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The Rise of the West. Countries get rich because they become particularly skilled in certain industries that they can sell in exchange for money. So why are McDonald's workers in the U.S. or Western Europe earning up to 10-times more than in India, China, or Latin America? It's not that Chinese and Chileans are less skilled at heating burgers. Rather it has everything to do with the economy outside of McDonald's kitchens.
For almost two centuries, starting around 1800, the history of the global economy was broadly one of divergence in average incomes. In relative terms, rich countries got even richer. There was growth in the poorer countries, too, but it was slower than rich-country growth, and the discrepancy in prosperity between rich and poor countries increased.
CommentsThis “divergence” was very pronounced in colonial times. It slowed after the 1940’s, but it was only around 1990 that an entirely new trend could be observed – convergence between average incomes in the group of rich countries and the rest of the world. From 1990 to 2010, average per capita income in the emerging and developing countries grew almost three times as fast as average income in Europe, North America, and Japan, compared to lower or, at most, equal growth rates for almost two centuries.
CommentsThis has been a revolutionary change, but will this 20-year-old trend continue? Will convergence remain rapid, or will it be a passing phase in world economic history?
Singapore has historically been seen as a canary in the coal mine of the world economy, given its extreme vulnerability to the swings of global trade.
But now, analysts at one bank have raised concern about a data point not usually seen as a threat: social and political discontent.
alongside the rise of the Internet and the empowerment of the Internet generation has emerged the greatest inequalities of wealth and privilege that any of the increasingly Internet enabled economies/societies have experienced at least since the great Depression and perhaps since the beginnings of systematic economic record keeping. The association between the rise of inequality and the rise of the Internet has not yet been explained and if may simply be a coincidence but somehow I’m doubtful and we await a newer generation of rather more critical and less dewey economists to give us the models and explanations for this co-evolution.
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But in the context of the Open Government Partnership and the 70 or so countries that have already committed themselves to this or are in the process I’m not sure that the world can afford to wait to see whether this correlation is direct, indirect or spurious especially if we can recognize that in the world of OGP, the currency of accumulation and concentration is not raw economic wealth but rather raw political power.
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in the same way as there appears to be an association between the rise of the Internet and increasing concentrations of wealth one might anticipate that the rise of Internet enabled structures of government might be associated with the increasing concentration of political power in fewer and fewer hands and particularly the hands of those most adept at manipulating the artifacts and symbols of the new Internet age.
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The most significant driving force of any city is its people. It is crucial to have a livable environment for increasingly mobile populations, and to attract a significant workforce. More than one-third of the people in New York and London are foreign-born. Despite their astonishing growth, Asian economic powerhouses fail to reach that level of cosmopolitan culture. New York or London will continue to top the indices, but only if they ensure their strong cultural offers are unmatched and maintain open immigration policies.
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as soon as a centa-millionaire in Moscow, Beijing or São Paolo makes their fortune, the first thing they do is figure out how they can ferret away large chunks of that wealth to countries that guarantee political and personal freedoms, have sound legal systems, a favorable tax environment, good security and good schools for their kids.
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what Benedict Anderson describes, that ”the Bangkok bourgeoisie isn’t far from that of Manila, Kuala Lumpur, Singapore and Jakarta: timid, selfish, uncultured, consumerist, and without any decent vision of the future of the country”, is a fairly accurate picture, particularly with regards to the upper middle classes in Singapore.
Inequality in the world’s poorest countries is considered one of the main barriers to development. But this column points out that the inequality is about much more than the über-rich and the destitute – it is about access to political power. This column looks at political dynasties, where leadership is passed down through family ties, to see if these are a cause of the persistent social and economic divides.
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The rise of elected officials with extensive familial links to present and previous politicians in power signals a growing inequality in access to power and political influence. That, in turn, could also affect the persistence and prevalence of social and economic divides.
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one study of political dynasties in the US Congress showed how dynasties helped to improve the gender balance in the US Congress, by allowing more female legislators to get in via their familial ties (Dal Bo et al 2009).
With professional & business services currently employing about 18 million people, as compared to about 12 million in manufacturing, someone will have to remind me why manufacturing is supposed to be a special sector and not not professional and business services.
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Why is manufacturing special? Because someone with a high school diploma can make a better living there than they can in most other sectors of the economy that they are qualified to work for.
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Manufacturing is special because it tends to pay generally good wages to people whose skills and education are limited.
if the super-rich save a lot, ever-increasing income concentration can be expected to lead to a chronic excess of planned savings over investment.
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huge income concentration at the top in the US led to policies aimed at encouraging unsustainable borrowing by lower- and middle-income groups, through subsidies and loan guarantees in the housing sector and loose monetary policy. There was also an explosion of credit-card debt. These groups protected the growth in consumption to which they had become accustomed by going more deeply into debt. Indirectly, the very rich, some of them outside the US, lent to the other income groups, with the financial sector intermediating in aggressive ways. This unsustainable process came to a crashing halt in 2008.
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Macroeconomic policy can try to compensate through deficit spending and very low interest rates. Or an undervalued exchange rate can help to export the lack of domestic demand. But if the share of the highest income groups keeps rising, the problem will remain chronic. And, at some point, when public debt has become too large to allow continued deficit spending, or when interest rates are close to their zero lower bound, the system runs out of solutions.
the enormous difference in the tasks of those seeking to transform American and global energy menus to cut climate risks and those pushing to maintain the status quo. For too long, I said, environmental activists have argued that it’s heaps of corporate or conservative money and professional disinformers who’ve blocked action on greenhouse gases.
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The incident illustrates the importance of sweating the details if your goal is to build societal support for the grand challenge of getting out of our fossil-fueled comfort zone and de-carbonizing the fast-growing global energy system. Hard-won progress in conveying the basics of the energy and climate challenge can be undermined, glitch by glitch, without care.
The reason details matter? The folks I call “stasists” have it easy. An object at rest — in this case fossil-fueled society — tends to stay at rest.
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The Great Gatsby Curve - Intergenerational social mobility and equality - graph by Miles Corac
It’s striking just how closely related inequality and mobility are. And it’s political dynamite. Why? If income inequality in one generation can be linked to unequal opportunity in the next, then income inequality can’t just be dismissed as the politics of envy. My bet is that this chart that will launch a thousand papers, as economists try to sort out just what these linkages are. Whatever the answer, it will transform our thinking about inequality.
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Winship has a bunch of complaints about how the data are constructed — and many are valid. He says that it’s difficult to construct internationally comparable measures of income inequality – that the chart should use inequality from an earlier era, and that only some types of inequality would generate immobility. He also points out that mobility is difficult to measure: the data come from different countries with different researchers using different methods. It’s a standard play from the wonk-fight playbook: throw lots of mud at the data, and hope that this leads people to mistrust the conclusions that follow.
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Here’s the thing: his criticisms actually strengthen the original finding.
Think about it. Imagine how strong the “true” relationship must be if it shows up even when using only rough proxies for the “true” levels of inequality and immobility. In light of Winship’s criticisms, the high correlation in this chart is all the more remarkable. If his gripes are correct, then graph understates the correlation between inequality and mobility.
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professionals like doctors and lawyers are paid slightly better in Singapore than the average of the IPS sample of developed countries. Second, our lower-income workers fare much worse than their counterparts in developed countries.
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In Singapore, a construction worker earns about 9 percent of what a doctor earns, compared to Hong Kong where such a worker earns about 25 percent of what a doctor does.
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Doctors in both cities earn about the same. Likewise, both Singapore and Hong Kong are open to foreign labour. Yet there is this disparity.
If we look at other developed countries, again, Singapore looks like the outlier. Ho said, “First, professionals like doctors and lawyers are paid slightly better in Singapore than the average of the IPS sample of developed countries. Second, our lower-income workers fare much worse than their counterparts in developed countries.
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... When you call lower-income people "losers," you're falsely assuming that we're all racing for the same finish line: material success. But to a large extent, lower-income people are just racing for other finish lines. Leftist outrage over income inequality is therefore deeply misguided. To a large extent, incomes differ because priorities differ. And if poor they don't consider their lack of riches a big deal, why should anyone else?"
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... When you call lower-income people "losers," you're falsely assuming that we're all racing for the same finish line: material success. But to a large extent, lower-income people are just racing for other finish lines. Leftist outrage over income inequality is therefore deeply misguided. To a large extent, incomes differ because priorities differ. And if poor they don't consider their lack of riches a big deal, why should anyone else?"
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Another of the many interesting findings reported:
"Simpler language is better than complex language for making people think you are credible and intelligent."
Here is an interesting paper that answers the question. Some highlights from Table 3 about the top 0.1 percent:
When we examine the effects of offshoring on wages for different knowledge groups, we find that offshoring has the largest positive effect on occupations that require communication and language (premium of +4.4%), followed by social sciences (+3.7%), and maths (+2.7%). The premium for natural sciences and engineering is close to 0. This may seem curious given the policy emphasis on STEM (Science, Technology, Engineering, and Maths) education in many advanced economies, but if science and maths are universal languages, jobs requiring them can be done anywhere with an educated workforce.
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When we examine the effects of offshoring on wages for different knowledge groups, we find that offshoring has the largest positive effect on occupations that require communication and language (premium of +4.4%), followed by social sciences (+3.7%), and maths (+2.7%). The premium for natural sciences and engineering is close to 0. This may seem curious given the policy emphasis on STEM (Science, Technology, Engineering, and Maths) education in many advanced economies, but if science and maths are universal languages, jobs requiring them can be done anywhere with an educated workforce.
When Roz Tuplin graduated in 2010 she thought that a post-graduate degree in English Literature would be good grounding for a job in the media.
She knew she would have to gain work experience, but after a year of trying to get a placement, she has decided to pay employers £65 a day to let her through the door.
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Access to internships, many said to have been arranged through well-connected parents, has been an area of controversy.
In April, Deputy Prime Minister Nick Clegg said the schemes were unfair on the less well-off and the common practice of making young people work for nothing is barring entry to those from poorer backgrounds.
Although Ms Tuplin has saved to pay for the work experience she recognises that she is in a privileged position.
One-third of the nation's "1%" identify themselves as Republicans, 41% as independents, and 26% as Democrats. This is a mirror image of the "99%," a third of whom are Democrats, with 39% independents and a quarter Republicans.
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One-third of the nation's "1%" identify themselves as Republicans, 41% as independents, and 26% as Democrats. This is a mirror image of the "99%," a third of whom are Democrats, with 39% independents and a quarter Republicans.
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When the party leanings of independents are taken into account, 57% of the nation's wealthiest adults associate themselves with the Republican Party, compared with 44% of the "99%.
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It may be unfair, but by working shorter paid hours, women are managing to achieve a reasonable balance in their lives. In a regular survey produced by the European Foundation for the Improvement of Living and Working Conditions, only 16-18% of women (depending on whether they have young children) across Europe report dissatisfaction with their work-life balance, against 20-27% for men.
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Men are still more likely than women to be in paid work. Across the OECD countries some 83% of men of working age are in the labour market, compared with 64% of women. But the share of women at work is still rising. In the Nordic countries the gap between men and women has almost gone and in most of the big rich countries it is only ten or 15 percentage points. In the emerging markets it is much wider, not least because women do a lot of unpaid work in family businesses and farms that do not show up in the figures. However, in China the gap, at about 12 percentage points, is smaller than in many Western countries.
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Measured by how many full-time jobs those hours would add up to, the average employment gap between men and women in the OECD widens to around a third. That is because women, particularly if they have children, are much more likely than men to work part-time (see chart 1), and even in full-time jobs they work shorter hours.
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