There’s no question that industrialization in third-world countries from a combination of offshoring and domestic consumption has driven their economic growth and reduced poverty. But you seem to be trying to turn that into an argument for free-market policies across the board, including domestic economic policy and specifically, I presume, that of the US.
I would suggest that a much more policy-relevant question is why the Gini coefficient of some first-world industrialized countries is much worse than that of others – in particular, why when the Gini as you said earlier has been falling in the world overall, it has been rising in the US for the past 35 years, and is now one of the very highest (greatest inequality) among all OECD nations. I would suggest that the major factors for this increasing inequality are precisely the kinds of things Piketty singles out for criticism, such as regressive tax policy in the treatment of very high incomes and favorable tax treatment of the types of income that disproportionately favor the wealthy.
No one is arguing that economic growth isn’t a good thing, or that a free market system with appropriate safeguards isn’t generally the best way to run an economy. The issues are with the economic and social policies that must go along with that, specifically issues of taxation, regulation, and essential social services.
I agree that we should have good social services, and the US can do a lot better in that regard. We’re way behind many other countries. But I think that has little to do with our tax policies. It’s not as if our government brings in substantially less money per capital than say, Sweden or Germany or Canada. It’s that our politics are more dysfunctional, and that’s probably a function of the diversity of our country. Diverse interests produce a lot of squeaky wheels that need to be greased, which means a lot of waste and completely unnecessary programs which crowd out the funding of good programs.
As we conservatives like to say ad nauseum, we have a spending problem, not a revenue problem. If we spent our tax dollars smarter we’d be able to fund more worthwhile stuff, which would lift up poorer people. We could have better mass transit, for example, but instead we build more and more roads, because there are more votes among car owners than among bus riders.
In addition to that, it seems to me that global competition drives down wages (from the U.S. perspective) but only those wages below a certain level. A company may move its manufacturing to Bangladesh and its call center to India in search of lower costs, but the executive suite gets to stay here at prevailing U.S. rates.
I am reading Piketty’s book which is a funny combination of fascinating, and totally stats and boring. Thus I hoped for someone to discuss the interesting bits. I have not got to the last chapters, where apparently he makes some recommendations to alleviate the problem set out in the first post here.
The most curious part is about the time 1945 to 1975 during which income inequality decreased. This is when most of us grew up, the economic “feel” we are used to, what we based expectations on, and what economists thought was a general trend rather than an anomaly. This was also an era of social separation, where we began the trend of smaller households with a one generation family inside, not 3 age groups. I am writing this because I think a “wealth redistribution” will come to us here in the U.S. in rather unexpected ways. I was thinking of “home ownership.” it may be that wealthy people pay for part of a home, and a family owns a percentage of it; with a different prnciple at work rather than a bank mortgage. Collectives and coops might have a heyday, with governorship resting with the residents, but “ownership” resting elsewhere. The principle of the wealthy getting tax write offs for subsidizing the big ticket items like housing, that meager principle needs to be expanded.
So come on you guys, please read the book, and what’s more, you can invent “financial” systems that, if put in place, might alleviate some elements of poverty. I can ask “what if?” questions and don’t have the background to even attempt an answer. So, help.