61, 62, 71, 72 autocrats vs. democrats, 21, 63, 82, 85–91, 132, 333, 365 charismatic, 61, 68, 69 in circle of life, 60–62, 364–65 corruption of, 3, 12, 60, 61, 67, 91, 97, 105–6, 114, 127–29, 226, 320, 379 and elections, 364–65 fresh, 63, 64–70, 75, 76–77, 86, 94, 388 populist, 59, 77–80, 96–99, 363–64 and regional alliances, 179 stale, 21, 59, 61, 63, 70–77, 86, 92, 94, 249, 376, 392–93 technocrats, 63, 80–85, 237 tenure of, 73–75, 90 Li, Robin, 113 Libya, 4, 74, 92, 167, 168, 185 life expectancy, 10, 19, 25, 26, 28, 44 and retirement, 37, 38–40 Li Keqiang, 84, 150, 312 location, 166–200 and economic growth, 175–78, 199–200 and global trade, 171–75, 176–89, 199–200 population centers, 189–97 regional alliances, 173–75, 178–84, 199 service cities, 197–200 and shipping routes, 185–86, 402–3 long term, myth of, 399–401 López Michelsen, Alfonso, 188 Lucas, Robert, 280 Lucas paradox, 280 Lula da Silva, Luiz Inácio, 66, 69, 71, 74, 79, 284 Ma, Jack, 113, 114 Macri, Mauricio, 83, 365–66 Maduro, Nicolás, 158 Ma Huateng, 113 Maktoum, Sheikh Mohammed bin Rashid Al, ruling family of, 166–67 Malaysia, 190, 342 banking crisis in (1990s), 316 debt in, 299, 300, 306, 315, 325 economic cycle in, 29, 327, 378–79 and global trade, 174, 178, 180 hype about, 330, 331, 345, 348 immigration to, 48, 51 investment in, 206, 231 leadership in, 60, 76, 379 manufacturing in, 205 state banks in, 151, 323–24 wealth in, 107, 118 Malta, 342, 348 Malthus, Thomas, 27, 343 Manuel, Trevor, 341 manufacturing: and economic growth, 15–16, 216, 227, 341 for export, 207–8 and GDP, 204–6, 214–15 and innovation, 15, 204 international, 213–15, 216 investment in, 203–6, 232 and productivity, 15, 204–5, 207 stabilizing effect of, 215–17 virtuous cycle of, 206–10, 215, 221, 228 Mao Zedong, 84 Marcos, Ferdinand, 7, 79, 334 Marino, Roger, 49 markets: cycles of, viii–x, 74–75 and leadership, 79–81 predictive power of, 13–14, 75 Marx, Karl, 92 Mauro, Paolo, 336 Mboweni, Tito, 245 Meirelles, Henrique, 69, 245 Menem, Carlos, 82 Mercosur trade bloc, 182–83, 366 Merkel, Angela, 45, 387, 388 Mexico, 368–70 breakdown in government functions, 201–2 corruption in, 141 currency crisis (1994) in, 5, 65, 148, 273, 281, 285, 298, 324 debt of, 291, 298, 324–25 economic cycle in, 98, 348, 400 government spending in, 140, 141, 148 and immigration, 53–54 inflation in, 242, 246, 370 infrastructure in, 232, 369 investment in, 203, 205, 220, 232, 368, 369 leadership in, 81, 94, 98, 368–69 location of, 168, 169, 177, 193, 199–200, 370 manufacturing in, 369–70 and oil, 130, 368, 369 population centers in, 193–94, 199 population growth rates in, 26, 30, 369 and regional alliances, 183, 199, 370 social unrest in, 70, 77, 98 technology in, 219–20 wealth gap in, 115, 120, 364 workforce in, 40, 43 middle class: anger of, 3, 5, 72–73, 76–77 growing, 204 jobs for, 213 and wealth inequality, 102 Middle East: Arab Spring, 4, 31, 76, 91–92, 167, 242 energy subsidies in, 156, 157 investment in, 169–70 political unrest in, 167, 168, 169, 170, 396 restrictions on women in, 42 see also specific nations middle-income trap (hype), 344–45 Mikitani, Hiroshi, 110 Modi, Narenda, 79, 94, 210, 350–51, 370, 373–75 Mohamad, Mahathir, 60, 231, 280, 330 money flows, 2, 5, 268–70, 275, 277, 279–90, 292, 295–96 Monti, Mario, 81 Morales, Evo, 76 Morocco, 168, 185, 190, 199 Moynihan, Daniel Patrick, 234–35 Mozambique, 225, 354 Mubarak, Gamal, 133 Mubarak, Hosni, 76, 92 Mugabe, Robert, 86, 88–89, 96–97, 373 Musk, Elon, 123–24 Myanmar, 187, 333, 334 Nakasone, Yasuhiro, 46 Nanda, Ramana, 220 natural resources, 223–29 Nehru, Vikram, 81, 82 Netherlands, 41–42, 50, 176, 224–25, 255, 256, 299 news media, see hype New Zealand, 244 Nguyen Tan Dung, 90–91 Nicaragua, 98 Niger, 66, 339 Nigeria: commodities economy of, 4, 174, 223, 225–27, 228, 293, 394, 398 corruption in, 226–27, 398 economic cycle in, 88, 348, 398 GDP in, 12, 87, 227 government spending in, 141–42 hype about, 348, 398 inflation in, 242 leadership in, 352–53, 365, 398 and regional alliance, 182 slipping backward, 202, 205, 232, 398 workforce in, 19, 29, 31, 185 North America Free Trade Agreement (NAFTA), 183 North Korea, 74, 86, 96, 136, 174 Norway, 90, 225, 300, 346, 348 Nyerere, Julius, 96 Obasanjo, Olusegun, 398 OECD (Organization for Economic Cooperation and Development), 40, 44, 48–49 oil: and bad billionaires, 100, 111 and corruption, 226 curse of, 12, 169, 224, 227 and “Dutch disease,” 224–25 exporters of, 155, 174, 341, 394 extraction of, 124–25 investment in, 223, 224, 225, 228 offshore, 130 price of, 4, 29, 60, 62, 64, 65, 89, 111, 114, 154–55, 227–29, 257, 268, 282, 293, 333, 342, 348, 362, 393, 394, 398 shale, 228–29 Okonjo-Iweala, Ngozi, 227 Oman, 342 Omidyar, Pierre, 49 OPEC, 64, 65, 240, 333 Ortega, Daniel, 98 Osborne, Michael, 54 Osnos, Evan, 145 Ostry, Jonathan, 125–26 Ozden, Caglar, 51 Pacific Alliance, 183–84, 199 Pakistan, 142, 180, 370–73 infrastructure in, 187, 372 leadership in, 77, 94, 96, 372 service jobs in, 212 war with India, 97, 375 workforce in, 31, 42, 370–71, 373 Palaiologos, Yannis, 164 Paldam, Martin, 241 Palestine, 175 Papademos, Lucas, 80 Paraguay, 182, 183, 242 Park Chung-hee, 85 Park Geun-hye, 47, 383 pattern recognition, 7–11 Peña Nieto, Enrique, 94, 115, 368–69 People Matter (Rule 1), 23–57; see also workforce per capita income, 10, 339–40, 348 Perils of the State (Rule 4), 132–65 and bad billionaires, 127–29 devaluing the currency, 290–96, 381 energy subsidies, 156–58 and leaders, see leadership meddling in private companies, 158–62, 246, 250–51 and population growth, 33, 35–36 privatization, 161–62, 177 sensible role for state, 162–65 state banks, 134, 151–54, 243–44 state companies as political tools, 154–56, 165 Perón, Juan, 333 Persson, Stefan, 174, 179 Peru, 52, 188, 190, 291 commodities economy of, 174, 228, 368 investment in, 228 leadership in, 98 and Pacific Alliance, 183–84 workforce in, 43 pessimism, prevailing fashion of, 9, 275, 360, 399 Philippines, 180, 193, 194, 198 economic recovery in, 327, 350, 375–76, 378 economic slowdown in, 346 hype about, 333, 334, 348 investment in, 232, 375–76 leadership in, 79, 97, 376 population growth in, 31 service jobs in, 212–13, 221 social unrest in, 70, 77 wealth redistribution in, 97 workforce in, 19, 31 Piketty, Thomas, 104 Piñera, Sebastián, 34–35, 95–96, 98, 102, 126 Pinochet, Augusto, 82, 98, 99 Pires, Pedro, 353 Poland, 139, 190, 339 billionaires in, 109, 120, 391 currency of, 288–90 debt in, 391 investment in, 205, 215, 391 leadership in, 74–75, 365 location of, 168, 176, 177, 198–200 political shift in, 391 population growth rate in, 30, 39 private economy in, 159, 160, 161 workforce in, 39, 391, 392 population growth: baby bonuses, 33–36 decline in, 19–20, 24–32, 44, 56, 392, 394, 399 and economic growth, 29–32, 57 forecasts of, 25, 27, 28, 32 measurement of, 21 and replacement fertility rate, 26, 33, 37, 47 and workforce growth, 18–19, 39, 57 populism, 59, 60, 77–80, 81–82, 96–99, 100, 247, 363–64, 389 Portugal, 29, 30, 39, 288 Price of Onions (Rule 7), 234–61; see also inflation; prices prices, 234–61 asset, 257–61 of commodities, 111, 114, 174, 228, 263, 278, 341–42, 354, 365, 386; see also oil consumer, 235, 256, 257–61 and currency, 294 and deflation, 256 falling, 4, 5, 253–54 of food, 234, 235, 236, 241–42, 365 to foreign buyers, 258 “Mapping the World’s Prices,” 265 of money, 304 public anger about, 237, 241–42 stabilizing, 261 of stocks, 313 validity of data about, 13 wage-price spiral, 240 Pritchett, Lant, 336, 347 production: chain of, 27 as growth factor, 15–16 productivity: elusive x factor in, 20 and government spending, 148–49 and ICOR, 149 and immigration, 51 in manufacturing, 15, 204–5, 207 measurement of, 17, 18–21 and population trends, 39, 57 and technology, 220–21 Putin, Vladimir, 18, 42, 392–94 and billionaires, 114, 115, 350 and economic reforms, 58–59, 60, 61, 67–69, 78, 284 hype about, 342, 350, 393, 394 and populism, 59 rise to power, 61, 66, 67 and social unrest, 73–74 and stale leadership, 60, 71–72, 76, 114, 159–60, 392 and state intervention, 159–60, 350 Qaddafi, Muammar el-, 74 Rahman, Sheikh Mujibur, 96 Rajan, Raghuram, 251 Rajapaksa, Mahinda, 180, 373 Rao, Jaithirth, 209–10 Razak, Najib, 379 Reagan, Ronald, 64–65, 66, 70 Real Effective Exchange Rate (REER), 265, 267, 272 real estate: bad billionaires in, 100, 105, 107, 108, 110–11, 364, 369 and debt, 310–13 investment binges in, 222–23, 228, 229–31, 382, 387 prices of, 108, 257–61, 309, 312, 382, 389 and state banks, 154 recessions: 1930s (Great Depression), 172, 173, 254, 258 1970s, 2, 64, 65 1980s, 2, 64, 305 1990s, 2, 6, 13, 64, 66, 68, 83, 138, 148, 161 2007–2009, see global financial crisis in Asia (1997-1998), see Asia China as possible source of, 2–3 cycles of, 2, 14, 64–66, 87–88 debt as cause of, 260, 298–99, 301, 303–4, 308–10, 317–19 dot-com bust, see dot-com bubble forecasting of, 14, 337–38, 400 official documentation of, 14 U.S. origins of, 2, 132, 303–4, 305–6, 308–9, 327–28, 362 Regional Comprehensive Economic Partnership, 173 rent-seeking industries, 110–11, 122, 123, 124 Renzi, Matteo, 81, 94 Rhodes-Kropf, Matthew, 220 Rickards, James, 168 Robinson, James, 176 robots, 27, 36, 54–57, 214 Rockefeller, John D., 124 Rodrik, Dani, 207 Romania, 87, 162, 238, 348, 391–92 Rothschild, Baron de, 349 Rousseff, Dilma, 80, 152–53, 155, 366, 368 Roy, Nilanjana, 236 Rubin, Robert, 341 Russia, 193, 326, 344 aging population in, 72 authoritarianism in, 3, 60 author’s speech in, 58–59 banking crisis (1990s), 61 billionaires in, 103, 107, 114–15, 116, 119, 120, 364, 393 birth rate in, 26 brain drain from, 52 capital flight from, 52, 281, 282, 367 commodities economy in, 4, 205, 225, 341, 367, 376, 393, 397 currency of, 263, 265, 268, 281, 282, 289, 291, 393, 394 debt in, 59, 291, 327, 394 economic growth in, 17, 60, 63, 66, 69, 159, 340, 358 economic slowdown in, 346, 392 education in, 17 financial deepening in, 327 GDP of, 4, 175, 394 government spending in, 139, 149, 394 hype about, 4, 338, 347, 348, 350 inflation in, 241, 242, 246 international business in, 18, 394 international sanctions against, 282 investment in, 205, 208, 232, 394–95, 397 leadership in, 349, 392–94; see also Putin, Vladimir oil in, 29, 60, 62, 72, 114, 155, 159, 265, 282, 341, 342, 393, 394 oligarchs in, 107, 114–15, 160, 268 per capita income in, 61, 68 political cronyism in, 4, 159, 160 reforms in, 58, 59, 60, 61, 66, 67, 68, 78 social unrest in, 4, 73–74 state banks in, 151–52, 159, 282 stock exchange in, 161 tech companies in, 17, 159–60 workforce in, 30, 42, 155, 393 Rwanda, 181, 182, 199 Rybolovlev, Dmitry, 107 Sakurauchi, Yoshio, 329–30 Samuelson, Paul, 13 Santos, Manuel, 188, 189 Sassen, Saskia, 197 Saudi Arabia, 29, 42, 170, 190 currency of, 396 energy subsidies in, 156, 157 GDP in, 87 government spending in, 139, 396 leadership in, 87, 396 and oil prices, 227–28, 279, 333, 394 roller-coaster economy of, 227–28 savings, 16, 277–79 Scandinavia, 35, 42 Schlumpeter, Joseph, 360 Schularick, Moritz, 259 service businesses, 204, 210–13 service cities, 197–200 Sharif, Nawaz, 94, 372 Sharma, Rahul, 170–71 Shinawatra, Thaksin, 79, 97 Shinawatra, Yingluck, 78–79, 217 Sierra Leone, 225 Silk Road, 8, 187–88, 399 Singapore, 32, 33, 175, 182, 238, 346, 348 Singh, Manmohan, 62, 73, 74–75, 133, 187, 234–37, 250 Sirisena, Maithripala, 181 Sisi, Abdel Fattah el-, 76, 157 social upheavals: Arab Spring, 4, 31, 76, 91–92, 167, 242 “middle-class rage,” 72–73 as revolts against stale leadership, 21, 61, 70, 72, 73–74, 77, 92 spread of, 3, 91–92 South Africa: commodities economy in, 223, 225, 263, 376, 397 corruption in, 164 currency in, 397 debt of, 291 decline in development of, 3, 6, 205, 346, 397 economic growth in, 10, 38, 90, 340 HDI ranking, 10 immigration to, 48 investment in, 232, 397 leadership in, 76, 90, 352–53, 397 life expectancy in, 10 social unrest in, 4, 73, 74 South Asia, 370–75, 400 commodities economies in, 371 political instability in, 180, 373 regional alliances, 179, 180 restrictions on women in, 42 Southeast Asia, 375–80 economic cycle in, 310, 324, 326, 327, 349, 375–76, 400 and global trade, 176, 178, 179–80 and hype, 330, 331 South Korea, 190, 197–98 and China, 382 debt in, 216, 321 economic growth in, 10, 66–67, 87, 175, 216, 238, 308 government spending in, 140, 146 HDI ranking, 10 homogeneity in, 46–47 hype about, 333, 334, 339 inflation in, 237, 246 and international business, 179, 382–83 investment in, 205, 206, 218, 221, 225, 238, 253 leadership in, 66–67, 82, 85, 93, 349 literacy in, 17 manufacturing in, 205, 212–13, 214–15, 216, 225, 382–83 per capita income in, 215, 316 productivity in, 20 robots in, 56 technology in, 218, 221, 295, 382 wealth in, 107–8, 109, 116, 117–18, 120, 121–22, 383 workforce in, 40, 43, 44, 47, 56, 140, 383 Soviet Union: after 1991, see Russia central plan of, 81, 85 fall of, 29, 67, 107, 109, 151, 198, 208, 242 Spain, 29, 32, 192 current account in, 288 debt in, 327–28, 389–90 internal devaluation in, 287 manufacturing in, 387 Spence, Michael, 341 Spence Commission, 341–42 Sri Lanka, 180–81, 187, 212, 365, 370–71, 373 stagflation, 64, 65, 240, 395 stagnation, 6, 83, 88, 91, 105, 172, 192 state banks, 134, 151–54 state capitalism, 133–35, 155 stock markets: best time to buy in, 349 and crisis of 2008, 146–47 mania/crash, 258–61, 313–14, 318 signals from, 13, 74–75, 133, 134, 258, 313 state-run companies in, 135 “structural reform,” 62–63, 163 Studwell, Joe, 17, 143–44 Sudan, 142, 185 Suharto, 59–60, 82, 93, 293, 320–21, 330 Summers, Lawrence, 104, 336, 347 supply and demand, 256–57 supply networks, 235, 238, 239–40, 243, 253, 292, 365 supply side, 24 Surowiecki, James, 13 Sweden, 42, 50, 136, 138 billionaires in, 108, 116, 121, 123 debt in, 300 economic cycle in, 17, 90, 256 financial crisis (1990s), 317 and inflation, 245 Switzerland, 41, 50, 121, 138–39, 198, 294 Syria: and Arab Spring, 92, 167 civil war in, 4, 92, 168, 224 economic cycle in, 87, 88 leadership in, 89 refugees from, 2, 44, 48 Taiwan, 144, 151, 190 banking crises in (1995, 1997), 316, 317 and China, 382–83 debt in, 291, 307, 317–18 economic growth in, 87, 175, 238, 308, 348 government spending in, 140, 146 hype about, 333, 334, 345, 346, 348 and international business, 382–83 investment in, 205, 218 leadership in, 82, 86, 93 literacy in, 17 per capita income in, 316 and regional alliances, 179, 383 and technology, 221, 295 wealth in, 107–8, 118, 120, 122 working-age population in, 383 Tanzania, 96, 181–82 taxes: corporate, 63, 138 cutting, 67 evading, 128, 137, 142, 164 failure to collect, 141–43 and government spending, 136–37 import tariffs, 172 inheritance, 124 and public services, 140 Taylor, Alan M., 259, 304, 310 technology: automation, 214 cycle of, 8, 124, 218–21 driverless cars, 54 and immigration, 51–52 investment in, 218–21, 229, 233, 255 and jobs, 101, 211, 212 and leisure time, 199 and productivity, 20, 51, 119, 220–21 robot workers, 27, 36, 54–57, 214 and service businesses, 210, 211–13 3-D printing, 8, 214 Tetlock, Philip, 400 Thailand, 47–48, 189–90 capital flight from, 272, 292 commodities economy in, 342, 379 credit binge in, 199, 297, 298–302, 306, 315, 328, 380 currency of, 217, 267, 271–73, 273, 285–86, 292 economic contraction in, 286, 349, 379 economic growth in, 79, 217, 256, 348, 380 economic recovery of, 288, 302, 325, 327 and hype, 330, 349 infrastructure in, 207–8, 230 and international trade, 174, 178, 179–80, 216 investment in, 206, 217, 225, 230–31 leadership in, 78–79, 97, 379–80 manufacturing in, 216–17, 225, 227, 379 military coup in (2014), 379–80 population growth rates in, 30, 47 social unrest in, 78–79, 189, 190, 217 state banks in, 151, 321, 323–24 Thatcher, Margaret, 64–65, 68, 94 Thiel, Peter, 104, 119, 125 thrift, 16, 277–79 Time, 331, 334–35, 347, 349, 350, 352 tourism, 2, 37, 199, 211, 288, 384–85 trade balance, 269 Transatlantic Trade and Investment Partnership, 173, 179 Trans-Pacific Partnership, 173, 178, 361, 377, 378, 383, 384, 386 Trudeau, Justin, 386 Trump, Donald, 53, 364 Tsai Ing-wen, 383 Tunisia, 91–92, 224 Turkey, 190, 326 currency of, 273–74, 280, 283, 291, 292, 293, 396 debt of, 291, 306, 327, 328 economic growth in, 66, 69, 72 financial deepening in, 327 government spending in, 139, 247–48 hype about, 345, 348 immigration to, 48 inflation in, 241, 242, 246, 247–50, 326 leadership in, 60, 66, 71–72, 74, 349, 395 and location, 395–96 per capita income in, 68, 331, 348 population growth in, 31 populist nationalism in, 60, 72, 247 reforms in, 67–68, 72, 248, 249, 331 social unrest in, 4, 61, 72, 73, 74 wealth in, 114, 116, 120 Tusk, Donald, 74–75 Uganda, 87, 181, 354–55 United Arab Emirates, 167, 170 United Kingdom, see Britain United Nations (UN), 10, 47 on population growth, 19, 25, 27, 33, 44–45 United States, 194–95, 360–64 billionaires in, 107, 108, 114, 116, 118–19, 121, 123–25, 364 birth rate in, 26 checks and balances in, 364 credit markets in, 13, 298, 303–4, 305–6, 316 currency of, 266, 271, 272, 362–63 current account deficit in, 278, 362–63 debt in, 363 economic growth in, 3, 288, 337–38, 340 economic recovery in, 24, 64–65, 102, 360 economic strength of, 266, 400 financial speculation in, 102 and geopolitics, 172–73 and global trade, 184, 185, 402–3 government spending in, 138, 139 and hype, 361–62 and immigration, 45, 49–50, 52, 53, 360 industrialization in, 144, 215 inflation in, 240–41, 258 infrastructure in, 207, 208 life expectancy in, 39, 40 and location, 176–77, 200 long boom of, 255–56 manufacturing in, 204, 213, 214, 215, 361 oil and gas in, 228–29, 362 per capita income in, 32, 66, 339, 346 polarization in, 62–63, 132, 363–64 productivity in, 20, 51–52, 220–21, 257, 303 recessions originating in, 2, 132, 303–4, 305–6, 308–9, 327–28, 362 and regional alliances, 173–75, 178, 183, 188, 199, 361, 383, 384, 386 “second term curse” in, 70–71 technology in, 20, 218, 221, 294, 303, 361–62 Treasury bonds, 280 Washington Consensus, 132–33 and wealth gap, 101, 102, 364 workforce in, 19, 32, 37, 41–42, 43–44, 360 Uribe, Álvaro, 77, 183, 350 Uruguay, 300 Velasco, Juan, 98 Venezuela, 4, 158 economic cycle in, 87, 346, 365 leadership in, 64, 69, 76, 77, 98, 365 oil in, 333, 334 and regional alliances, 182, 366 Vietnam, 42, 202 billionaires in, 118 Communist Party in, 377–78 currency in, 295 fiscal deficit in, 377 and global trade, 174, 176–78, 180, 295 hype about, 345 inflation in, 378 investment in, 378 leadership in, 90–91 location of, 168, 177–78, 185, 378 manufacturing in, 213, 378 per capita income in, 178, 378 population centers in, 190, 191, 199 Viravaidya, Mechai, 47 Volcker, Paul, 241, 245, 335 wage-price spiral, 240 Walton family, 119 Wang Jianlin, 114 wealth: balance in, 103 billionaire lists, 100, 103, 104, 116, 117, 120–21 and capital flight, 52–53, 107, 279–81, 292 creation of, 99, 103, 115 crony capitalism, 105–6, 112, 130, 332 of entrepreneurs, 118–19, 122 in family empires/inherited, 104, 116–21 measures of, 101 redistribution of, 95, 96–98, 99, 101, 126 of robber barons, 124 scale of, 107–10 and state meddling, 127–29 wealth gap, 95–96, 99–102, 364 and corruption, 127–29 and easy money, 101–2, 108 and economic declines, 125–27 rise of, 129–31 welfare states, 64, 65, 93, 97, 126, 138, 140–41 Wen Jiabao, 307, 308, 311–12 Widodo, Joko, 143, 157, 163, 376–77 Wiesel, Elie, 331–32 wildebeest, survival of, viii, ix, xi women: and birth rates, 18, 25–26, 28, 33–36, 43, 44, 47, 392 economic restrictions on, 42 education of, 26, 41 working, 28, 34, 35, 36, 40–44, 47 workforce: aging, 392 and available jobs, 32, 37, 55 and baby bonuses, 33–36 and economic growth, 24, 26, 52 global, 55–56 growth rate in, 28–32 highly skilled, 48–54 hours worked by, 18 and immigration, 28, 44–54 manual labor, 213 new people in, 28, 36, 57 participation rate in, 36–37 and pension funds, 279 and population declines, 24–32, 35, 38, 43, 44, 56 and productivity data, 18–19, 39 replaced by machines, 16, 24 and retirement, 36–40 robots in, 54–57 skilled, 48–54 wages, 101, 184, 185, 204, 214, 243, 257 women in, 28, 34, 35, 36, 40–44, 47 World Bank: on convergence, 339, 341 data set of, 407 on economic growth factors, 12, 18, 342, 346 forecasting record of, 336, 338 on inflation, 242 on infrastructure, 186, 187 on middle-income trap, 345 on new business, 48 on service sector, 210–11 Spence Commission, 341–42 on wealth gap, 100 on workforce, 42, 51 world economy, 358–401 absence of optimism in, 359 combined scores of, 358–59 crisis (2008), see global financial crisis disruptions of, 358–59 potential growth rate of, 359 world maps, 356–57, 402–3 see also specific nations World Trade Organization, 177 Wu Jinglian, 314 Xiao Gang, 311 Xi Jinping, 120, 156, 187, 208 Yellen, Janet, 101 Yeltsin, Boris, 67, 242 Yemen, 92 Yudhoyono, Susilo Bambang (SBY), 93, 157 Zambia, 96, 354 Zambrano, Lorenzo, 219–20 Zeihan, Peer, 184 Zielinski, Robert, The Kiss of Debt, 297–98, 299, 323 Zimbabwe, 86, 88–89, 96–97, 373 Zoellick, Robert, 242 “zombie companies,” 318–19 Zong Qinghou, 113 Zuckerberg, Mark, 104, 119, 124 Zuma, Jacob, 352, 397 ALSO BY RUCHIR SHARMA Breakout Nations: In Pursuit of the Next Economic Miracles ABOUT THE AUTHOR Ruchir Sharma is head of emerging markets and chief global strategist at Morgan Stanley Investment Management, with more than $20 billion of assets under management.

I also listen closely to how the public is talking about the nation’s leading tycoons, because it is often the popular perception of inequality, even more than the reality, that shapes the political reaction and economic policy. To skeptics who find issues like wealth inequality or an approach like reading billionaire lists too soft to take seriously, I would argue that this is an increasingly vital sign. Some world leaders still tend to dismiss vices like inequality, and the corruption that often feeds it, as timeless and inevitable sins that are common to all countries, particularly poor ones in the chaotic early stages of development. But this is a cop-out. Developing societies do tend to be more unequal than rich ones, but it is increasingly unclear that their inequality problem will naturally disappear. The belief that inequality fades over time had been the working assumption since the 1950s, when the economist Simon Kuznets pointed out that countries tend to grow more unequal in the early stages of development, as some poor farmers move to better-paying factory jobs in the cities, and less unequal in the later stages, as the urban middle class grows.

Making Globalization Work by Joseph E. Stiglitz

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affirmative action, Andrei Shleifer, Asian financial crisis, banking crisis, barriers to entry, Berlin Wall, business process, capital controls, central bank independence, corporate governance, corporate social responsibility, currency manipulation / currency intervention, Doha Development Round, Exxon Valdez, Fall of the Berlin Wall, Firefox, full employment, Gini coefficient, global reserve currency, Gunnar Myrdal, happiness index / gross national happiness, illegal immigration, income inequality, income per capita, incomplete markets, Indoor air pollution, informal economy, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), inventory management, invisible hand, John Markoff, Kenneth Arrow, Kenneth Rogoff, low skilled workers, manufacturing employment, market fundamentalism, Martin Wolf, microcredit, moral hazard, North Sea oil, offshore financial centre, oil rush, open borders, open economy, price stability, profit maximization, purchasing power parity, quantitative trading / quantitative finance, race to the bottom, reserve currency, rising living standards, risk tolerance, Silicon Valley, special drawing rights, statistical model, the market place, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, trickle-down economics, union organizing, Washington Consensus, zero-sum game

World Commission on the Social Dimension of Globalization, A Fair Globalization: Creating Opportunities for All (Geneva: International Labour Office, 2004), p. x; available at www.ilo.org/public/english/fairglobalization/report/ index.htm. 2. World Commission on the Social Dimension of Globalization, A Fair Globalization: Creating Opportunities for All, op. cit., p. 44; and Giovanni Andrea Cornia and Tony Addison with Sampsa Kiiski, "Income Distribution Changes and Their Impact in the Post–World War II Period," World Institute for Development Economics Research Discussion Paper 2003/28, March 2003. Inequality is measured by the Gini coefficient, one of the standard measures. 3. Even the $2-a-day standard is less than a fifth of the poverty standard used in the United States and western Europe. 4. Shaohua Chen and Martin Ravallion, "How Have the World's Poorest Fared since the Early 1980s?," World Bank Development Research Group, World Bank Policy Research Working Paper 3341, June 2004. The $1-a-day standard actually is defined as $1.08 in 1993 "real" (or purchasing power parity) dollars; the $2-a-day standard is defined as $2.15.

., 56, 300n G-8, 15, 209, 227 Garcia Merou, Martin, 213 GDP, xviii, 44, 153, 154, 181, 276, 322n, 324n of Argentina, 212, 222, 240 as measurement of development success, 45, 50, 130 of Moldova, 211 ratio of debt to, 218 of Russia, 234, 242 General Agreement on Tariffs and Trade (GATT), 75, 315n Uruguay Round, 75-76, 77-78, 84, 88, 105, 274-75, 306n General Electric, 65, 191, 201 General Motors, 65, 172, 187, 189, 279 generic drugs, 78, 104, 120-22, 315n-16n genetically modified foods, 94-95, 129 genetic structure, patents on, 13-14 Geneva, Switzerland, 278, 305n Georgia (nation), 140 Georgia (state), 192 Germany: greenhouse gases from, 172 tariffs of, 303n Treaty of Versailles and, 239 Venezuelan naval expedition oh 213 Ghana, 41, 331n Giffen, James, 139 INDEX Gilbert, Walter, 314n Gini coefficient, 294n Glacier National Park, 161 global economy, 5, 244 instability and volatility of, ix, xi, 245-46 legal framework for, 207-8 as propped up by U.S. purchasing power, 251-52, 261 as weakened by global reserve system, 250-54 global financial institutions, xii, xv, 3-4, 236 accountability oh 19, 283-84 democratic deficit in, 21 flawed system oh 17-18 see also International Monetary Fund; World Bank global financial system, see global reserve system global greenback system, 260-68, 335n, 336n administration oh 266 allocation policy oh 266-68 cycle of crisis broken by, 264-65 functions oh 262-63 stability as increased by, 263-64 globalization, 5-6 backlash against, 23, 269, 288 challenges to, 273-76 corporations at center oh xii-xiv, xv, 188, 197-98 democratization of, 269-92 exploitation of resources and, 149 first modern protest against, 7 hope oh 4 nation-state and, 19-24 political forces and, xiii-xiv, xviii, 4, 269, 291 reform oh 6-7, 13-19 scope oh 4, 56-59 two faces oh 7-13 Globalization and Its Discontents (Stiglitz), ix, x, xii, xiii, 293n Global Leadership Forum, 320n Global Monetary Authority, 335n global reserve system, 245-68, 277, 281 as cause of instability, 254-60 decline in aggregate demand as result oh 250-51, 252-53 diversification of currency in, 254-56, 259 dollar as major currency for, 245, 246, 248-49, 253 downward bias oh 262 347 low interest rate on dollar in, 245, 249-50, 255-56, 261 regional cooperatives and, 260-61 reforms oh 260-68, 286 as self-defeating, 254-55, 263 U.S. as major beneficiary oh 250 see also global greenback system global social contract, 285-87 global warming, 17, 21, 24, 161-86, 280, 284, 285, 288, 310n common tax proposal for, 181-84 as downplayed by GWB, 168 incontrovertible facts about, 166 industrialization and, 171-72, 173 privatization and, 163 and rising sea levels, 164-65, 167 Global Witness, 156 gold, as historical currency, 246 governance, 54-56, 128 see also corporate governance government, 47 balance between market and, xv cartel creation and, 201 development role of East Asian, 29, 30, 31-32, 45-46 downscaling oh 17 educational investment by, 28 environmental protection by, 197 equity promotion by, 27-28 foreign investment managed by, 33 infrastructure and, 27-28, 49 regulation and, 28 unemployment and, 253, 273 Grameen micro-credit bank, 51-52 "Grand Bargain," 77 grants, 14 Great Britain, 40, 42 Egypt occupied by, 214 energy efficiency oh 170 tariffs of, 303n Venezuelan naval expedition oh 213 Great Depression, xvii-xviii, 68, 74, 214, 236, 334n greenhouse gas emissions, 131, 161, 165, 166, 177, 183, 266, 280 from agriculture, 323n-24n deforestation and, 178-80 Rio agreement's curtailing oh 168-69 of U.S., 165, 171-74, 176 see also Kyoto Protocol Green net national product (Green NNP), 154 Green Revolution, 42, 43 348 INDEX Greenspan, Alan, 217 Grossman, Sanford J., 327n gross national happiness (GNH), 45 growth, sustainability of, 26, 36, 45 Guantanamo Bay, 151 guarantee fund, 124 Guatemala, 78 Gulf Stream, 166-67 Guyana, 307n, 331n Haile Selassie, 229 Haiti, 31, 307n Halonen, Tarja Kaarina, 8 Hardin, Garrett, 322n Harvard University, 242 Hastert, J.

Economists who place less importance on reducing income inequality are more prone to think that the actions governments might take to reduce that inequality are too costly, and may even be counterproductive. These "free market" economists are also more inclined to believe that markets, by themselves, without government intervention, are efficient, and that the best way to help the poor is simply to let the economy grow—and, somehow, the benefits will trickle down to the poor. (Interestingly, such beliefs have persisted, even as economic research has undermined their intellectual foundations.) On the other hand, those who, like me, think that markets often fail to produce efficient outcomes (producing too much pollution and too little basic research, for instance) and are disturbed by income inequalities and high levels of poverty; also believe that reducing that inequality can cost less than the conservative economists predict.


pages: 223 words: 58,732

The Retreat of Western Liberalism by Edward Luce

3D printing, affirmative action, Airbnb, basic income, Berlin Wall, Bernie Sanders, Branko Milanovic, Bretton Woods, call centre, carried interest, centre right, cognitive dissonance, colonial exploitation, colonial rule, computer age, corporate raider, cuban missile crisis, currency manipulation / currency intervention, Dissolution of the Soviet Union, Doha Development Round, Donald Trump, double entry bookkeeping, Erik Brynjolfsson, European colonialism, everywhere but in the productivity statistics, Fall of the Berlin Wall, Francis Fukuyama: the end of history, future of work, George Santayana, gig economy, Gini coefficient, global supply chain, illegal immigration, imperial preference, income inequality, informal economy, Internet of things, Jaron Lanier, knowledge economy, liberal capitalism, Marc Andreessen, Mark Zuckerberg, Martin Wolf, mass immigration, means of production, Monroe Doctrine, moral panic, more computing power than Apollo, mutually assured destruction, new economy, New Urbanism, Norman Mailer, offshore financial centre, one-China policy, Peace of Westphalia, Peter Thiel, Plutocrats, plutocrats, precariat, purchasing power parity, reserve currency, Richard Florida, Robert Gordon, Ronald Reagan, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, Snapchat, software is eating the world, South China Sea, Steve Jobs, superstar cities, TaskRabbit, telepresence, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tyler Cowen: Great Stagnation, universal basic income, unpaid internship, Washington Consensus, We are the 99%, We wanted flying cars, instead we got 140 characters, white flight, World Values Survey, Yogi Berra

The golden decades of the post-war era bore out the theory of declining inequality. But over the last thirty years that has gone into reverse. During those decades, the share of the US economic pie divided between labour and capital was roughly 70:30.29 Capital’s share – the flows taken up by returns on financial assets rather than wages and salaries – has since risen to a level not seen since the days of The Great Gatsby. The gap between the pay of the average chief executive and their employees has risen tenfold since the late 1970s to around four hundred.30 Europe has seen varying rates of rising inequality, with Britain and Spain recording the fastest-rising Gini coefficient – the measure of inequality – and Germany and Scandinavia the least. But all have been moving the same way. In contrast to the industrial era, however, today’s inequality is accompanied by vanishing mobility.

In spite of having grown up in relatively straitened circumstances, Westerners born since 1981 do not suffer the same inflated expectations as their elders. Millennials have grown up with something the rest of us may be forced to learn in the years ahead. These are the costs, both material and psychological, that we pay for stagnation. The other big crisis of Western political economy is rising income inequality. The West is suffering from acute polarisation. History tells us that inequality soars when societies develop. That is what economic theory dictates as well. During the nineteenth century, British and US inequality rose to giddying heights as the owners of new wealth – the railroads, shipping lines, iron and steel mills and machine industries – reaped the benefits of vast new monopolies. It was also an age of ferment. Though wealth gaps reached almost biblical levels in the era of robber barons, people were on the move.

Hobson, Imperialism: A Study (James Pott & Company, New York, 1902), p. 333. 3 Jamil Anderlini and Lucy Hornby, ‘China overtakes US as world’s largest goods trader’, Financial Times, 10 January 2014, <https://www.ft.com/content/7c2dbd70-79a6-11e3-b381-00144feabdc0>. 4 Branko Milanovic, Global Inequality: A New Approach for the Age of Globalization (Belknap Press, Cambridge MA, 2016 (ebook)). 5 Danny Quah, ‘The Global Economy’s Shifting Centre of Gravity’, Global Policy, 2:1 (January 2011), <http://onlinelibrary.wiley.com/doi/10.1111/j.1758-5899.2010.00066.x/pdf>. 6 Milanovic, Global Inequality. 7 Hobson, Imperialism, p. 339. 8 Milanovic, Global Inequality. 9 Richard Baldwin: The Great Convergence: Information Technology and the New Globalization (Belknap Press, Cambridge MA, 2016 (ebook)). 10 Hugh White, The China Choice: Why We Should Share Power (Oxford University Press, Oxford, 2012 (ebook)). 11 The World Economic Forum’s website has a comprehensive database of each forum’s reports and sessions stretching back many years.


pages: 537 words: 158,544

Second World: Empires and Influence in the New Global Order by Parag Khanna

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Admiral Zheng, affirmative action, anti-communist, Asian financial crisis, Bartolomé de las Casas, Branko Milanovic, British Empire, call centre, capital controls, central bank independence, cognitive dissonance, colonial rule, complexity theory, continuation of politics by other means, crony capitalism, Deng Xiaoping, Dissolution of the Soviet Union, Donald Trump, Edward Glaeser, energy security, European colonialism, facts on the ground, failed state, flex fuel, Francis Fukuyama: the end of history, friendly fire, Gini coefficient, global reserve currency, global supply chain, haute couture, Hernando de Soto, illegal immigration, income inequality, informal economy, invisible hand, Islamic Golden Age, Khyber Pass, knowledge economy, land reform, low skilled workers, mass immigration, means of production, megacity, Monroe Doctrine, oil shale / tar sands, oil shock, open borders, open economy, Parag Khanna, Pax Mongolica, Pearl River Delta, pirate software, Plutonomy: Buying Luxury, Explaining Global Imbalances, Potemkin village, price stability, race to the bottom, RAND corporation, reserve currency, rising living standards, Ronald Reagan, Silicon Valley, Skype, South China Sea, special economic zone, stem cell, Stephen Hawking, Thomas L Friedman, trade route, trickle-down economics, uranium enrichment, urban renewal, Washington Consensus, women in the workforce

See Emile Kok-Kheng Yeoh, “Development Policy, Demographic Diversity, and Interregional Disparities in China,” paper presented at the inaugural international ChinaWorld workshop, March 10–11, 2006, Asia Research Centre, Copenhagen Business School. See Shang-Jin Wei, “Is Globalization Good for the Poor in China?” Finance and Development, September 2002. China’s Gini coefficient, a measure of income equality, has risen to .45 since the beginning of reforms as the rich get richer—but this is no worse than the United States. And its urban Gini coefficient is only .32, which is near the global average. 33. Hu Jintao’s prioritization of rural development in fact sharpened the ideological debate over the merits of capitalism in light of the widening gap between urban and rural incomes. 34. Petrochemical factories have caused significant pollution in a third of rural rivers and 90 percent of urban rivers, most notably the Songhua River of Harbin, where in 2005 a chemical spill threatened the entire water supply of an already chronically water-short region.

China’s coastal provinces have to date received an overwhelming proportion—four-fifths—of total foreign investment, but this dazzling statistic is by design: Capitalism has come in stages to China as a way to manage it gradually. The cost of this approach, however, has been inequality.31 Migrants show up in big coastal cities as if arriving in a new world the likes of which they have never imagined. Many rummage through trash dumps to earn more money than they would as farmers, while elites casually ignore them like hordes of animals. Like Brazil, inequality has correlated to rising crime in China. The city of Guangzhou has deployed hundreds of additional policemen to patrol the streets. But because China is tackling its inequality problem head-on rather than getting hung up about crime, it has become the model that Brazil is watching most closely. Halting the rural migration of over three hundred million Chinese is not possible, but China’s efforts at providing housing, electricity, water, health care, and even education and pensions, will gradually bring down overall inequality.32 Rather than debate statistics, however, Chinese leaders know that even as the top rises like a skyrocket, the key is to raise the bottom.

Even a year after Katrina, much housing remained in ruins, some schools had not reopened, and the electricity supply was limited, prompting an enterprising Chinese contractor to offer to rebuild a number of dilapidated Mississippi towns, as their residents were still living in tents and trailers. American socioeconomic attitudes would be laughable if they were not so scary. As in other countries, there is a general correlation linking low education, high income inequality, low living standards, and rising crime: America has an equal number of gang members as policemen (about 750,000). The relationship between inequality and homicide is airtight: “Societies that tolerate the injustices of great inequality will almost inescapably suffer their social consequences: they will be unfriendly and violent, recognized more for their hostility than their hospitality.”29 If every society gets the barbarians it deserves, as Toynbee argued, are Americans their own worst enemies? It remains a mystery why Americans, threatened physically by no one but themselves, require so many weapons, as they are mostly used to kill one another off.


pages: 409 words: 118,448

An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy by Marc Levinson

affirmative action, airline deregulation, banking crisis, Big bang: deregulation of the City of London, Boycotts of Israel, Bretton Woods, Capital in the Twenty-First Century by Thomas Piketty, car-free, Carmen Reinhart, central bank independence, centre right, clean water, deindustrialization, endogenous growth, falling living standards, financial deregulation, floating exchange rates, full employment, George Gilder, Gini coefficient, global supply chain, income inequality, income per capita, indoor plumbing, informal economy, intermodal, invisible hand, Kenneth Rogoff, knowledge economy, late capitalism, linear programming, lump of labour, manufacturing employment, new economy, Nixon shock, North Sea oil, oil shock, Paul Samuelson, pension reform, price stability, purchasing power parity, refrigerator car, Right to Buy, rising living standards, Robert Gordon, rolodex, Ronald Coase, Ronald Reagan, Simon Kuznets, statistical model, strikebreaker, structural adjustment programs, Thomas Malthus, total factor productivity, unorthodox policies, upwardly mobile, War on Poverty, Washington Consensus, Winter of Discontent, Wolfgang Streeck, women in the workforce, working-age population, yield curve, Yom Kippur War, zero-sum game

Simon Kuznets, “Economic Growth and Income Inequality,” American Economic Review 45 (1955): 1–28. Kuznets acknowledged that his findings pertained to the economies of Europe, North America, and Japan, and that the distribution of income in “underdeveloped” countries might not even out in the same way. 3. The data on income distribution in this paragraph are taken from Anthony B. Atkinson and Salvatore Morelli, “Chartbook of Economic Inequality,” at www.chart-bookofeconomicinequality.com, accessed January 8, 2014. The other countries for which Atkinson and Morelli provide relevant data for the 1950s and 1960s are Australia, Canada, Finland, France, Great Britain, Japan, New Zealand, Norway, South Africa, Sweden, and the United States. In Japan, the Gini coefficient, a measure that would equal 0 if each household had an equal share of the nation’s income and 1 if all income belonged to a single household, fell from around 0.3 before the war to 0.04 in 1953, indicating a very high degree of equality.

Smith, Income, Poverty, and Health Insurance Coverage in the United States: 2012, US Census Bureau, Current Population Reports, P60–245 (September 2013), Table A-4; Atkinson and Morelli, “Chartbook of Economic Inequality.” In the United States, the Gini coefficient of household gross income reached its lowest level in 1974. 7. Alissa Goodman and Steven Webb, “For Richer, for Poorer: The Changing Distribution of Income in the United Kingdom, 1961–91,” Institute for Fiscal Studies, 1994, 15–17, 40, 56–60; Mike Brewer, Alastair Muriel, and Liam Wren-Lewis, “Accounting for Changes in Inequality Since 1968: Decomposition Analyses for Great Britain,” Institute for Fiscal Studies, 2009; UK Office for National Statistics, “Middle-Income Households, 1977–2011/12,” December 2, 2013; A. B. Atkinson, “Bringing Income in from the Cold,” Economic Journal 107 (1997): 297–312.

Even though higher pensions and other government benefits boosted the incomes of some population groups, especially retirees and single parents, income distribution grew far more skewed in the 1980s, and would continue to grow increasingly unequal for decades beyond.7 The disparities in other wealthy countries were less stark, in most cases because government stepped in to reduce the effects of less equal wages. In Canada, for example, wage inequality increased from the mid-1970s but income inequality did not, thanks to government benefits that targeted low-wage workers. It was not until the 1980s that the top wage earners began to pull away. In Japan, incomes became more equal through the 1970s; but once inequality began to rise, around 1981, it advanced so steadily that by 2005 one author could write that it was “approaching the highest among advanced countries.” Sweden, long thought of as a bastion of social-democratic equality, saw income disparities begin to increase around 1981, and so did Spain and Switzerland.


pages: 499 words: 152,156

Age of Ambition: Chasing Fortune, Truth, and Faith in the New China by Evan Osnos

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conceptual framework, crony capitalism, currency manipulation / currency intervention, David Brooks, Deng Xiaoping, East Village, financial independence, Gini coefficient, income inequality, indoor plumbing, information asymmetry, land reform, Lao Tzu, low skilled workers, market fundamentalism, Mohammed Bouazizi, Plutocrats, plutocrats, rolodex, Silicon Valley, South China Sea, sovereign wealth fund, special economic zone, Steve Jobs, transcontinental railway, Washington Consensus, Xiaogang Anhui farmers, young professional

A new mood was setting in: China’s boom had made almost everyone better off to some degree—average incomes had more than tripled over the past decade—but the gap between rich and poor had ballooned more than the Party ever intended. In 2001 the blunt-spoken premier Zhu Rongji had been asked if he worried that the growing divide might lead to social unrest. “Not yet,” Zhu said. He pointed to the measurement of income equality known as the Gini coefficient, which ranges from 0 to 1, with one being extreme disparity in wealth. Chinese officials predicted that China would be stable as long as its Gini stayed below what he called a “danger line” of 0.4. Eleven years later, the number had grown so large that the government simply stopped publishing it, saying the wealthy hid too much of their income to make the statistic credible. The income gap was not an abstraction: a child born on the remote Qinghai Plateau was seven times more likely to die before the age of five than a child born in the capital.

It could have reformed the tax system—it still had no capital gains or inheritance taxes—but instead it adopted a more immediate strategy: in April 2011, Beijing banned companies from using the word luxury in their names and ads. The “Black Swan Luxury Bakery,” which was selling wedding cakes for $314,000, had to call itself the “Black Swan Art Bakery.” (The ban did not last.) After years of not daring to measure the Gini coefficient, in January 2013 the government finally published a figure, 0.47, but many specialists dismissed it; the economist Xu Xiaonian called it “a fairy tale.” (An independent calculation put the figure at 0.61, higher than the level in Zimbabwe.) Yet, for all the talk about income, it was becoming clear that people cared most of all about the gap in opportunity. When the Harvard sociologist Martin Whyte polled the Chinese public in 2009, he discovered that people had a surprisingly high tolerance for the rise of the plutocracy.

THE HARD TRUTH To understand the changes in opportunity and mobility in China, I relied on many studies, including Cathy Honge Gong, Andrew Leigh, and Xin Meng, “Intergenerational Income Mobility in Urban China,” Discussion Paper no. 140, National Centre for Social and Economic Modelling, University of Canberra, 2010; James J. Heckman and Junjian Yi, “Human Capital, Economic Growth, and Inequality in China,” NBER Working Paper no. 18100, May 2012; John Knight, “Inequality in China: An Overview,” World Bank, 2013; Yingqiang Zhang and Tor Eriksson, “Inequality of Opportunity and Income Inequality in Nine Chinese Provinces, 1989–2006,” China Economic Review 21, no. 4 (2010): 607–16. I am thankful for Martin Whyte’s advice and judgment on this subject. 19. THE SPIRITUAL VOID For background on faith in China before and after 1949, including the lost temples of Beijing, Mao’s cult of personality, and the violence that stemmed from it, I relied on Geremie Barmé, Shades of Mao: The Posthumous Cult of the Great Leader (Armonk, NY, and London: M.E.


pages: 386 words: 122,595

Naked Economics: Undressing the Dismal Science (Fully Revised and Updated) by Charles Wheelan

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affirmative action, Albert Einstein, Andrei Shleifer, barriers to entry, Berlin Wall, Bernie Madoff, Bretton Woods, capital controls, Cass Sunstein, central bank independence, clean water, collapse of Lehman Brothers, congestion charging, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, Daniel Kahneman / Amos Tversky, David Brooks, demographic transition, diversified portfolio, Doha Development Round, Exxon Valdez, financial innovation, fixed income, floating exchange rates, George Akerlof, Gini coefficient, Gordon Gekko, greed is good, happiness index / gross national happiness, Hernando de Soto, income inequality, index fund, interest rate swap, invisible hand, job automation, John Markoff, Joseph Schumpeter, Kenneth Rogoff, libertarian paternalism, low skilled workers, lump of labour, Malacca Straits, market bubble, microcredit, money market fund, money: store of value / unit of account / medium of exchange, Network effects, new economy, open economy, presumed consent, price discrimination, price stability, principal–agent problem, profit maximization, profit motive, purchasing power parity, race to the bottom, RAND corporation, random walk, rent control, Richard Thaler, rising living standards, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, school vouchers, Silicon Valley, Silicon Valley startup, South China Sea, Steve Jobs, The Market for Lemons, the rule of 72, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, transaction costs, transcontinental railway, trickle-down economics, urban sprawl, Washington Consensus, Yogi Berra, young professional, zero-sum game

Our only resounding success is poverty among the elderly, which has fallen from 30 percent in the 1960s to below 10 percent, largely as the result of Social Security. Income inequality. We care about the size of the pie; we also care about how it is sliced. Economists have a tool that collapses income inequality into a single number, the Gini index.* On this scale, a score of zero represents total equality—a state in which every worker earns exactly the same. At the other end, a score of 100 represents total inequality—a state in which all income is earned by one individual. The countries of the world can be arrayed along this continuum. In 2007, the United States had a Gini index of 45, compared to 28 for France, 23 for Sweden, and 57 for Brazil. By this measure, the United States has grown more unequal over the past several decades. America’s Gini coefficient was 36.5 in 1980 and 37.9 in 1950. Size of government.

Thus, buying two stocks will not offer as much diversification as would splitting your portfolio between two flips of a coin. Nonetheless, the broader point is valid. * To derive the Gini index, the personal incomes in a country are arranged in ascending order. A line, the Lorenz curve, plots the cumulative share of personal income against the cumulative share of population. Total equality would be a 45-degree line. The Gini coefficient is the ratio of the area between the diagonal and the Lorenz curve to the total area under the diagonal. * I can’t remember the exact numbers, but they were something along these lines. * Okay, that’s not exactly true. At the height of the financial crisis, right around the time that Lehman Brothers declared bankruptcy, the yield on three-month U.S. Treasury notes fell below zero, which means that the nominal interest rate had turned negative.

Becker, Ryerson Lecture at the University of Chicago, as reprinted in Becker, Human Capital (Chicago: University of Chicago Press, 1993), p. 21. 8. Ibid., p. 23. 9. Roger Lowenstein, “The Inequality Conundrum,” New York Times Sunday Magazine, June 10, 2007. 10. Dora Costa, “The Wage and the Length of the Work Day: From the 1890s to 1991,” Journal of Labor Economics, January 2000. 11. All of the income inequality information, including the H. L. Mencken quotations, comes from Robert H. Frank, “Why Living in a Rich Society Makes Us Feel Poor,” New York Times Magazine, October 15, 2000. 12. Philippe Aghion, Eve Caroli, and Cecilia Garcia-Penalosa, “Inequality and Economic Growth: The Perspective of the New Growth Theories,” Journal of Economic Literature, vol. 37 (December 1999), pp. 1615–60. 13. Marvin Zonis, Remarks Presented at the University of Chicago Business Forecast Luncheon, December 6, 2000.


pages: 413 words: 119,379

The Looting Machine: Warlords, Oligarchs, Corporations, Smugglers, and the Theft of Africa's Wealth by Tom Burgis

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Airbus A320, Berlin Wall, blood diamonds, BRICs, British Empire, central bank independence, clean water, colonial rule, corporate social responsibility, crony capitalism, Deng Xiaoping, Donald Trump, F. W. de Klerk, Gini coefficient, Livingstone, I presume, McMansion, megacity, offshore financial centre, oil shock, open economy, purchasing power parity, rolodex, Ronald Reagan, Silicon Valley, South China Sea, sovereign wealth fund, structural adjustment programs, trade route, transfer pricing, upwardly mobile, urban planning, Washington Consensus, WikiLeaks, zero-sum game

The data on income distribution under apartheid are drawn from Murray Leibbrandt, Ingrid Woolard, Arden Finn and Jonathan Argent, ‘Trends in South African Income Distribution and Poverty Since the Fall of Apartheid’, OECD, May 2010, www.npconline.co.za/MediaLib/Downloads/​Home/Tabs/Diagnostic/Ec​onomy2/Trends%20in%20South%20African%20In​come%20Distribution%20and%20Poverty%​20since%20the%20Fall%20o​f%20Apartheid.pdf. The 2009 income distribution data are from the World Bank: World Bank, World Development Indicators 2014, http://databank.worldbank.org/data/views/reports/tableview.aspx#. 12. The Gini coefficient shows income distribution on a scale in which zero shows perfect equality and 100 shows perfect inequality. In 1993, the year before the end of white rule, South Africa’s Gini coefficient was 59.3. In 2009 it was 63.1, the highest level in the world after the Seychelles, Namibia and the Comoros. World Bank, World Development Indicators 2014, http://databank.worldbank.org/data/views/reports/tableview.aspx?isshared=true#. 13. Pascal Fletcher and Jon Herskovitz, ‘South Africa Labor Hero Urged Crackdown on “Criminal” Strike’, Reuters, 24 October 2012, www.reuters.com/article/​2012/10/24/us-safrica-mines-ramaphosa-idU​SBRE89N13B20121024. 14.

Over that period, of forty-five countries that failed to sustain economic growth, all but six were heavily dependent on oil or mining.12 Without exception, through the 1990s every country that borrowed from the World Bank did worse the more it depended on extractive industries. The game, Salim and his team concluded, was rigged – and the World Bank appeared to be on the wrong side. ‘The knowledge, power, financial, and technical resource gaps between major extractive industry companies, civil society, developing-country governments, and local communities throughout the world are profound,’ Salim’s research concluded. ‘The inequalities between local communities and transnational companies are not just economic in nature; they include access to political power and information and the ability to know and use the legal system to their advantage.’ In the dry language of the World Bank Salim was describing the looting machine: the alliance between shadow governments and the resource industry that tramples over the people who live where oil and minerals are found.

His son, Teodorin Obiang, officially received only a modest salary for the ministerial positions he has held but has nonetheless been the proud owner of a $30 million mansion in Malibu, properties in Cape Town and the Avenue Foch in Paris, a fleet of Ferraris and Rolls-Royces, a Gulfstream jet, paintings by Renoir and Matisse, and one of Michael Jackson’s crystal-encrusted gloves.6 The rest of Equatorial Guinea endures living standards ranked 136 out of 186 countries, behind Guatemala (GDP per head: $5,000), and has the same life expectancy, fifty-one years, as Somalia. The average length of schooling is eight years, about the same as in Afghanistan. Mining was always going to be central to the ANC’s plans to redress the economic injustices of apartheid – an experiment in whether South Africa could break the link between resource wealth and extreme inequality. The industry had served both as the test tube for apartheid policies and the breeding ground of resistance to white rule. The ANC inherited a country in which the mining industry, like the rest of the economy, was controlled by a white minority that had surrendered political but not commercial hegemony. The new government’s solution was a policy called Black Economic Empowerment, or BEE, under which the owners of South Africa’s biggest companies would transfer a chunk of their shares to blacks and other previously disadvantaged ethnicities.


pages: 283 words: 73,093

Social Democratic America by Lane Kenworthy

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affirmative action, Affordable Care Act / Obamacare, barriers to entry, basic income, Celtic Tiger, centre right, clean water, collective bargaining, corporate governance, David Brooks, desegregation, Edward Glaeser, endogenous growth, full employment, Gini coefficient, hiring and firing, Home mortgage interest deduction, illegal immigration, income inequality, invisible hand, Kenneth Arrow, labor-force participation, manufacturing employment, market bubble, minimum wage unemployment, new economy, postindustrial economy, purchasing power parity, race to the bottom, rent-seeking, rising living standards, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, school choice, shareholder value, sharing economy, Skype, Steve Jobs, too big to fail, Tyler Cowen: Great Stagnation, union organizing, universal basic income, War on Poverty, working poor, zero day

In the first chart, the vertical axis shows public transfers as a share of total household income; here we see that Australia’s transfers are highly targeted and that the country spends comparatively little on them. In the second chart, the vertical axis shows the degree to which transfers reduce income inequality; given its low spending, Australia’s public transfer system is effective at redistributing income.101 FIGURE 4.19 Australia’s government transfers: heavily targeted, inexpensive, and redistributive Australia is “Asl.” Targeting: concentration coefficient for government transfers; “high” indicates more targeted, “low” more universal. Transfer generosity: government transfers as a share of household income. Redistribution: percentage reduction in inequality of household income (Gini coefficient) when government transfers are added. Data source: Ive Marx, Lina Salanauskaite, and Gerlinde Verbist, “The Paradox of Redistribution Revisited,” unpublished paper, 2012, using Luxembourg Income Study data.

They also increasingly marry (or cohabit with) others like themselves.53 Do we have conclusive evidence of rising inequality of opportunity in earnings and income? Not yet.54 Existing panel data sets are too young to give us a clear signal. But given the large increases in inequality of test scores and college completion between children from low-income families and those from high-income families, it is very likely that the same will be true, and perhaps already is true, for their earnings and incomes when they reach adulthood. Slow Income Growth As a society gets richer, the living standards of its households should rise.55 The poorest needn’t benefit the most; equal rates of improvement may be good enough. We might not even mind if the wealthiest benefit a bit more than others; a little increase in income inequality is hardly catastrophic. But in a good society, those in the middle and at the bottom ought to benefit significantly from economic growth.

After rising steadily for a century, the share of Americans completing secondary school has been stuck at 75 percent for several decades.31 Social and economic shifts are partly to blame: there are more students for whom English is not the principal language at home, more children grow up in unstable families, and the incomes of low-income households have barely budged. Despite these obstacles, or perhaps because of them, we need schools to do better. A generation ago many blamed the huge inequality of school resources, a product of our decentralized, property-tax-based system of school funding.32 Some of that inequality has been rectified, as state governments now contribute a larger share of funds to schools and distribute them to offset the unequal distribution of local property values.33 While funding inequality across states remains substantial, overall the situation is better. Some believe the problem lies in lack of competition among public schools. If competition works, it is in one respect an ideal policy strategy: it requires little or no understanding of why some schools perform well while others don’t.


pages: 309 words: 78,361

Plenitude: The New Economics of True Wealth by Juliet B. Schor

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Asian financial crisis, big-box store, business climate, carbon footprint, cleantech, Community Supported Agriculture, creative destruction, credit crunch, Daniel Kahneman / Amos Tversky, decarbonisation, dematerialisation, demographic transition, deskilling, Edward Glaeser, en.wikipedia.org, Gini coefficient, global village, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, Joseph Schumpeter, Kenneth Arrow, knowledge economy, life extension, McMansion, new economy, peak oil, pink-collar, post-industrial society, prediction markets, purchasing power parity, ride hailing / ride sharing, Robert Shiller, Robert Shiller, sharing economy, Simon Kuznets, single-payer health, smart grid, The Chicago School, Thomas L Friedman, Thomas Malthus, too big to fail, transaction costs, Zipcar

More than half earning less than a thousand dollars annually is the author’s calculation from Chen and Ravallion (2008), table 5. 26 In 1960 the average person consumed just a third: Economic report of the president (2009), table B-31, p. 321, per capita consumption expenditures in 2000 dollars, author’s calculation. 1960-2008:3. 26 inflation-adjusted per-person expenditures have tripled for furniture and household goods: Economic report of the president (2009), table B-17, p. 305, author’s calculation of per capita changes from aggregate expenditures, 1990-2008:3. 26 Overall, average real per-person spending increased 42 percent: Economic report of the president (2009), table B-31, p. 321, per capita consumption expenditures in 2000 dollars, author’s calculation, 1990-2008:3. 26 Since 2000, nearly half, or 47 percent, of the nation’s entire income: Mishel, Bernstein, and Shierholz (2009), table 1.7, p. 61. 26 income inequality was worse than . . . since the end of the 1920s: The U.S. Census Bureau’s historical data on Gini coefficients shows the 2006 Gini of 47 as the highest since 1967, the earliest reported by the Census. See United States Census Bureau (2009). The Gini in 1929 is estimated at 41 as reported by Brenner, Kaelble, and Thomas (1991), p.199. The share going to the top 1 percent was not quite at 1929 levels (Saez [2008]). See also Mishel, Bernstein, and Shierholz (2009), figure 1K, p. 64. 26 Broader measures showed erosion in well-being : United Nations Development Programme (2007) for 1980-2005.

Few economists go all the way with the Cornucopians, but a larger number are believers in a more moderate variant of eco-optimism, which argues that growth itself will save the environment. Represented in a concept called the Environmental Kuznets Curve, it is modeled on studies of inequality carried out in the 1950s and ’60s by the economist Simon Kuznets. Kuznets saw a humpback data pattern across nations. At a given point in time, some had low levels of both income and inequality, some had more inequality and more income, and some had high incomes with low inequality. From this finding, most economists came to believe that countries must endure a growing concentration of income as they develop, but that once they become wealthy, they can buy themselves more fairness. Of course, in recent decades wealthy countries are getting more unequal again, even as they grow.

Plenitude lifestyles reclaim time, so people can reinvigorate their social connections, build community, and work together on investments in local and regional ecosystems. Sustainability groups operating at the local and regional levels are already part of networked efforts to influence economic development, pushing for community investments with public payoffs. A commonwealth approach is a departure from the usual debates about inequality, which center on income rather than assets, and redistribution rather than expansion of wealth. After-the-fact taxation that redirects skewed market outcomes was once the dominant approach to inequality, but it has become less popular as its drawbacks surfaced. Neoliberal ideology has predisposed many to view market outcomes as natural or even fair, and has obscured the underlying biases, subsidies, and distortions associated with current market rules and structures. Interventions that create more equality in the initial distribution of assets or restructure flawed rules are more likely to yield fairer market outcomes that need less ex post facto tinkering.


pages: 318 words: 85,824

A Brief History of Neoliberalism by David Harvey

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affirmative action, Asian financial crisis, Berlin Wall, Bretton Woods, business climate, capital controls, centre right, collective bargaining, creative destruction, crony capitalism, debt deflation, declining real wages, deglobalization, deindustrialization, Deng Xiaoping, Fall of the Berlin Wall, financial deregulation, financial intermediation, financial repression, full employment, George Gilder, Gini coefficient, global reserve currency, illegal immigration, income inequality, informal economy, labour market flexibility, land tenure, late capitalism, Long Term Capital Management, low-wage service sector, manufacturing employment, market fundamentalism, mass immigration, means of production, Mexican peso crisis / tequila crisis, Mont Pelerin Society, mortgage tax deduction, neoliberal agenda, new economy, Pearl River Delta, phenotype, Ponzi scheme, price mechanism, race to the bottom, rent-seeking, reserve currency, Ronald Reagan, Silicon Valley, special economic zone, structural adjustment programs, the built environment, The Chicago School, transaction costs, union organizing, urban renewal, urban sprawl, Washington Consensus, Winter of Discontent

In the past five years, the income divide between the urban rich and the rural poor has widened so sharply that some studies now compare China’s social cleavage unfavourably with Africa’s poorest nations.’46 Social inequality was never eradicated in the revolutionary era. The differentiation between town and country was even written into law. But with reform, writes Wang, ‘this structural inequality quickly transformed itself into disparities in income among different classes, social strata, and regions, leading rapidly to social polarization’.47 Formal measures of social inequality, such as the Gini coefficient, confirm that China has travelled the path from one of the poorest and most egalitarian societies to chronic inequality, all in the space of twenty years (see Figure 5.2). The gap between rural and urban incomes (ossified by the residential permit system) has been increasing rapidly.

The gap between rural and urban incomes (ossified by the residential permit system) has been increasing rapidly. While affluent urban dwellers drive BMWs, rural farmers are lucky to eat meat once a week. Even more emphatic has been the increasing inequality within both the rural and the urban sectors. Regional inequalities have also deepened, with some of the southern coastal zone cities surging ahead while the interior and the ‘rust belt’ of the northern region have either failed to take off or floundered badly.48 Figure 5.2 Increasing income inequality in China: rural (above) and urban (below), 1985–2000 Source: Wu and Perloff, China’s Income Distribution Over Time. Mere increases in social inequality constitute an uncertain indicator of the reconstitution of class power. The evidence on this last point is largely anecdotal and by no means secure. We can, however, proceed inferentially by looking first at the situation at the bottom of the social ladder.

Tabb, The Long Default, 15. 14. Edsall, The New Politics of Inequality, 128. 15. Court, Corporateering, 29–31, lists all the relevant legal decisions of the 1970s. 16. The accounts of Edsall, The New Politics of Inequality, followed by Blyth, Great Transformations, are compelling. 17. Edsall, The New Politics of Inequality, 235. 18. T. Frank, What’s the Matter with Kansas: How Conservatives Won the Hearts of America (New York: Metropolitan Books, 2004). 19. D. Kirkpatrick, ‘Club of the Most Powerful Gathers in Strictest Privacy’, New York Times, 28 Aug. 2004, A10. 20. See J. Stiglitz, The Roaring Nineties (New York: Norton, 2003). 21. Yergin and Stanislaw, Commanding Heights, 337; Stiglitz, The Roaring Nineties, 108. 22. Edsall, The New Politics of Inequality, 217. 23. Again, the account here rests heavily on Blyth, Great Transformations, and Edsall, The New Politics of Inequality. 24.


pages: 317 words: 101,475

Chavs: The Demonization of the Working Class by Owen Jones

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Asperger Syndrome, banking crisis, Berlin Wall, British Empire, call centre, collapse of Lehman Brothers, credit crunch, deindustrialization, Etonian, facts on the ground, falling living standards, first-past-the-post, ghettoisation, Gini coefficient, hiring and firing, housing crisis, Hugh Fearnley-Whittingstall, illegal immigration, income inequality, informal economy, low skilled workers, low-wage service sector, mass immigration, Neil Kinnock, Occupy movement, pension reform, place-making, Plutocrats, plutocrats, race to the bottom, Right to Buy, rising living standards, The Bell Curve by Richard Herrnstein and Charles Murray, The Spirit Level, too big to fail, unpaid internship, upwardly mobile, We are the 99%, wealth creators, Winter of Discontent, women in the workforce, working-age population

Again, this disappearance of opportunities has affected a large proportion of young working-class men, the overwhelming majority of whom did not riot. But with so many leaving school with nothing much to look forward to, itshould not be all that surprising if a small minority should respond to their bleak prospects in this way. A toxic combination of inequality and consumerism also undoubtedly played its part. In 1979, Britain was one of the most equal Western societies. After three decades of Thatcherism, it is now one of the least equal. The Gini coefficient-which measures levels of inequality in a society-has shot up from .25 to .40 in three decades. London is one of the most unequal cities on earth: the richest 10 per cent is worth 273 times more than the poorest 10 per cent" London is not-yet-like Paris, where the affluent are concentrated in the centre, and the poorest are more likely to be found in the banlieues (the suburbs).

This book will look at how chav-hate is far from an isolated phenomenon. In part, itis the product of a deeply unequal society. 'In my view, one of the key effects of greater inequality is toincrease feelings of superiority and inferiority in society,' says Richard Wilkinson, coauthor of the seminal The Spirit Level, a book that effectively demonstrates thelinkbetween inequality and a range of social problems. And indeed inequality is much greater today than it has been for most of our history. 'A widespread inequality is an extremely recent thing for most of the world,' argues the professor of human geography and' inequality expert', Danny Dorling. Demonizing people at the bottom has been a convenient way of justifying an unequal society throughout the ages. After all, in the abstract it would seem irrational that through an accident of birth, some should rise to the top while others remain trapped at the bottom.

Even more strikingly, while only 19 per cent felt that poverty was caused by laziness or a lack of willpower in 1986, the figure had increased to 27 per cent twenty years later. What is remarkable about these figures is that they have come at a time when inequality has grown as sharply as social mobility has declined. The G ini coefficient-used to measure overall income inequality in Britain-was rated as 26 in 1979. Today it has risen to 39. It is not simply that this growing social division renders those at the top more likely to be ignorant of how other people live their lives. As we have seen, demonizing the less well-off also makes it easier to justify an unprecedented and growing level of social inequality. After all, to admit that some people are poorer than others because of the social injustice inherent in our society would require government action. Claiming that people are largely responsible for their circumstances facilitates the opposite conclusion.


pages: 317 words: 87,566

The Happiness Industry: How the Government and Big Business Sold Us Well-Being by William Davies

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1960s counterculture, Airbnb, business intelligence, Cass Sunstein, corporate governance, dematerialisation, experimental subject, Exxon Valdez, Frederick Winslow Taylor, Gini coefficient, income inequality, intangible asset, invisible hand, joint-stock company, lifelogging, market bubble, mental accounting, nudge unit, Philip Mirowski, profit maximization, randomized controlled trial, Richard Thaler, road to serfdom, Ronald Coase, Ronald Reagan, science of happiness, selective serotonin reuptake inhibitor (SSRI), sentiment analysis, sharing economy, Slavoj Žižek, smart cities, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia, Steve Jobs, The Chicago School, The Spirit Level, theory of mind, urban planning, Vilfredo Pareto

Michael Hardt and Antonio Negri, Empire, Cambridge, MA: Harvard University Press, 2000; Adam Arvidsson and Nicolai Peitersen, The Ethical Economy: Rebuilding Value After the Crisis, New York: Columbia University Press, 2014; Jeremy Gilbert, Common Ground: Democracy and Collectivity in an Age of Individualism, London: Pluto Press, 2014. 5 The Crisis of Authority 1‘Full Text: Blair’s Newsnight Interview’, theguardian.com, 21 April 2005. 2Richard Wilkinson and Kate Pickett, The Spirit Level. 3ESPNcricinfo staff, ‘We Urge the Development of Inner Fitness’, espncricinfo.com, 1 April 2014. 4‘Competitiveness and Perfectionism: Common Traits of Both Athletic Performance and Disordered Eating’, medicalnewstoday.com, 22 May 2009. 5Tim Kasser, The High Price of Materialism, Cambridge, MA: MIT Press, 2003. 6See Toben Nelson et al., ‘Do Youth Sports Prevent Pediatric Obesity? A Systematic Review and Commentary’, Current Sports Medicine Reports 10: 6, 2011. 7This is according to the Gini coefficient. 8Kim Phillips-Fein, Invisible Hands: The Making of the Conservative Movement from the New Deal to Reagan, New York: W. W. Norton & Company, 2009. 9Jessica Grogan, Encountering America: Humanistic Psychology, Sixties Culture and the Shaping of the Modern Self, New York: Harper Perennial, 2013. 10Hadley Cantril, The Pattern of Human Concerns, New Brunswick: Rutgers University Press, 1966. 11Quoted in Jamie Peck, Constructions of Neoliberal Reason, Oxford: Oxford University Press, 2010, 117. 12Andrew McGettigan, ‘Human Capital in English Higher Education’, paper given at Governing Academic Life, London School of Economics and Political Science, 25–26 June 2014. 13Edmund Kitch, ‘The Fire of Truth: A Remembrance of Law and Economics at Chicago, 1932–1970’, Journal of Law and Economics 26: 1, 1983. 14Ibid. 15George Priest, ‘The Rise of Law and Economics: A Memoir of the Early Years’, in Francesco Parisi and Charles Rowley, eds., The Origins of Law and Economics: Essays by the Founding Fathers, Cheltenham: Edward Elgar, 2005, 356. 16Milton Friedman, ‘The Social Responsibility of Business Is to Increase Its Profits’, The New York Times Magazine, 13 September 1970. 17Will Davies, The Limits of Neoliberalism: Authority, Sovereignty and the Logic of Competition, London: Sage, 2014. 18Nikolas Rose, ‘Neurochemical Selves’, Society, November/December, 2003; Nikolas Rose, Politics of Life Itself: Biomedicine, Power and Subjectivity in the Twenty-First Century, Princeton, NJ: Princeton University Press, 2007. 19Peter Kramer, Listening to Prozac, London: Fourth Estate, 1994. 20Alain Ehrenberg, The Weariness of the Self: Diagnosing the History of Depression in the Contemporary Age, Montreal: McGill-Queen’s University Press, 2010. 21David Healy, The Antidepressant Era, Cambridge, MA: Harvard University Press, 1997. 22As has been widely researched and commented on, antidepressants are only marginally more effective than placebos, and the effectiveness of placebos has been growing year on year.

One way of observing the relationship between depression and competitiveness is in statistical correlations between rates of diagnosis and levels of economic inequality across society. After all, the function of any competition is to produce an unequal outcome. More equal societies, such as Scandinavian nations, record lower levels of depression and higher levels of well-being overall, while depression is most common in highly unequal societies such as the United States and United Kingdom.2 The statistics also confirm that relative poverty – being poor in comparison to others – can cause as much misery as absolute poverty, suggesting that it is the sense of inferiority and status anxiety that triggers depression, in addition to the stress of worrying about money. For this reason, the effect of inequality on depression is felt much of the way up the income scale. Yet there is more to this than just a statistical correlation.

Understanding the strains and pains that work, hierarchy, financial pressures and inequality place upon human well-being is a first step to challenging those things. This emancipatory spirit flips swiftly into a conservative one, once the same body of evidence is used as a basis to judge the behaviour and mentality of people, rather than the structure of power. Hope is not so much dashed as ensnared. Critique is turned inwards. This is not necessarily how things have to be. Once the critical eye is turned upon institutions, and away from the emotion or mood of the individual who inhabits them, things start to look very different indeed. Among wealthy nations, the rate of mental illness correlates very closely to the level of economic inequality across society as a whole, with the United States at the top.4 The nature and availability of work plays a crucial role in influencing mental well-being, as do organizational structures and managerial practices.


pages: 330 words: 91,805

Peers Inc: How People and Platforms Are Inventing the Collaborative Economy and Reinventing Capitalism by Robin Chase

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3D printing, Airbnb, Amazon Web Services, Andy Kessler, banking crisis, barriers to entry, basic income, Benevolent Dictator For Life (BDFL), bitcoin, blockchain, Burning Man, business climate, call centre, car-free, cloud computing, collaborative consumption, collaborative economy, collective bargaining, commoditize, congestion charging, creative destruction, crowdsourcing, cryptocurrency, decarbonisation, don't be evil, Elon Musk, en.wikipedia.org, ethereum blockchain, Ferguson, Missouri, Firefox, frictionless, Gini coefficient, hive mind, income inequality, index fund, informal economy, Intergovernmental Panel on Climate Change (IPCC), Internet of things, Jane Jacobs, Jeff Bezos, jimmy wales, job satisfaction, Kickstarter, Lean Startup, Lyft, means of production, megacity, Minecraft, minimum viable product, Network effects, new economy, Oculus Rift, openstreetmap, optical character recognition, pattern recognition, peer-to-peer, peer-to-peer lending, peer-to-peer model, Richard Stallman, ride hailing / ride sharing, Ronald Coase, Ronald Reagan, Satoshi Nakamoto, Search for Extraterrestrial Intelligence, self-driving car, shareholder value, sharing economy, Silicon Valley, six sigma, Skype, smart cities, smart grid, Snapchat, sovereign wealth fund, Steve Crocker, Steve Jobs, Steven Levy, TaskRabbit, The Death and Life of Great American Cities, The Future of Employment, The Nature of the Firm, transaction costs, Turing test, turn-by-turn navigation, Uber and Lyft, Zipcar

It’s essential that we bring economies back to a more sustainable distribution of productivity gains. In economist Thomas Piketty’s 2014 bestselling Capital in the 21st Century, his analysis found that the top 10 percent of Americans in 2010 owned 70 percent of the capital, trending toward the extreme capital inequality last observed in 1910 monarchical Europe. Today, in the countries experiencing the most economic equality (like Norway, Denmark, and Hungary as measured by the Gini coefficient), the top 10 percent control about 50 percent of the capital, an amount considered “medium inequality.” In the fall 2014 issue of the Journal of Post Keynesian Economics, Pavlina R. Tcherneva, an economist at Bard College, updated Piketty’s data through 2012 and looked at which groups got the benefits of economic expansion. In the postwar expansion of 1949–1953, the top 10 percent of Americans received 20 percent of the economic gains.

This is the structure for our times: With it we can experiment, iterate, adapt, and evolve, quickly. We can solve large problems cost-effectively and rapidly. We can scale globally yet adapt to the very local. The old industrial model cannot solve climate change. It is too slow, too inefficient, too exclusive. Peers Inc is driving the rapid transformation of our economy and will also provide an answer to the conundrum of disappearing jobs, escalating income inequality, and devastating resource scarcity. What we do now will have profound and lasting effects on our future. We are at the end of the old fossil-fuel-saturated, consumption-based industrial economy. We are at the beginning of the new collaborative economy, which thrives on sharing, openness, and connectedness. What we choose to leave behind and how we prepare for the new will determine whether we make this transition in time and how many people we help cross the chasm.

As the platform starts to really perform, the tendency is for larger platforms to eat smaller ones because of network effects: We all want to use the short-term rental service with the broadest possible range of rooms advertised, or be on the social network that has most of our friends on it. The winners keep winning and tend to wind up with monopolistic power. She continues: It soon grows beyond replacement. Just look at how even after [Microsoft] management wasted billions of dollars on Bing, it is still failing against [Google], while [Google] never even missed a quarter. Thus, hyper efficiency, automation, wealth transfer and income inequality go together. In addition, this concentrating quality has all the power of the gravitational pull of a black hole. That is because in this model, with a relatively fixed cost for the central processing engine, he with the most transactions wins. Not only are all transactions amortized against a similar fixed base allowing for lower end prices, but the biggest engine gets smarter, faster. Thus, in their desperate race against each other to be the number one transaction engine, any emerging giants quickly obliterate mom and pop operations without blinking.


pages: 398 words: 86,855

Bad Data Handbook by Q. Ethan McCallum

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Amazon Mechanical Turk, asset allocation, barriers to entry, Benoit Mandelbrot, business intelligence, cellular automata, chief data officer, Chuck Templeton: OpenTable, cloud computing, cognitive dissonance, combinatorial explosion, commoditize, conceptual framework, database schema, en.wikipedia.org, Firefox, Flash crash, Gini coefficient, illegal immigration, iterative process, labor-force participation, loose coupling, natural language processing, Netflix Prize, quantitative trading / quantitative finance, recommendation engine, selection bias, sentiment analysis, statistical model, supply-chain management, survivorship bias, text mining, too big to fail, web application

Although the ultimate diagnostic tool is a double-logarithmic plot of the full histogram as shown in Figure 7-4, an early warning sign is excessively large values for the calculated width of the distribution (for the visitor data, the standard deviation comes out to roughly 437, which should be compared to the mean, of only 26). Once the full histogram information is available, we can plot the Lorenz curve and even calculate a numerical measure for the skewness of the distribution (such as the Gini coefficient) for further diagnosis and analysis. Figure 7-5. Cumulative distribution function for the data from Figure 7-4. Notice the reduced scale of the horizontal axis. Figure 7-5 suggests a way to deal with such data. The graph shows a cumulative distribution plot, that is, the cumulative fraction of people and page views, attributable to visitors having consumed fewer than x pages per month.

Feng, Shuaizhang. 2004. “Detecting errors in the CPS: A matching approach.” Economics Letters 82: 189-194. Feng, Shuaizhang, Burkhauser, Richard, & Butler, J.S. 2006. “Levels and long-term trends in earnings inequality: Overcoming Current Population Survey Censoring Problems Using the GB2 Distribution.” Journal of Business & Economic Statistics 24, no. 1: 57 - 62. Gottschalk, Peter, and Robert Moffitt. 1994. “The growth of earnings instability in the U.S. labor market.” Brookings Papers on Economic Activity 2: 217-254. Haider, Steven J. 2001. “Earnings instability and earnings inequality in the United States, 1967-1991.” Journal of Labor Economics 19, no. 4: 799-836. Ham, John C., Xianghong Li, and Lara Shore-Sheppard. 2009. “Correcting for Seam Bias when Estimating Discrete Variable Models, with an Application to Analyzing the Employment Dynamics of Disadvantaged Women in the SIPP,” http://web.williams.edu/Economics/seminars/seam_bias_04_06_lara_williams.pdf (April).

“Correcting for Seam Bias when Estimating Discrete Variable Models, with an Application to Analyzing the Employment Dynamics of Disadvantaged Women in the SIPP,” http://web.williams.edu/Economics/seminars/seam_bias_04_06_lara_williams.pdf (April). Hirsch, Barry T., and Edward J. Schumacher. 2004. “Matched bias in wage gap estimates due to earnings imputation.” Journal of Labor Economics 22, no. 3: 689-772. Jenkins, Stephen P. 2009. “Distributionally-Sensitive Inequality Indices and the GB2 Income Distribution.” Review of Income and Wealth 55, no. 2: 392-398. Jenkins, Stephen P., Richard V. Burkhauser, Shuaizhang Feng, and Jeff Larrimore. 2011. “Measuring inequality using censored data: A multiple imputation approach.” Journal of the Royal Statistical Society (A), 174, Part 1: 63-81. Lillard, Lee, James P. Smith, and Finis Welch. 1986. “What do we really know about wages? The importance of nonreporting and Census imputation.” Journal of Political Economy 94, no. 3: 489-506.


pages: 701 words: 199,010

The Crisis of Crowding: Quant Copycats, Ugly Models, and the New Crash Normal by Ludwig B. Chincarini

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affirmative action, asset-backed security, automated trading system, bank run, banking crisis, Basel III, Bernie Madoff, Black-Scholes formula, buttonwood tree, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, collective bargaining, corporate governance, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, delta neutral, discounted cash flows, diversification, diversified portfolio, family office, financial innovation, financial intermediation, fixed income, Flash crash, full employment, Gini coefficient, high net worth, hindsight bias, housing crisis, implied volatility, income inequality, interest rate derivative, interest rate swap, John Meriwether, labour mobility, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, low skilled workers, margin call, market design, market fundamentalism, merger arbitrage, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, Myron Scholes, negative equity, Northern Rock, Occupy movement, oil shock, price stability, quantitative easing, quantitative hedge fund, quantitative trading / quantitative finance, Ralph Waldo Emerson, regulatory arbitrage, Renaissance Technologies, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, Sharpe ratio, short selling, sovereign wealth fund, speech recognition, statistical arbitrage, statistical model, survivorship bias, systematic trading, The Great Moderation, too big to fail, transaction costs, value at risk, yield curve, zero-coupon bond

The richest are measured as the top 20% of people by income, the middle class is the middle 20%, and the poor are the bottom 20% of Americans by income at any one point in time. For example, if there are 100 people in the population, then you order the people by income and then take the top 20 people and take their median income and so on. 7. The bias could go in either direction. 8. A common measure that is used to understand inequality is the Gini coefficient. A measure of 0 indicates total equality and a measure of 1 indicates total inequality. The Gini coefficient has been rising since 1967 from a value of 0.403 to the 2009 value of 0.468. 9. It would be an interesting research project to study this in more depth to see if it is a more general phenomena. 10. The actual definition from the BLS is as follows. For analyzing general price trends in the economy, seasonally adjusted changes are usually preferred since they eliminate the effect of changes that normally occur at the same time and in about the same magnitude every years such as price movements resulting from changing climatic conditions, production cycles, model changeovers, holidays, and sales.

Since the 1970s, the gap between rich and poor has grown under both Democratic and Republican presidential administrations.12 During the Clinton administration, the economy was prosperous, but the rich saw income growth of 30%. The poorest got income growth of 16%, while middle-class income grew just 15%. Since 1967, rich people’s average incomes have grown by 70%. Poor people’s incomes have grown by just 29%. Wall Street and Washington didn’t create this inequality. A variety of factors are at work. More-educated workers have reaped the rewards of technological progress to a greater degree than have less-educated workers. Opening world trade has meant fierce competition for low-skill jobs. The fairy-tale decade misled us into thinking the economy was better than it was. Everyone is to blame. Our next problem is already in the making. The U.S. government is taking on a huge amount of debt, which higher taxes will eventually have to repay.

That is, firms produced more goods than were purchased and thus their pile of inventories grew contributing to GDP growth. Although hard to analyze, typically a rise in inventories signals a slowing economy. Officially, we were out of the recession, but the economy was still not doing well as of the first quarter of 2011. Did the stimulus help boost GDP in the aftermath? The answer is a little and only temporarily. TABLE K.5 Prosperity and Income Inequality To put the recent crisis in perspective, one might ask what has happened to the prosperity of different classes of people by income; that is the rich, the middle-class, and the poor. Table K.5 shows the growth in median income for the richest Americans, middle-class Americans, and the poorest Americans.6 One should remember that this does not include migrations across categories. Thus, if a very poor person moves from the poorest group to a higher group, this would not be reflected in the numbers.7 The numbers simply take a snapshot of the different groups and ask how the median person in that group is doing in that particular year.


pages: 406 words: 113,841

The American Way of Poverty: How the Other Half Still Lives by Sasha Abramsky

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2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, American Legislative Exchange Council, bank run, basic income, big-box store, collective bargaining, deindustrialization, fixed income, Francis Fukuyama: the end of history, full employment, ghettoisation, Gini coefficient, housing crisis, illegal immigration, immigration reform, income inequality, indoor plumbing, job automation, Mark Zuckerberg, Maui Hawaii, microcredit, mortgage debt, mortgage tax deduction, new economy, Occupy movement, offshore financial centre, payday loans, Plutocrats, plutocrats, Ponzi scheme, Potemkin village, profit motive, Ronald Reagan, school vouchers, upwardly mobile, War on Poverty, Washington Consensus, women in the workforce, working poor, working-age population, Works Progress Administration

In September 2012, the Associated Press calculated that a resident who had lived in the state since the first checks were issued in 1982 would have received more than $34,000 from the fund during the three decades that followed.5 Perhaps not entirely coincidentally, despite the fact that the legislature doesn’t collect back the dividend from wealthier residents via higher state taxes, Alaska’s Gini Coefficient data—Gini being a complex measure used to track inequality—indicated the state had less extremes of wealth and poverty than almost any other state in the union. Almost certainly, Zelleke’s proposal is too big a pill to swallow. But there’s no practical reason that an alternative, more limited, model couldn’t be developed. It would be easy to distribute a basic guaranteed income to the poorest of the poor via an EBT card—the same sort of card that food stamps recipients currently receive their benefits on; one that would be accepted by any business that accepts credit card payments.

In fact, an increasingly vocal line of reasoning, harking back to the Social Darwinism, survival-of-the-fittest rhetoric of the late nineteenth century, has it that it represents something quintessentially hopeful. The flip side of inequality, they argue, is opportunity. Anyone can, in America, strike it rich. All one needs for success is a little bit of gumption and a willingness to take risks. That was, in many ways, the key argument that GOP presidential hopeful Rick Santorum laid out in a major speech before the Detroit Economic Club on February 16, 2012. “I’m about equality of opportunity. I’m not about equality of result when it comes to income inequality. There is income inequality in America. There always has been, and hopefully, and I do say that, there always will be,” Santorum told his audience, in a city in which two-thirds of children were currently living below the poverty line.

For Walmart worker Aubretia Edick, low hourly wages combined with her manager allotting her fewer hours each week meant skipping meals and keeping her upstate New York house thermostat on low throughout the long winter months. In his 1971 book A Theory of Justice,13 the influential liberal philosopher John Rawls argued that the moral imperative of a political and economic system was to raise the condition of society’s most vulnerable, and that the means to do so were, largely, to be discovered by trial and error. In theory, growing inequality would pass his morality test so long as the condition of the poor was being bettered. In practice, however, because inequality tended to increase during moments when poor people were losing political and economic clout, such developments tended to raise a red flag. Far better to promote policies that have the effect of reducing the divides between the wealthiest and the poorest in any given society, he continued. Rawls wasn’t a take-to-the-barricades revolutionary.


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Them And Us: Politics, Greed And Inequality - Why We Need A Fair Society by Will Hutton

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Andrei Shleifer, asset-backed security, bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, capital controls, carbon footprint, Carmen Reinhart, Cass Sunstein, centre right, choice architecture, cloud computing, collective bargaining, conceptual framework, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, debt deflation, decarbonisation, Deng Xiaoping, discovery of DNA, discovery of the americas, discrete time, diversification, double helix, Edward Glaeser, financial deregulation, financial innovation, financial intermediation, first-past-the-post, floating exchange rates, Francis Fukuyama: the end of history, Frank Levy and Richard Murnane: The New Division of Labor, full employment, George Akerlof, Gini coefficient, global supply chain, Growth in a Time of Debt, Hyman Minsky, I think there is a world market for maybe five computers, income inequality, inflation targeting, interest rate swap, invisible hand, Isaac Newton, James Dyson, James Watt: steam engine, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, liberal capitalism, light touch regulation, Long Term Capital Management, Louis Pasteur, low-wage service sector, mandelbrot fractal, margin call, market fundamentalism, Martin Wolf, mass immigration, means of production, Mikhail Gorbachev, millennium bug, money market fund, moral hazard, moral panic, mortgage debt, Myron Scholes, Neil Kinnock, new economy, Northern Rock, offshore financial centre, open economy, Plutocrats, plutocrats, price discrimination, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, railway mania, random walk, rent-seeking, reserve currency, Richard Thaler, Right to Buy, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, Rory Sutherland, Satyajit Das, shareholder value, short selling, Silicon Valley, Skype, South Sea Bubble, Steve Jobs, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, unpaid internship, value at risk, Vilfredo Pareto, Washington Consensus, wealth creators, working poor, zero-sum game, éminence grise

By contrast, for childless, working-age adults, Labour’s policies made little difference. If the Tories’ policies had been maintained between 1997 and 2006, the Gini coefficient – the standard measure for income distribution where zero is perfect equality and one means that a single person has all a country’s income – would actually have been 1 per cent higher than it was under Labour.11 New Labour, then, did make a difference. The trouble is that it made nothing like enough of a difference. The social settlement in Britain was not to have powerful social insurance, massive investment in education or big transfers to ameliorate structural inequality; it was to work around the edges. To compensate, most people sustained their living standards through borrowing rather than by earning increased prosperity.

I understand why the left makes these arguments, and even have some sympathy for them. The current level of inequality is offensive and the damage being done goes well beyond mere income inequality. But that does not mean that society is prepared to flip to a world of complete equality. It might just want more equality – while maintaining a degree of inequality based on due desert – but is very wary about how to get there. This seems to be borne out by opinion polls. In one British poll, 76 per cent of respondents felt that the gap between those on low and high incomes was ‘too large’, but only 34 per cent believed that the government should redistribute money from the better-off to tackle inequality.10 Over time, there has been a substantial drop in support for higher taxes and spending: from 65 per cent in 1997 to 38 per cent in 2005.

: Why Bubbles Are Great for the Economy, Collins. 7 Paola Giuliano and Antonio Spilimbergo (2009) ‘Growing up in a Recession: Beliefs and the Macroeconomy’, IZA DP No. 4365. 8 Clive Cookson, ‘Bank Crises Kill, Says Study’, Financial Times, 26 February 2008, at http://www.ft.com/cms/s/0/170ca8d6-e40e-11dc-8799-0000779fd2ac.html. 9 See the DCLG’s Indices of Deprivation (2007 is the latest available year) at http://www.communities.gov.uk/communities/neighbourhoodrenewal/deprivation/deprivation07/. 10 Mike Brewer, Luke Sibiet and Liam Wren-Lewis (2007) ‘Racing away? Income Inequality and the Evolution of High Incomes’, IFS Briefing Note No. 76. 11 Stewart Lansley (2006) Rich Britain: The Rise and Rise of the New Super-Wealthy, Politico’s. See also George Irvin (2008) Super Rich: The Rise of Inequality in Britain and the United States, Polity; and David Rothkopf (2008) Superclass: The Global Power Elite and the World They Are Making, Farrar, Straus Giroux. 12 Oliver James (2007) Affluenza: How to be Successful and Stay Sane, Vermilion; Avner Offer (2006) The Challenge of Affluence: Self-Control and Well-Being in the United States and Britain since 1950, Oxford University Press. 13 Cabinet Office (2009) Unleashing Aspiration: The Final Report of the Panel on Fair Access to the Professions, HMSO. 14 Christopher Foster (2005) British Government in Crisis or the Third English Revolution, Hart. 15 Ian Jack, ‘Fear and Loathing in Dagenham’, Guardian, 21 November 2009. 16 Susan Neiman (2009) Moral Clarity: A Guide for Grown-up Idealists, Bodley Head, p. 4. 17 Tom MacInnes, Peter Kenway and Anushree Parekh, ‘Monitoring Poverty and Social Exclusion 2009’, report, Joseph Rowntree Foundation. 18 Jonathan Grant and Joachim Krupels, ‘Science and Technology Policy’, in Varum Uberoi, Adam Coutts, Iain Mclean and David Halpern (eds) (2009) Options for a New Britain, Palgrave Macmillan. 19 Dominic Sandbrook, ‘The Death of Ideas’, New Statesman, 6 August 2009. 20 Charles Tilly (2008) Credit and Blame, Princeton University Press. 21 J.


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A Splendid Exchange: How Trade Shaped the World by William J. Bernstein

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Admiral Zheng, asset allocation, bank run, Benoit Mandelbrot, British Empire, call centre, clean water, Columbian Exchange, Corn Laws, David Ricardo: comparative advantage, deindustrialization, Doha Development Round, domestication of the camel, double entry bookkeeping, Eratosthenes, financial innovation, Gini coefficient, God and Mammon, ice-free Arctic, imperial preference, income inequality, intermodal, James Hargreaves, John Harrison: Longitude, Khyber Pass, low skilled workers, non-tariff barriers, Paul Samuelson, placebo effect, Port of Oakland, refrigerator car, Silicon Valley, South China Sea, South Sea Bubble, spice trade, spinning jenny, Steven Pinker, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade liberalization, trade route, transatlantic slave trade, transatlantic slave trade, transcontinental railway, upwardly mobile, working poor, zero-sum game

Yet again, this is nothing new. In the nineteenth century, as inequality rose, so did fear of immigration. A century ago, the United States, Canada, Australia, Brazil, and Argentina all began to restrict immigration. This tightening did not correlate at all with the factors that traditionally have received blame for it: economic hard times and racism. Rather it took place precisely when income competition from recent European immigrants at the low end of the wage scale started to squeeze low-paid voters.25 Why all the fuss about income inequality? Isn't it simply a sign of a healthy economy that generously rewards the successful and ambitious? Well, no. Economists and demographers use a number of measures of inequality, the most popular being the Gini coefficient. This number varies between zero and one; a population in which everyone has exactly the same income has a coefficient of 0.0, and a population in which only one individual earns all the income has a coefficient of 1.0.

The list of the highest-Gini nations fails to impress: Namibia, 0.74; Botswana, 0.63; Bolivia, 0.60; and Paraguay, 0.58.26 More systematic research strongly suggests that increasing inequality produces social and political instability, which in turn leads to decreased investment and decreased economic development .27 Modem developed nations have gotten into the habit of intentionally lowering their Ginis with redistributive tax policies and social welfare programs. These expensive schemes can harm economic development, but by reducing inequality, they can also buy social peace, which can offset the inefficiencies of social spending. One of the leading authorities in this area, Geoffrey Garrett, notes that: Since the welfare state mitigates conflict by reducing market-generated inequalities of risk and wealth, it may have a beneficial rather than deleterious consequence for business.

Compared with the rest of the world, the developed nations are relatively well endowed with abundant high-skilled labor and have relatively little unskilled labor. Whom does free trade hurt in the developed world? The relatively scarce factor: low-skilled labor. Who benefits? Highly skilled workers. Further, globalization increases income inequalities in the rich nations, as the inflation-adjusted incomes of the highly skilled rise rapidly and those of the low-skilled rise more slowly or even fall. Once again, Stolper-Samuelson comes alive in the real world. For the past generation, income inequalities have grown dramatically in the United States. Figure 14-1 plots Census Bureau data with American families sorted into two groups-the top quintile, or 20 percent, and bottom 80 percent-and then computes their shares of total national income over the past thirty-five years.


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Common Wealth: Economics for a Crowded Planet by Jeffrey Sachs

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agricultural Revolution, air freight, back-to-the-land, British Empire, business process, carbon footprint, clean water, colonial rule, corporate social responsibility, correlation does not imply causation, creative destruction, demographic transition, Diane Coyle, Edward Glaeser, energy security, failed state, Gini coefficient, Haber-Bosch Process, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), intermodal, invention of agriculture, invention of the steam engine, invisible hand, Joseph Schumpeter, knowledge worker, labor-force participation, labour mobility, low skilled workers, mass immigration, microcredit, oil shale / tar sands, old age dependency ratio, peak oil, profit maximization, profit motive, purchasing power parity, road to serfdom, Ronald Reagan, Simon Kuznets, Skype, statistical model, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, transaction costs, unemployed young men, War on Poverty, women in the workforce, working-age population

The social-welfare states have hired many otherwise hard-to-employ individuals (for example, with disabilities or low school performance) into the government social sectors in the past twenty years as part of their labor market strategy. SOCIAL SPENDING AND ECONOMIC OUTCOMES The evidence suggests that the high social spending in the social-welfare states is indeed very effective in reducing poverty and inequality and in promoting health and prosperity. Table 11.2 shows three different measures of poverty in the three country groups: the poverty rate (the percentage of people living at less than half the average national household income); the share of disposable income (after taxes) received by the poorest 20 percent of the population; and the Gini coefficient on income, which measures how equally wealth is distributed across the country (0 is perfectly equal, 100 is entirely unequal). As the table shows, the social-welfare states outperform the other two groups across all three measures.

The idea is that the world will have winners only if it also tolerates losers. Markets should be left to provide the bulk of the services otherwise provided by the welfare state. The opposing view is that a large social safety net actually ensures confidence in the future, enables people to take risks, and also allows for a redistribution of wealth that prevents the most extreme economic inequality. Redistribution of wealth ensures that the most acute inequalities are avoided. While there will still be inequality, there will be no deprived underclass at the low end of the income spectrum nor a wealthy plutocracy at the other. Proponents of an expansive welfare state also argue that relying on markets to ensure help for the poorest of the poor within a society is futile. Even in the rich countries, markets do not reach the very poor, who have too little income to afford health insurance, to rebuild their homes after a flood, or to pay the rent if they lose their jobs.

They are heavy investors both in R & D and in higher education, and they have very high rates of patents per capita as well. As a final point, social-welfare spending not only reduces inequities and uncertainties within a rich society but also bolsters the confidence and trust within the society to be more generous on the international stage. Countries treat the world’s poor and vulnerable as they treat their own. U.S. policies, by pursuing a constricted notion of social insurance, foster a society of fear and vulnerability that lacks the readiness to contribute more to global cooperation. Mainstream Americans feel increasingly unnerved by widening income inequality at home, and are therefore less likely to support assistance for the poor abroad. Figure 11.2 illustrates the relationship between domestic social policies and international aid policies.


pages: 366 words: 117,875

Arrival City by Doug Saunders

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agricultural Revolution, Ayatollah Khomeini, Berlin Wall, Branko Milanovic, call centre, credit crunch, Deng Xiaoping, desegregation, ghettoisation, Gini coefficient, guest worker program, Hernando de Soto, Honoré de Balzac, illegal immigration, immigration reform, income inequality, informal economy, Jane Jacobs, Kibera, land reform, land tenure, low skilled workers, mass immigration, megacity, microcredit, new economy, Pearl River Delta, pensions crisis, place-making, price mechanism, rent control, Silicon Valley, special economic zone, the built environment, The Chicago School, The Death and Life of Great American Cities, upwardly mobile, urban planning, urban sprawl, white flight, working poor, working-age population

Its evolution ought to be studied by governments in Africa, South America, and East Asia, for it is precisely the form of politics that fills the vacuum when the rural migrants are taken for granted. * I have omitted Soheila’s surname to protect her security. † The names of these settlements were later changed by the government to Nasim Shahr and Golestan, though they are still widely known by their original names. ‡ The Gini Coefficient, the standard measure of inequality, in which zero indicates perfect equality and a one indicates complete inequality, increased from 0.44 to 0.48, a significant jump, between 2000 and 2005, according to the Venezuelan Central Bank. § Shivaji Bhosale was the seventeenth-century Maharashtrian Hindu who led an uprising against the Moghul rulers of the region and established a Marathi empire; he is a folk hero among Maharashtrians and low-caste Hindus across India. 8 THE NEW CITY CONFRONTS THE OLD WORLD THE PROBLEM OF SPACE Les Pyramides, Evry, France Like the ruins of some lost Martian empire on the cover of a previous generation’s science-fiction novel, the dun-and-gray pyramids materialize amid fields and forests along the motorway an hour south of Paris.

* The title “fastest-growing city” has a number of legitimate claimants, including Dhaka and Lagos, because it has a number of meanings: it can be the place that adds the largest number of people every year (a measure that favors large cities), the place whose population increases by the largest proportion (a measure that favors small cities), or the place with the highest increase in its rate of growth. However, with a growth rate approaching 4 percent per year across its wider metropolitan district (whose population is 32 million), Chongqing qualifies by any measure. † All figures in this book are converted to United States dollars. ‡ Inequality has declined with urbanization in those countries that allow their arrival cities to flourish. Brazil, Peru, and Malaysia have all seen inequality fall during their periods of urbanization. China, with its restricted arrival cities, has seen inequality increase. India, with chaotic urban policies, has seen no change. In all these cases, urbanization has sharply reduced poverty and improved the living standards of the poorest fifth of the population. § There are exceptions. The post-communist years in Central and Eastern Europe saw urban-to-rural migrations as people fled the collapse of industrial pseudo-economies to the security of subsistence agriculture.

Or, in an alternative version offered in popular books and movies, arrival cities are written off as contiguous extensions of a dystopian “planet of slums,” a homogenous netherworld, in which the static poor are consigned to prisonlike neighborhoods guarded by hostile police, abused by exploitative corporations, and preyed upon by parasitic evangelical religions.2 This is certainly the fate of many arrival cities after they have been deprived of their fluid structure or abandoned by the state. Yet, to see this as their normal condition is to ignore the arrival city’s great success: it is, in the most successful parts of both the developing world and the Western world, the key instrument in creating a new middle class, abolishing the horrors of rural poverty and ending inequality.‡ Rather than dismissing these neighborhoods as changeless entities or mere locations, we need to start seeing them as a set of functions. The first arrival-city function is the creation and maintenance of a network: a web of human relationships connecting village to arrival city to established city. These networks, aided by communications technology, money transfers, and more traditional family and village relationships, provide a sense of protection and security (always of primary importance in the arrival city); they generate a sense of leadership and political representation; they give the arrival-city enclave a self-identity.


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What's Next?: Unconventional Wisdom on the Future of the World Economy by David Hale, Lyric Hughes Hale

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affirmative action, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Berlin Wall, Black Swan, Bretton Woods, capital controls, Cass Sunstein, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, debt deflation, declining real wages, deindustrialization, diversification, energy security, Erik Brynjolfsson, Fall of the Berlin Wall, financial innovation, floating exchange rates, full employment, Gini coefficient, global reserve currency, global village, high net worth, Home mortgage interest deduction, housing crisis, index fund, inflation targeting, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Just-in-time delivery, Kenneth Rogoff, labour market flexibility, labour mobility, Long Term Capital Management, Mahatma Gandhi, Martin Wolf, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, money market fund, money: store of value / unit of account / medium of exchange, mortgage tax deduction, Network effects, new economy, Nicholas Carr, oil shale / tar sands, oil shock, open economy, passive investing, payday loans, peak oil, Ponzi scheme, post-oil, price stability, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, reserve currency, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, sovereign wealth fund, special drawing rights, technology bubble, The Great Moderation, Thomas Kuhn: the structure of scientific revolutions,