Income Inequality

The inequality puzzle

Excerpts from an article by Dambisa Moyo at Project Syndicate. An economist and author who sits on the boards of directors of global corporations, she was named by TIME Magazine as one of the “100 Most Influential People in the World.”

NEW YORK – Over the past decade, income inequality has come to be ranked alongside terrorism, climate change, pandemics, and economic stagnation as one of the most urgent issues on the international policy agenda. And yet, despite all the attention, few potentially effective solutions have been proposed. Identifying the best policies for reducing inequality remains a puzzle.

To understand why the problem confounds policymakers, it is helpful to compare the world’s two largest economies. The United States is a liberal democracy with a market-based economy, in which the factors of production are privately owned. China, by contrast, is governed by a political class that holds democracy in contempt. Its economy – despite decades of pro-market reforms – continues to be defined by heavy state intervention.

But despite their radically different political and economic systems, the two countries have roughly the same level of income inequality. Each country’s Gini coefficient – the most commonly used measure of income equality – is roughly 0.47.

In one important way, however, their situations are very different. In the US, inequality is rapidly worsening. In 1978, the top 1% of the US population was ten times richer than the rest of the country. Today, the average income of the top 1% is roughly 30 times that of the average person in the remaining 99%. During the same period, inequality in China has been declining.

…But societies do not flourish on economic growth alone. They suffer when the poor are unable to see a path toward betterment. Social mobility in the US (and elsewhere) has been declining, undermining faith in the “American Dream” (which includes the belief that hard work will make one better off than one’s parents). Over the past 30 years, the probability that an American born into the bottom quartile of the income distribution will end his life in the top quartile has more than halved…

Widening inequality provides fodder for political unrest, as citizens watch their prospects decline…

Globally, the slowdown in economic convergence has similar implications, as richer countries maintain their outsize influence around the world – leading to disaffection and radicalization among the poor. As difficult a puzzle as income inequality may seem today, failing to solve it could lead to far more severe challenges.

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Categories: Income Inequality

7 replies »

  1. Very true. It has been said that when greed upsets the balance and poverty provides no way forward, then human conflict is inevitable. The seeds of global conflict have been sown long ago. Corrupt governance cares not for the citizenry, only those that prop up the “game” and ultimately the “illusion” of responsible governance. We are at a crossroads. The level of corruption in many countries is reaching epidemic proportions.
    When those that “make the laws” become the ones that the laws are not applicable to, then anarchy is not far behind. The “new perception” is that a “party in power”, serving in governance, can create policies and laws that “benefit their financial supporters”, while the “disenfranchised and isolated taxpayer and ordinary citizen”, continues to reel under the yolk of increasing taxes and fee's.
    This is not democracy. The concept of democracy has been “eroded” into a hollow word, with no “substantial” meaning whatsoever. This is corruption, plain and simple. The benefits accrue to a small group of supporters who have “donated”,( read “paid”) for influence, and reward.
    Can this be construed as “influence peddling”? You bet. You pay to play.
    This is the real root of this problem, whether in Canada, the U.S. or even China. The middle class has been passed over by a new “criminal” class of shady politicians.
    B.C. is an “extreme case” of this “infiltration of governance” by those with “criminal intent”,
    who seek to undermine our laws, pillage our resources, pay off their supporters, and impoverish, their citizens, who have no “organized” recourse under the law.
    Can anyone, provide a means to either “impeach a corrupt government via legal or even constitutional means” or provide a methodology for the removal of a criminal organization, operating from within a serving government using legal or immediate political means other than an election. ( A farsical solution at best) . It is time something serious was done here in BC to remove this corrupt governance and the “party ” of “dubious intent”.(The above is a personal opinion.)

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  2. We lost our chance at reducing some of this inequality when we elected Liberals over the NDP.
    JT scoffed at a $15 minimun wage, claiming it will hurt business. He will not implement a national childcare program which would help boost family fortunes. He will not raise taxes on corporations. I won't be holding my breath to see a national pharmacare program or tax evaders being brought to justice. Yes they will be handing out goodies at the expense of future generations, but it doesn't have to be this way.

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  3. Hopefully when and if we cleanse ourselves of the current blight, the 'cure' won't be worse than the disease, as this hope was what allowed the current malady to flourish for as long as it has.

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  4. The press release says credit program is being “expanded” by another $120 million. That may result in zero gas revenue in next few years. The monthly rights sale in February 2016 brought in zero dollars. That compares with a monthly average of $100 million in the last five years of Gordon Campbell's administration.

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