featured selected – updates below
GM posts/pages on inequality
- 5-2022 (IN)EQUALITY now(ish)
- 4-2022 Inequality – The Long View
- 3/2021 Fed’s QE feeds Matthew Effect
- 6/2020 The Unequal Mr Picketty
- 4/2020 Covid : Billionaires Chip In A Trillion
- gg page Branco Milanovic Inequality
see also
gg/caw 4-2022 Inequality represents the mainstream’s mode of avoiding any analysis of power. Instead one prefers to analyse the economy as a de-contextualised abstraction in a neutralising and naturalising fashion. As Graeber&Wengrow put it: “The term ‘ inequality ’ is a way of framing social problems appropriate to an age of technocratic reformers , who assume from the outset that no real vision of social transformation is even on the table.”
The political implications of the Hobbesian model need little elaboration . It is a foundational assumption of our economic system that humans are at base somewhat nasty and selfish creatures , basing their decisions on cynical , egoistic calculation rather than altruism or co – operation ; in which case , the best we can hope for are more sophisticated internal and external controls on our supposedly innate drive towards accumulation and self – aggrandizement . Rousseau’s story about how humankind descended into inequality from an original state of egalitarian innocence seems more optimistic ( at least there was somewhere better to fall from ) , but nowadays it’s mostly deployed to convince us that while the system we live under might be unjust , the most we can realistically aim for is a bit of modest tinkering . The term ‘ inequality ’ is itself very telling in this regard . …
Something of a consensus has emerged among intellectuals and even , to some degree , the political classes that levels of social inequality have got out of hand , and that most of the world’s problems result , in one way or another , from an ever – widening gulf between the haves and the have – nots . … The term ‘ inequality ’ is a way of framing social problems appropriate to an age of technocratic reformers , who assume from the outset that no real vision of social transformation is even on the table . …
Debating inequality allows one to tinker with the numbers , argue about Gini coefficients and thresholds of dysfunction , readjust tax regimes or social welfare mechanisms , even shock the public with figures showing just how bad things have become ( ‘ Can you imagine ? The richest 1 per cent of the world’s population own 44 per cent of the world’s wealth ! ’ ) – but it also allows one to do all this without addressing any of the factors that people actually object to about such as ‘ unequal ’ social arrangements : for instance , that some manage to turn their wealth into power over others ; or that other people end up being told their needs are not important , and their lives have no intrinsic worth . … The ultimate effect of all these stories about an original state of innocence and equality , like the use of the term ‘ inequality ’ itself , is to make wistful pessimism about the human condition seem like common sense. …
D Graeber, D Wengrow, Dawn of Everything 2021 Ch1 Farewell to Humanity’s Childhood
articles etc updated 11-2023
theguardian.com 27-11-2023 UK spends more financing inequality in favour of rich than rest of Europe, report finds – Inequalities of income, wealth and power cost UK £106.2bn a year compared with average developed OECD country – by Amelia Hill
Inequalities of income, wealth and power cost the UK £106.2bn a year compared with the average developed country in the Organisation for Economic Co-operation and Development (OECD), according to the Equality Trust’s cost of inequality report… The report found that the richest 1% in the UK are the most expensive top 1% group in Europe, paying the lowest taxes of such a group in any large European country. The benefits of allowing this to continue are “almost impossible to defend”, said Danny Dorling, the author of Inequality and the 1%. “Inequality is more than just economics: it is the culture that divides and makes social mobility impossible,” he said. “The mere accident of being born outside the 1% will have a dramatic impact on the rest of your life: it will reduce your life expectancy, as well as educational and work prospects, and affects your mental health. The cost of the super-rich is just too high for the rest of us. We must urgently redress the balance.”
Stewart Lansley, the author of The Richer, the Poorer and The Cost of Inequality, said it was “an acute paradox of contemporary capitalism that as societies get more prosperous, rising numbers are unable to afford the most basic of material and social needs”. He said: “In Britain, child poverty has doubled in 40 years. Yet few modern tycoons go without private jets, luxury yachts, even private islands.” Lansley blames the way the gains from growth have been increasingly colonised by a small group of financial and business magnates – a process he says is facilitated by state policy….
telegraph.co.uk/ 11-4-2023 Meet Britain’s big brand millionaires calling for a wealth tax – Growing number of ultra rich believe they must pay more tax to tackle growing inequality – By Charlotte Gifford
theguardian.com 11-4-2023 Australia’s richest captured 93% of economic growth between 2009 financial crisis and Covid, paper shows – Wealthiest 10% captured growth in company profits while most Australians watched their real wages shrink, Australia Institute finds – by Amy Remeikis
…A new paper from the Australia Institute shows 93% of the benefits of economic growth between 2009 and 2019 went to the top 10%, while the bottom 90% received just 7%. …
…“It is really a story about wages and profits,” he said. “Most of us – 90% – receive income from wages, which have gone backwards in real terms. But profits are doing very well and the ownership concentration on those profits is that 10% who are benefiting.” The Australia Institute believes the stage-three tax cuts, legislated to begin from July next year, will make inequality even worse in Australia. People earning more than $180,000 will see the greatest benefit from the stage-three tax cuts, while low income earners will receive no benefit. The low and middle income tax offset which benefited most Australian workers ended in the last financial year. The Morrison government had designed it to be temporary, whereas the third stage of the tax reform continues in perpetuity.
…Grundoff said inequality in Australia had been increasing, even before those stage-three tax cuts. His latest paper examined income per adult on a pre-tax basis, which means it shows how incomes are apportioned before the tax-and-transfer system kicks in to redistribute some income to lower income households via welfare and public services. It shows what’s happened to Australian incomes through five distinct economic cycles, from the 1950s up to 2019, with each period starting with a recession or economic crisis and ending just before the next economic disruption (what economists call a “business cycle”). The analysis reveals there has been a complete change in outcomes over those 70 years. In earlier periods, the bottom 90 per cent of income recipients clearly shared the benefits of economic expansion, with higher per adult incomes. Their share has slowly decreased over time, but since the GFC, their share has been dramatically reduced….
medium/thingaday 3-2023, 9-2022, 2018 A RAND Study Destroyed the Concept of Unfettered Capitalism and Nobody Noticed – It happened two years ago and hasn’t gotten much attention since it came out. – by Matthew Maniaci
“Two years ago, I was scrolling through my daily Medium newsletter, and I came across a Fast Company article from October 6, 2020. It neatly sums up the outcome of a RAND study which found that had incomes kept up with the economy, the median income would be about $42,000 higher than it currently is. Here’s the article if you’re interested….
The study itself is loaded with interesting data, which I’ve gone through with my layman’s knowledge, but the linked article sums it up nicely. Here’s the actual report, if you’re a data wonk and would like to read it:
The study found that across basically every demographic that was measurable in their timeframe (1975–2018), real income growth for the vast majority of people did not keep up with economic growth. Their premise was that measuring across all quintiles (that’s every 20%) of income brackets, income growth should roughly match economic growth evenly across all brackets. This is indeed the case in the 20 years post-World War II, as they demonstrate in their opening charts.
Contrary to this expectation, starting in 1975, income growth for the bottom four quartiles (that’s the top 80% of earners and below) did not keep up with economic growth, with the lowest earners faring the worst. During that same time frame, however, the top 20% of earners’ incomes rose at a rate much higher than economic growth. The rise was much more pronounced in the top 5% of earners, to the point where even being in the 90th percentile of wages put you below the rate of economic growth….
Demonizing unions and reducing their power through laws such as the so-called “right to work,” letting the minimum wage continue to fall in real terms, and reducing protections for workers, in general, all contributed to a reduction in real wages for most Americans.
At the same time, the 1% was growing their income by leaps and bounds thanks to a corporate structure that favored them. Because corporations were beholden to their shareholders first, profits were driven into dividends, share buybacks, and stock splits as opposed to company infrastructure and employees. The end result was that companies were able to keep wages broadly down in a sort of “race to the bottom” because more investment in workers affected the bottom line.
So, it wound up being a sort of perfect storm to enrich the 1% at the expense of everyone else. All the CEOs, hedge fund managers, and assorted other major shareholders got rich while the precepts of unfettered capitalism and fiscally conservative/libertarian government policies kept wages for just about everyone else low. Put simply: trickle-down economics didn’t…”…
theguardian.com 22-1-2023 Joseph Stiglitz: tax high earners at 70% to tackle widening inequality – Nobel prize-winning economist calls for new top rate of income tax and 2-3% wealth tax on fortunes – by RupertNeate
>Cost of living, Hunger, Polycrisis, Profiteering, Taxation, World Economic Forum
frompoverty.oxfam.org 16-1-2023 Taxation of the World’s Super-Rich has collapsed: as 1 in 8 people go to bed hungry, that has to change – by By Duncan Green
oxfam.org 16-1-2023 Survival of the Richest: How we must tax the super-rich now to fight inequality
We are living through an unprecedented moment of multiple crises. Tens of millions more people are facing hunger. Hundreds of millions more face impossible rises in the cost of basic goods or heating their homes. Poverty has increased for the first time in 25 years. At the same time, these multiple crises all have winners. The very richest have become dramatically richer and corporate profits have hit record highs, driving an explosion of inequality. This report focuses on how taxing the rich is vital to addressing this unprecedented polycrisis and skyrocketing inequality. The report explores how, in recent history, taxation of the richest was far higher; how talk of taxing the rich and making billionaires pay their fair share is hugely popular; and how taxing the rich claws back elite power and reduces not just economic inequality, but racial, gender and colonial inequalities, too. The report lays out how much tax the richest should pay, and the practical, tried and tested ways in which governments can raise such taxation. It shows us how taxing the rich can set us clearly on a path to a more equal, sustainable world free from poverty.
DOWNLOAD FILE – English paper (3 MB)English summary (716 KB)French paper (3 MB)French summary (762 KB)Spanish paper (3 MB)Spanish summary (706 KB)Arabic paper (2 MB)Arabic summary (411 KB)English methodology note (2 MB)
> inequality, wealth, Ungleichheit, Armut, Reichtum
youtube/DW 19-1–2023 Rich and poor – The growing wealth gap in Germany
Germany is one of the wealthiest countries in the world – but the gap between rich and poor continues to grow. What’s it like to live in Germany when you hardly have any money left for groceries at the end of the month? And what’s it like when you have so much money that you can barely spend it all? We tell the stories behind the bank statements – and ask why Germany is a rich country with poor people.
Elke, for example, lives off welfare. When she cooks, her priority is giving her daughter enough to eat. Elke eats the leftovers. Boris, a high-earning self-employed marketing coach, loves luxury cars and thinks being poor is a decision. And the middle-class Valdivieso family, homeowners with a comfortable income, have been worried about social decline since the energy crisis began – and feel let down by politicians. They’re not the only ones who feel like things in Germany are going downhill. What happens to a society when rich and poor keep drifting further and further apart?
One thing is sure: people are protesting. Under the hashtag “I’m affected by poverty”, resistance is growing on social media; Elke even speaks at a big demonstration in front of the Chancellery in Berlin. And there are some wealthy people who say they’d like to pay more taxes to close the wealth gap. What kind of political decisions is Germany facing?
theguardian.com 11-2022 Rising asset wealth and falling real wages ‘drive inequality in Britain’ – Young people no longer able to rely on hard work to improve their living standards as they age, says IFS
…”…Highlighting a collapse in home ownership among younger adults, the IFS said only 36% of those born in the 1980s owned their own home by the age of 30, compared with 55% for those born in the 1970s and over 60% of those born in the 1950s and 1960s. House prices have risen steadily in recent decades and boomed since the 2008 financial crisis, helped by rock-bottom interest rates from the Bank of England since the banking crash, before a further sharp increase during the Covid pandemic. The IFS said these trends had acted to push up the proportion of the country’s wealth held by older generations. By contrast average wage growth has stalled over the past decade, with typical pay worth less today than in 2007 after inflation is taken into account. The IFS said this combination meant that inherited wealth was becoming more important for the lifetime economic resources of younger generations, as earnings from work grew less influential…”…
oxfam.com 7-11-2022 Carbon billionaires – The investment emissions of the world’s richest people – by Alex Maitland, Max Lawson, Hilde Stroot, Alexandre Poidatz, Ashfaq Khalfan and Nafkote Dabi.
The world’s richest people emit huge and unsustainable amounts of carbon and, unlike ordinary people, 50% to 70% of their emissions result from their investments. New analysis of the investments of 125 of the world’s richest billionaires shows that on average they are emitting 3 million tonnes a year, more than a million times the average for someone in the bottom 90% of humanity. The study also finds billionaire investments in polluting industries such as fossil fuels and cement are double the average for the Standard & Poor 500 group of companies. Billionaires hold extensive stakes in many of the world’s largest and most powerful corporations, which gives them the power to influence the way these companies act. Governments must hold them to account, legislating to compel corporates and investors to reduce carbon emissions, enforcing more stringent reporting requirements and imposing new taxation on wealth and investments in polluting industries.
theguardian.com 10-2022 Enormous emissions gap between top 1% and poorest, study highlights – ‘Polluting elite’ responsible for same amount of carbon dioxide in a year as poorest 10% are in more than two decades, data shows – by Fiona Harvey
…”…The findings highlight the enormous gaps between what have been termed “the polluting elite”, whose high-carbon lifestyles fuel the climate crisis, and the majority of people, even in developed countries, whose carbon footprints are far smaller. … For instance, in any given year, fewer than half of people in the UK take a flight. But 1% of people are responsible for one-fifth of the overseas flights taken from the UK. … Flying, driving large, expensive cars, owning multiple homes and travelling between them, eating a diet rich in meat and imports, buying more clothes and imported luxury goods are all reasons for the richest generating far higher carbon footprints. … Taxes on the most polluting activities could target only the rich and need not add to the cost of living crisis for the great majority of people. They could also help to plug the yawning gap in the UK’s public finances. …”…
>Carbon footprints – Carbon tax – Inequality
gaiageld.com 8-2022 Inequality in Latin America is fuelling a new wave of populism -Voters are once again turning to politicians who promise radical change
economist.com 2-8-2022 Global inequality is rising again – But the causes of the resurgence are not all bleak
…”…To understand why, consider the two different forms of inequality researchers look at: gaps that occur within a country and those between countries. From the 1980s through the 2000s, inequality rose within most countries (including many in the emerging world) as rich Americans, Britons, Chinese and so on did better than their poorer compatriots.
The contribution of this within-country dynamic was swamped, however, by the diverging fortunes of rich and poor countries as a whole. Because poorer countries were growing faster than richer ones—and massive ones like China and India were doing especially well—the net effect of changes across the world economy was a sharp decline in global inequality.
Progress then ground to a halt in the decade before the pandemic. Shifts to the distribution of income within countries ceased to push inequality higher (indeed, in some recent years within-country shifts served to reduce global inequality on net). But this generally welcome trend occurred alongside much more halting progress in the closing of income gaps between countries. …
Yet higher global inequality is also the outcome of a happier development. Recent work by Ravi Kanbur of Cornell University and Eduardo Ortiz-Juarez and Andy Sumner of King’s College London suggests that measured global inequality may rise in steady fashion in the years ahead for much the same reason it fell in recent decades. While the emerging world as a whole has gained ground on rich countries since the 1980s, the lion’s share of the reduction in global inequality over that time was attributable to the rapid economic growth of China and India. gdp per person in China now stands at roughly the global average—a milestone India may reach in the 2030s. As incomes in those countries cross that threshold, their continued growth will become a source of increasing, rather than decreasing, inequality.
The enrichment of two countries that are home to more than a third of the world’s population is undoubtedly one of the big economic success stories of the past four decades. It has the unfortunate effect, however, of making the disappointing progress of those at the lower end of the income distribution more apparent.”
theguardian.com 7-2022 I help rich people tackle inequality. Here’s how the cost-of-living crisis could be fixed -Wealth inequality is destabilising our economy and threatening the fabric of our society. But it doesn’t need to be this way – by Stephanie Brobbey
theguardian.com 17-4-2022 Rich countries that let inequality run rampant make citizens unhappy, study finds – Study of 78 countries reveals impact of economic exclusion, including on changing fortunes in UK – by James Tapper
Countries that allow economic inequality to increase as they grow richer make their citizens less happy, a new study shows. Until now, researchers have believed that inequality was largely irrelevant to levels of life satisfaction, according to Dr David Bartram at the University of Leicester. But his study of 78 countries spanning four decades – the largest longitudinal research of its kind – punctures that myth, he said.
“When inequality increases, people with high incomes don’t benefit much from their gains – many rich people are focused on those who have even more than they do, and they never feel they have enough,” Bartram said. .
Bartram’s research, which is due to be presented at the British Sociological Association’s online annual conference on 21 April, examined survey data of life satisfaction levels, where people rate their life satisfaction on a scale of one to 10, and linked it to Gini coefficient numbers – a measure of inequality – from 1981 to 2020. In 1981, as the UK was gripped by a recession, life satisfaction stood at 7.7. But during the economic boom of the 1980s, inequality grew, and the research shows that the happiness figure dropped to 7.4 by 1999. However, as measures to reduce inequality began to take effect, happiness slowly returned so that by 2018, life satisfaction stood at 7.8.
“The data from the UK feeds into a more general finding – in wealthy countries increased inequality has a substantial negative impact on life satisfaction, and inequality has increased in most wealthy countries in recent decades,” Bartram said.
This link between higher inequality and lower life satisfaction is repeated elsewhere, Bartram said. Any country that moved from the lowest quarter of countries in terms of inequality to the highest quarter saw a decrease in life satisfaction of about 0.4 on the 10-point scale, he found. India’s life satisfaction declined from 6.7 in 1990 to 5.8 in 2006 as inequality rose. By 2012 it was still lower than in 1990, despite the country’s prolonged economic boom. The US and Australia also both saw pronounced falls in life satisfaction, but those countries where inequality had fallen were generally happier, such as Poland, Peru, Mexico and Ukraine, before the Russian invasion. The lesson for policymakers is that inequality matters, Bartram said…”…
economicsfromthetopdown.com/ 3-2022 The Voldemort Index – an essay that offers a fascinating glimpse into the elite worldview (Blair Fix)
…”…The Voldemort index, V, measures the degree to which the command of resources scales with income: command of resources ∼ (income)V
In general, the higher the value of V, the less the rich are deprived. A value of V = 1 is optimal, indicating that the rich get what they want in exact proportion to their income. Conversely, the value V = 0 is the worst-case scenario. It corresponds to a world in which resources are ‘rationed’ equally, irrespective of one’s income. This ‘rationing’ is the ultimate form of elite privation.
In what follows, I apply the Voldemort index to the international distribution of various commodities, including vaccines, lifespan, energy and pollution. The facts (which are rather depressing) speak for themselves. …”…
visualcapitalist.com 3-2022 Where Does the World’s Ultra-Wealthy Population Live Today? By Dorothy Neufeld
oxfamilibrary.openrepository.com/ 1-2022 Inequality Kills – by Nabil Ahmed – Contributing authors: Anna Marriott, Nafkote Dabi, Megan Lowthers, Max Lawson, Leah Mugehera
The wealth of the world’s 10 richest men has doubled since the pandemic began. The incomes of 99% of are worse off because of COVID-19. Widening economic, gender, and racial inequalities—as well as the inequality that exists between countries—are tearing our world apart. This is not by chance, but choice: “economic violence” is perpetrated when structural policy choices are made for the richest and most powerful people. This causes direct harm to us all, and to the poorest people, women and girls, and racialized groups most. Inequality contributes to the death of at least one person every four seconds. But we can radically redesign our economies to be centered on equality. We can claw back extreme wealth through progressive taxation; invest in powerful, proven inequality-busting public measures; and boldly shift power in the economy and society. If we are courageous, and listen to the movements demanding change, we can create an economy in which nobody lives in poverty, nor with unimaginable billionaire wealth—in which inequality no longer kills
oxfam.org/blog 12-2021 Narratives and their impact on inequality – by Diana Kallas
…”…Who came to decide that achieving economic growth is more important than ensuring basic rights and reducing inequality? Who sets these indicators, and when and how did those indicators become an uncontested norm that frames the policy debate? Why do economic experts often feel they need to provide a disclaimer such as “not that I am a communist, but…” before they suggest a tax on wealth or real estate gains? Why is the public sector considered to be inherently bad at doing business in many regions of the world? These types of questions help us understand what dominant narratives are, how they are shaped, and how they affect our lives. Dominant narratives set a storytelling framework – a ‘regime of truth’ – that determines what kind of discourse is accepted as true, and who can be an accepted authority figure on that truth. Critically, they are an instrument of power. …”…
disruptiveinequalities.com 8-2021 Averting the middle class gaze: Pushing beyond the discontented acceptance of inequality– Sue Ansarie is a Research Assistant and has mostly worked with community action groups in London to address issues such as housing and displacement of working class communities.
“I am about to tell you a true story. This is not about glory or pity. This is to reveal inequalities I faced growing up as a child and as part of my wider neighbourhood community. I do this to offer reflections on my experiences, and how they relate to inequalities in the present, which I see through my work as a researcher. …”…
vox.com 3-2021 The impact of inheritance – A “great wealth transfer” may be on the horizon. Will a gift from grandma save the middle class? By Meredith Haggerty
…”…inheritance is a conversation we need to have, because a great wealth transfer is upon us, coming soonish. A large amount of cash is expected to move from the pockets of boomers to everyone younger, though guesses at just how much and when vary: Forbes reports $30 trillion over “many years,” PNC says $59 trillion by 2061, CNBC mentions $68 trillion and 25 years, and the New York Times confirms the variety of these assessments but puts it at around $15 trillion over the next decade.
Who’s getting this money, how are they getting it, and what’s it going to do? In “Not All Millennials,” published in the Drift, Kiara Barrows noted that “the distribution of this inheritance will fall along the lines of existing inequalities, deepening the fractures in any millennial program of economic solidarity.” And that’s certainly true — the nation’s top 1 percent have received more than 35 percent of the inherited wealth, according to Edward Wolff, a professor at New York University and the author of Inherited Wealth in America: Future Boom or Bust?
But Wolff also says, surprisingly, that inherited wealth isn’t a huge driver of inequality in America — it actually has had an equalizing effect. And there’s no indication that the next decades will be any different. The reason is deceptively simple: While much (much!) more money flows among the rich, for middle- and low-income people who receive gifts or inheritance, they represent a larger percentage of wealth. So large, in fact, that for some people, a gift from mom or dad is the thing that will keep them middle class. But recipients-wise, we’re not talking about a lot of people. Twenty-two percent of American households receive a wealth transfer, Wolff says in a phone interview — a significant figure but certainly not a majority. …”…
theindianwire.com 2020 The Big Boomer Theory: Millennials to inherit the Greatest Wealth in History from the Fading Richest Generation – by Kritika Krishnakumar, Sayon Bhattacharya
oxfamapps.org 12-2021 World Inequality Report 2022: a treasure trove of trends and new data – By Duncan Green …the report is …”… a total gold mine, as you’d expect from a summary of the work of over 100 researchers over 4 years from every corner of the globe … Here are some of the findings and graphics …
An average adult individual earns $23,380 per year in 2021, and the average adult owns $102,600. These averages mask wide disparities both between and within countries. The richest 10% of the global population currently takes 52% of global income, whereas the poorest half of the population earns 8% of it. On average, an individual from the top 10% of the global income distribution earns $122,100 per year, whereas an individual from the poorest half of the global income distribution makes $3,920 per year …
Global wealth inequalities are even more pronounced than income inequalities. The poorest half of the global population barely owns any wealth at all, possessing just 2% of the total. In contrast, the richest 10% of the global population own 76% of all wealth. On average, the poorest half of the population owns $4,100 and the top 10% own $771,300….”…
reuters.com 10-2021 Japan confronts rising inequality after Abenomics – By Kantaro Komiya and Leika Kihara
“With Abenomics, the finance minister talked about wealth trickling down. But there was no such thing, was there? Almost nothing,” said Aoki, who took a job as a part-time kindergarten bus driver when the COVID-19 pandemic forced him to temporarily shut down his shop. … Japan’s poverty rate is the second-highest among G7 nations and the ninth-highest among OECD countries, according to the organisation’s survey, based on data available up to 2020. Nominal wages rose just 1.2% from 2012 through 2020, government data showed. Japanese households’ average wealth fell by 3.5% from 2014 to 2019 – although the top 10% wealthiest saw an increase, according to another government survey. read more
To be sure, inequality is far more pronounced in countries such as the United States and Britain. Japan stood around the middle of 39 countries surveyed by OECD in 2020 based on the Gini coefficient, which gauges inequality. … But achieving what a wall of money under Abenomics failed to do would be challenging. Already, Kishida shelved a plan to charge higher taxes on capital gains and dividends. read more
Shigeto Nagai, an economist at Oxford Economics, said offering shot-term tax breaks likely will not convince firms to raise wages, calling instead for reforms in areas such as Japan’s rigid labour system. “First and foremost, politicians must abandon the unrealistic and optimistic premise of Abenomics that Japan can cure all ills just by reflating nominal growth,” Nagai said.”F
theedgemarkets.com 3-2020 Edge Malaysia – Condivergence: Is inequality natural? – by Andrew Sheng
…”…Piketty had a bestseller, but it was the English economist Angus Deaton who won the 2015 Nobel Laureate in economics for integrating the analysis of consumption, poverty, welfare and health to explain social inequality. Nobel Laureate Joseph Stiglitz summed up the American “Great Divide” in income and wealth as “Of the 1 Percent, by the 1 Percent and for the 1 Percent”. It was the global financial crisis of 2008 that brought growing inequality to the top of the political agenda.
Anger and populist politics : My former colleague at the World Bank, Serbian-American economist Branco Milanovic, has made a name for himself with his “elephant curve” — which showed how the super-rich in the advanced economies, which he calls the “plutocrats”, were the big winners, the next beneficiaries being the middle class in emerging Asia, mostly China, India, Thailand, Vietnam and Indonesia.
What really changed the politics was how the losers in the advanced countries, which come from the middle class (they have much higher incomes than the middle class in the emerging markets), became populists. They blamed globalisation because they lost out to the middle class in the emerging markets, whereas the real beneficiaries were the super-rich, and those better educated and skilled in up-and-coming industries became better off. Society is unequal, and we need politics to solve that inequality.
Here is where it gets really wicked. On any subject, one-third of society denies there is a problem. One-third is uncertain and can be persuaded (the silent majority) and one-third thinks that something should be done — but it cannot quite agree on what. Thus, it is the conservative faction that resists change and prefers the status quo — you would too if you are part of the 1%. Malaysia is a good example of how affirmative action in terms of its New Economic Policy succeeded in narrowing inequality in the last 30 years by creating a professional middle class. But once vested interests are entrenched, it is much more difficult to make further inroads into addressing social inequality. If wealth is generated more through entrepreneurship, acquiring the skills of risk-taking requires much tougher education and re-skilling in a range of entrepreneurial skills. You learn to trade only by trading and taking risks…”…
D Graeber, D Wengrow, Dawn of Everything 2021 Ch 1 Farewell to Humanity’s Childhood: Or, why this is not a book about the origins of inequality
The political implications of the Hobbesian model need little elaboration . It is a foundational assumption of our economic system that humans are at base somewhat nasty and selfish creatures , basing their decisions on cynical , egoistic calculation rather than altruism or co – operation ; in which case , the best we can hope for are more sophisticated internal and external controls on our supposedly innate drive towards accumulation and self – aggrandizement . Rousseau’s story about how humankind descended into inequality from an original state of egalitarian innocence seems more optimistic ( at least there was somewhere better to fall from ) , but nowadays it’s mostly deployed to convince us that while the system we live under might be unjust , the most we can realistically aim for is a bit of modest tinkering . The term ‘ inequality ’ is itself very telling in this regard . …
Something of a consensus has emerged among intellectuals and even , to some degree , the political classes that levels of social inequality have got out of hand , and that most of the world’s problems result , in one way or another , from an ever – widening gulf between the haves and the have – nots . … The term ‘ inequality ’ is a way of framing social problems appropriate to an age of technocratic reformers , who assume from the outset that no real vision of social transformation is even on the table . …
Debating inequality allows one to tinker with the numbers , argue about Gini coefficients and thresholds of dysfunction , readjust tax regimes or social welfare mechanisms , even shock the public with figures showing just how bad things have become ( ‘ Can you imagine ? The richest 1 per cent of the world’s population own 44 per cent of the world’s wealth ! ’ ) – but it also allows one to do all this without addressing any of the factors that people actually object to about such as ‘ unequal ’ social arrangements : for instance , that some manage to turn their wealth into power over others ; or that other people end up being told their needs are not important , and their lives have no intrinsic worth . … The ultimate effect of all these stories about an original state of innocence and equality , like the use of the term ‘ inequality ’ itself , is to make wistful pessimism about the human condition seem like common sense. …
theguardian.com/ 22/11/2021 The Bank of Mum and Dad is allowing New Zealand’s wealthy to become ‘opportunity hoarders’ – When people are born into money it’s like they’ve stepped on an up escalator, borne effortlessly upwards while the poor go down by Max Rashbrooke
thetimes.co.uk 19/11/2021 ‘MY FRIENDS ALL EARN MORE THAN ME AND I CAN’T KEEP UP’ by Dolly Alderton
businessinsider.com 7/11/2021 Millennials own nothing because the economy screwed us over for 25 years — but older generations still try and blame it on our work ethic by Ingrid Cruz
bloomberg.com/ 5/10/2021 gen-x-leaves-boomers-trailing-with-50-wealth-jump-in-pandemic
ysi.ineteconomics.org 12/2021 Dissecting capitalism: Its past, present and future YSI South Asia Webinar on Capitalism – This series aims to explore the tenets of capitalism over the fabric of time and examine its influence on the global economy and social classes.
This project aims to organize a webinar series on the dominant ideology/economic system – capitalism. In our living memory, the financial crisis was first to remind us of the limitations of existing socio-economic system built upon the capitalistic foundations. With the beginning of the 2020s and the emergence of the COVID-19 pandemic, there is a change in the general consensus amongst economists and social scientists regarding capitalism. During this once in a century pandemic, the financial markets have continued their historic rise, in the presence of rising poverty, inequality and systemic disarray around the world. The dominant socio-economic system is somewhat failing to respond adequately to any large-scale crisis. As a result, the strengths and limitations of capitalism are questioned more than ever.
It has become a common point of discussion whether the current capitalist society is the best economic system for all. Another point of discussion is the reforms needed for capitalism to ensure socio-economic welfare or great thinkers and philosophers like Karl Marx right about the doom of capitalism.
With several channels of discussion on various platforms amongst people of all backgrounds, it has been a common phenomenon to make the attempt to “rethink” or “dissect” capitalism in order to analyse the gaping flaws of capitalism in its present form and to suggest means of reform and transformation. This webinar series brings together distinguished scholars of economics, philosophy, social policy and law to dissect capitalism with their unique theoretical and empirical lenses.
bbc.co.uk 10/2021 Pandora Papers 1: A simple guide to the Pandora Papers leak
The files expose how some of the most powerful people in the world – including more than 330 politicians from 90 countries – use secret offshore companies to hide their wealth. Lakshmi Kumar from US think-tank Global Financial Integrity explained that these people “are able to funnel and siphon money away and hide it,” often through the use of anonymous companies.
bbc.co.uk 10/2021 Pandora Papers 2: Your guide to nine years of finance leaks
The financial secrets of hundreds of world leaders, politicians and celebrities has been exposed in another huge leak of financial documents. Dubbed the Pandora Papers it features almost 12 million files from companies providing offshore services in tax havens around the world.
watch Panorama on the BBC iPlayer
pure.au.dk/ 5/2021 Steve Keen, Blair Fix, Phil Dobbie Discuss The Hierarchy Of Inequality
nature.com/ 9/2021 The dynamics of cooperation, power, and inequality in a group-structured society
Denis Tverskoi, Athmanathan Senthilnathan, Sergey Gavrilets download PDF here
Abstract : “Most human societies are characterized by the presence of different identity groups which cooperate but also compete for resources and power. To deepen our understanding of the underlying social dynamics, we model a society subdivided into groups with constant sizes and dynamically changing powers. Both individuals within groups and groups themselves participate in collective actions. The groups are also engaged in political contests over power which determines how jointly produced resources are divided. Using analytical approximations and agent-based simulations, we show that the model exhibits rich behavior characterized by multiple stable equilibria and, under some conditions, non-equilibrium dynamics. We demonstrate that societies in which individuals act independently are more stable than those in which actions of individuals are completely synchronized. We show that mechanisms preventing politically powerful groups from bending the rules of competition in their favor play a key role in promoting between-group cooperation and reducing inequality between groups. We also show that small groups can be more successful in competition than large groups if the jointly-produced goods are rivalrous and the potential benefit of cooperation is relatively small. Otherwise large groups dominate. Overall our model contributes towards a better understanding of the causes of variation between societies in terms of the economic and political inequality within them.”
theguardian.com 26/8/2021 Wishful thinking will not close Britain’s inequality gaps – Covid has made us poorer and increased wealth and educational disparities. Optimism alone cannot fix this by Torsten Bell
- UK recovery shows signs of stalling due to worker shortage
- Cases remain elevated as UK travel takes off
- Share your experiences of the UK supply chain shortage
But on the economy, despite driving the deepest downturn for 300 years, people seem desperate to believe the pandemic will help the UK overcome some of its deep-rooted challenges. Apparently it will help us level up by closing regional gaps, give low-paid workers the respect – and pay – they deserve and save the local high street. Much of this wishful thinking rests on futurology about home working. …
… most low-paid jobs can’t be done remotely, low-paid workers have borne the brunt of this crisis. As well as facing the highest health risks, they have been three times as likely as higher-paid workers to experience a labour market hit, such as losing their job or being furloughed.
What have low earners had in exchange for this highly unequal burden? Wishful thinking. At the start of the pandemic everyone recognised that it was low earners who kept our economy and health service running. They were clapped from our doorsteps and told greater dignity for such work would follow.
It hasn’t. Low earners still have no minimum notice period for their shifts (more than one in three workers recently surveyed were given less than a week’s notice of their work patterns) and no right to a contract reflecting the hours they actually work. Worse, the government recently decided not to extend sick pay to low earners – something it previously favoured.
We’re now told that current hiring difficulties will suddenly deliver lots of bargaining power for low-paid workers, automatically leading to surging pay and better-quality work. But data from the jobs site Indeed shows that it’s higher paid roles, in transport, manufacturing and construction that are seeing fast increases in advertised wages.
The increases for lower-paid workers aren’t hugely beyond the 20p rise in the national living wage back in April (typical hourly wages advertised for cleaners and warehouse staff have increased by 20p and 11p respectively since March). Zero-hours contracts have not disappeared. …
Covid has made us poorer. It has widened wealth gaps and educational inequalities. Almost everything important we need to achieve as a nation has been made harder, not easier. So, put the wishful thinking aside. Silver linings to Covid won’t solve our deep-seated economic problems. We have to.”
https://voxeu.org/ 18/8/2021 Monetary policy and inequality Ethan Ilzetzki
By most measures, income inequality has increased in the UK in the past several decades. The July 2021 CfM survey asked the members of its UK panel to evaluate the impact of central banks on inequality and whether the Bank of England should consider income and wealth distribution in its monetary policy decisions. The majority the panel thinks monetary policy has only a small impact on wealth and income inequality. A larger majority of nearly 90% of the panel believes that inequality should play a minimal role or no role in the Bank of England’s monetary policy decisions.
ysi.ineteconomics.org/ 8/2021 Inequality – EAEPE Pre-Conference: Triple Crisis and the Alternative Futures ysi-workinggroups.storage.googleapis.com/inequality PDF
theguardian.com 22/7/2021 Central banks can’t reduce inequality – it’s time for ministers to act. Central bank policies have enriched the wealthy – bold politicians must start redistributing wealth by Howard Davies
…”But talk is cheap. Is there any evidence that a concern for inequality has influenced policy? Indeed, is there any evidence that monetary policy can be used to moderate or reverse growing inequality? The chief economist of the BIS, Claudio Borio, believes there is. He argued at the end of last month: “There is a lot that monetary policy can do to foster a more equitable distribution over business cycles.” …
The slightly depressing conclusion is that the current monetary policy settings in the world’s developed economies are likely to create greater wealth inequality, and that in the short term there is not a lot monetary and regulatory authorities can do about it, save mentioning it in speeches. If the problem is to be resolved, we will need to see finance ministers with a strong political mandate to implement redistributional policies, rather than Fed chairmen and governors featuring prominently in this decade’s power lists.
theconversation.com 5/7/2021 What do children think of economic inequality? We did an experiment to find out – COVID-19 is increasing economic inequality around the world
On the one hand, the number of people in extreme poverty is on the rise for the first time in decades. … On the other hand, the wealthy have benefited from a soaring stock market, rising house prices and better job security. … Research has revealed much about how economic inequality affects human psychology. For example, people differ in how much they care about unequal wealth distribution. People’s tolerance of inequality usually depends on how fair they believe the economic system to be. … Social psychologists have also shown economic inequality affects how we treat others – when things are more unequal, we are much less generous. Importantly, those who think inequality is fair tend to be much less giving towards others. All this research has so far asked how economic inequality affects adult psychology, but what about children?” …
To our surprise, whether the children experienced high or low inequality did not affect how fair they thought their economic system was. However, the children differed in their personal interpretations – some thought it was based on merit, others thought it was completely unfair, and some felt entirely indifferent – as one child put it, “You get what you get, and you don’t get upset”.
Critically, the children who thought the economic situation was unfair were the ones who gave to the poor. This suggests children’s interpretations of inequality, rather than inequality itself, is a strong driver of their care and concern for the poor. As it stands, hundreds of millions of people live on less than $1.90 per day. Most of these people are in this position simply because they were born into a country with poor education, opportunities and standards of living. The next generation of children will inherit this world. It’s time we understand what they think about it, because what they think dictates what they’ll do to help in the years to come.
Read more: Rich and poor don’t recover equally from epidemics. Rebuilding fairly will be a global challenge
Read more: COVID-19: how rising inequalities unfolded and why we cannot afford to ignore it
bis.org pdf 7/2021 The distributional footprint of monetary policy Claudio Borio
The long-term rise in economic inequality since the 1980s is largely due to structural factors, well outside the reach of monetary policy, and is best addressed by fiscal and structural policies.
Monetary policy can most effectively contribute to a more equitable society by fulfilling its mandate, which addresses two key factors causing inequality at shorter horizons. This requires keeping inflation low and limiting the incidence and duration of macroeconomic and financial instability, which disproportionately hurt the poor. Central banks can also help mitigate economic inequality wearing their “non-monetary hats”, notably as prudential authorities, promoters of financial development and inclusion, and guardians of payment systems.
ybs.co.uk/ 6/2021 ONE IN FIVE UK ADULTS HAVE LESS THAN £100 IN SAVINGS
Around a fifth of (19%) UK adults have less than £100 in savings according to new research by Yorkshire Building Society – Figures also reveal the widening of the UK’s financial wellbeing gap, with the number of people not saving at all almost doubling in the last two years with more than one in five (21%) people not saving now compared to just over one in ten (12%) in 2019 – However, a fifth (20%) have increased their monthly savings during the coronavirus pandemic
amp.theatlantic.com 2019 American Wealth Is Broken – My family is a success story. We’re also evidence of the long odds African Americans face on the path to success. By Maura Cheeks
…”A raft of policies responsible for building the American middle class destroyed opportunities for black people to build intergenerational wealth. According to 2013 data from a paper by the progressive think tank Institute for Policy Studies, if the average wealth held by white families magically stopped growing, it would take 228 years for the average wealth held by African Americans to catch up. When researchers from the institute looked at median wealth from 1983 to 2016 (adjusting for inflation), black families saw their wealth decrease by more than half, while white families saw theirs rise by 33 percent. While white families have a median wealth of $171,000, black families have a median wealth of just $17,600. These relationships aren’t fixed. Once you get a certain amount of wealth, keeping it within your family is much easier. It took until 1976 for the government to introduce the generation-skipping transfer tax, which was instituted to stop individuals from avoiding federal estate taxes by leaving money to their grandchildren.”…
knowledge.insead.eduGMcopyhere 8/2020 What’s Behind the Rising Inequality of Everything? Benjamin Kessler , Morten Olsen
…”With all these dimensions of inequality telling the same basic story, we can speculate that the main drivers must be fundamental to the contemporary economy. Crony capitalism and other types of regulatory capture surely exacerbate inequality. But if all forms of soft and hard corruption were to disappear overnight, the upward distribution of resources would continue, albeit at a lower level. In other words, the underlying system, not its subversion, is at the root of the phenomenon. Specifically, the combination of globalisation and technological innovation seems to act as an engine for the superstar economy. …”…
academictimes.com/ 5/2021 Rise of the middle class in the 20th century was wildly overstated – However you parse the data, capitalism increasingly appears to disproportionately benefit the very top performers. By Ariane Lange
cep.lse.ac.uk pdf 2019 The End of the American Dream? Inequality and Segregation in US cities * Alessandra Fogli ,Veronica Guerrieri
Abstract : Since the ’80s the US has experienced both an increase in income inequality and an increase in residential segregation by income. After documenting this fact, we develop a general equilibrium model where parents choose the neighborhood where to raise their children. Segregation and inequality amplify each other because of local spillovers that affect the education returns. We calibrate the model using 1980 US data and the estimates for neighborhood exposure effects in Chetty and Hendren (2018b). We then show that segregation
contributes to 28% of the increase in inequality between 1980 and 2010 after an unexpected permanent skill premium shock.
https://eig.org/dcieop Is the American Dream Alive or Dead? It Depends on Where You Look
CongressionalResearch 2020 US Real Wage Trends, 1979 to 2019
Real wages rose at the top of the distribution, whereas wages rose at lower rates or fell at the middle and bottom. Real (inflation-adjusted) wages at the 90th percentile increased over 1979 to 2019 for the workforce as a whole and across sex, race, and Hispanic ethnicity. However, at the 90th percentile, wage growth was much higher for White workers and lower for Black and Hispanic workers. By contrast, middle (50th percentile) and bottom (10th percentile) wages grew to a lesser degree (e.g., women) or declined in real terms (e.g., men). The gender wage gap narrowed, but other gaps did not. Real wages fell for workers with lower levels of educational attainment and rose for highly educated workers. Education and occupation patterns appear to be important to wage trends.
nature.com 17/4/2021 Historical effects of shocks on inequality: the great leveler revisited – Bas van Bavel & Marten Scheffer – Abstract – Inequality of wealth and its associated power has varied greatly over human history. It is often thought that the main levelers of inequality were natural disasters such as epidemics or earthquakes, and social turmoil such as wars and revolutions. Here we critically review evidence of the effects of such events on inequality from medieval times till the present. We show that in spite of the marked differences in character and direct impact of the shocks we consider, most historical disasters were rather followed by a widening of wealth gaps.” more GM copy here read original here
economicsfromthetopdown.com 4/2021 The Deep History of Human Inequality – Blair Fix – CasP
… “I’ll grant Graeber and Wengrow this evidence, but doubt that it changes the big picture of inequality. There seems little question that rampant despotism is a recent invention, and that in our prehistory there was far less inequality. What remains unknown is the exact timing of the transition. Was it recent and sharp, as depicted in Figure 1? Or was it deeper and smoother? ….
In a blog post called ‘The Z-Curve of Human Egalitarianism’, Turchin speculates about the deep history of human inequality. If our primate relatives are any indication, Turchin notes, our ancient ancestors may have been rather despotic:
We know that our closest relatives, the chimps and gorillas, live in fairly ‘despotic’ or inegalitarian societies. The chimps, for example, establish linear dominance hierarchies, in which alpha males get better food and greater access to females. We don’t know for sure whether human ancestors also lived in similarly inegalitarian societies, but it seems likely. (Peter Turchin, 2012)
Looking at our primate cousins, Turchin infers that human evolution has a ‘U-shaped curve of despotism’. As we split from gorillas and chimps, inequality declined, only to re-emerge later with civilization. Turchin leaves this deep history as a qualitative speculation. But I’m going to try to make things quantitative. The way I’ll do it is by looking at body size. …
As the degree of polygyny grows, male reproductive inequality explodes. Along the curve in Figure 5, I’ve labelled various primate species based on their observed degree of polygyny. Species that are monogamous, like the three-striped night money, have virtually no reproductive inequality. But as polygyny increases, reproductive inequality grows. In highly polygynous species, like the patas monkey, male reproductive inequality is extreme. ” …
voxeu.org 17/4/2021 Income inequality in the EU: General trends and policy implications – Stefano Filauro, Georg Fischer
Inequality in the EU has traditionally been analysed either at the individual country level or in terms of the average of country trends, but attention is now shifting to the analysis of inequality between all citizens across individual member states. Using income survey data, this column shows that that inequality among EU citizens is significantly lower than among US citizens, but slightly higher than in countries with established welfare models such as Australia and Japan. This and other findings may be useful in identifying the most effective policy path to address inequality at the EU level.
ft.com 10/4/2012 FT’s DeAnnJulius figures Biden’s taxes brave and bold
aeaweb.org 24/3/2021 The top 10 percent through the ages
The COVID-19 pandemic may be increasing the gap between the rich and the poor. But how does today’s changing inequality compare to the past?
In a paper in the Journal of Economic Literature, author Guido Alfani summarized the efforts of historians whose archival research has greatly increased economists’ knowledge of past wealth holdings. His work helps put today’s wealth polarization in perspective.
Alfani’s estimates from the Economic Inequality across Italy and Europe (EINITE) database show that from 1300 to 1800 inequality grew steadily almost everywhere in Europe, with the exception of the century-long decline triggered by the Black Death.
Figure 8 from his paper combines the estimates of the period 1300-1800 with estimates of inequality in postindustrial Europe.
The chart shows the average share of wealth held by the richest 10 percent in two separate regions of Europe. The black line is an average of the Sabaudian State (roughly modern Piedmont, Italy), the Florentine State, the Kingdom of Naples, and the Republic of Venice. The grey line is an average for France, the United Kingdom, and Sweden (sourced from Thomas Piketty’s Capital in the Twenty-First Century).
“Economic Inequality in Preindustrial Times: Europe and Beyond” appears in the March issue of the Journal of Economic Literature.
SRF-DOKyoutube 5/2021 Warum ist die Schweiz so reich? Von Einkommen, Vermögen und der blauen Banane
link.springer.com 10/2020 Toward Understanding the Nature of Inequality in India in Terms of Changing Perceptions on Its Sources and Solutions D. Narasimha Reddy
This paper enquires about changing perceptions of inequality in terms of its sources, consequences, and the solutions that have been thrown up by the emerging research findings on the issue. The conception of inequality is a dynamic one and has seen many transitions. This paper surveys this transition starting from Aristotle to Piketty and shows that the shift to multidimensionality of inequality, besides locating the issue in historical context in terms of social, political, and economic dimensions also calls for differentiation of types of inequality. The conventional wisdom that inequality is the result of the differences in skills and talents is questioned and other sources of inequality, mainly policies and politics, are brought into debate. The relationship of inequality with growth, poverty, and labor market outcomes is analyzed and it is shown that inequality is a constraint on growth and poverty reduction. If one were to simplify the problem of inequality into two dimensions, viz., inequality of opportunities and inequality of outcomes, perhaps there is no other country in the world other than India which faces the inequality of opportunities as deep, because of its centuries of history, and as wide because of its universal nature across all regions of the country. India is one of the very few countries which do not collect information on income through household surveys. This paper uses many alternative data sources for India and shows that there is a clear phenomenon of ‘hollowing out’ of the middle class. Fiscal policy, especially taxation, has an important role in reducing inequality. But, reliance on fiscal policy only may not be sufficient and there is a need for radical policy and political mobilization.
phys.org 3/2021 Ancient Maya houses show wealth inequality is tied to despotic governance
“Every society has some degree of wealth inequality—over history, across continents, there always seem to be some people who have more than others. But the amount of inequality differs—in some civilizations, a few powerful people have nearly all the wealth, whereas in others, it’s more spread out. In a new study in PLOS ONE, archaeologists examined the remains of houses in ancient Maya cities and compared them with other Mesoamerican societies; they found that the societies with the most wealth inequality were also the ones that had governments that concentrated power with a smaller number of people. “Differences in house size are a reflection of wealth inequality…” …”
The Guardian 2/2021 “The European Union is “not fit for purpose” in the task of reducing poverty in Europe and Brexit risks exacerbating the problem, the UN’s special envoy on human rights has said after a two-month investigation. Prof Olivier De Schutter, who was given access to senior officials across the bloc’s institutions, said the EU’s “constitutional framework” was driving a race to the bottom in corporation and income tax and salary levels. A lack of harmonisation on those issues, coupled with the 1997 stability and growth pact that imposes ceilings of 3% a year in national budget deficits and 60% of GDP on public debt, were major constraints on progress, he said.”
inomics.com 6/1/2021 We Stand Divided The Effects of Inequality on Society By William Pearse
” … such is the prevalence of inequality, it’s at risk of defining our time. … It’s only in the last 15 years, or so, that the full impact of these divisions have been assessed in earnest, and the array of inequality’s far-reaching effects laid bare. Some are not so easily identifiable, let alone quantifiable. And yet, an appreciation of them is essential if the true nature of inequality is to be understood. The reality beyond the money-oriented stats; inequality as experienced on-the-ground. Academics should be thanked for filling the void, as there now exists a robust body of research concerning the psychological effects of inequality, exploring, in particular, the trust it diminishes among individuals, and for institutions; the sense of community it erodes; and its links to growing political apathy. It’s these more insidious impacts, often obscured from popular view, that are of interest here – and it’s no exaggeration to say, they run deep.”
bloomberg.com 12/2020 Trickle-Down Economics Fails a Sophisticated Statistical Test Here’s the wizardry behind two scholars’ questioning of tax cuts for the rich. Peter Coy
eprints.lse 2020 The Economic Consequences of Major Tax Cuts for the Rich – by David Hope, Julian Limberg
Last week two British scholars released a study (PDF) concluding that trickle-down economics doesn’t work. Trickle-down theory says cutting taxes on rich people will encourage them to work and invest more, ultimately creating jobs and benefiting everyone. In reality, it increases inequality while not having “any significant effect on economic growth and unemployment,” wrote David Hope, a visiting fellow at the London School of Economics’ International Inequalities Institute, and Julian Limberg, a lecturer in political economy at King’s College London.
The study was widely covered, including in this Bloomberg story. But articles haven’t explored how it was that these two scholars managed to undermine a theory that, while questioned, has been used to justify every major tax cut on the rich in recent decades, including the Tax Cuts and Jobs Act of 2017, which remains President Trump’s most notable achievement.
Their fresh contribution? Statistical wizardry. Hope and Limberg didn’t compile fresh data or apply new economic theory. Rather, they used sophisticated (though established) statistical methods to look for patterns in the data that others had missed. That’s the way a lot of economics is done these days. If you browse through the 50 most recently posted working papers on the National Bureau of Economic Research website, you’ll see that virtually all of them include a substantial amount of statistical analysis.
Hope and Limberg happen to have doctorates in political science, but their study would be at home in an economics journal. Their first statistical step was to use what’s called Bayesian latent variable analysis to build a comprehensive measure of major tax cuts in 18 wealthy nations from 1965 to 2015. The concept behind the approach is to boil down many kinds of tax cuts—income tax cuts, property tax cuts, corporate tax cuts, etc.—to a single variable for easy comparison. A “latent” variable is one that can’t be observed but underlies others that can be observed.
To find the latent variable in the tax cut data, Hope and Limberg combined two techniques, the Monte Carlo method and the Markov Chain method. You can think of the Monte Carlo method as rolling a pair of dice over and over to see the likelihood of getting a six rather than calculating the probability of a six from combinatorics theory. The Markov Chain method is useful for situations in which where you land depends on where you just came from, as in the game of Chutes and Ladders. The physicists who did the calculations that produced the first atomic bomb in the 1940s fused those two methods into what’s called Markov Chain Monte Carlo.
The authors’ next step was to see how tax cuts affected income inequality. They realized that a simple statistical regression wouldn’t work for three reasons: The effect could change over time; a simple regression wouldn’t account for the trajectory of previous tax changes; and it wouldn’t account for confounding political and economic factors that might affect both tax cuts and “subsequent income inequality dynamics.”
“To deal with these challenges to causal identification,” they write, “we use a new econometric approach.” That approach, they say, “implements a nonparametric generalisation of the difference-in-differences indicator for panel data analysis.” That’s a mouthful, but the concept is fairly straightforward. A nonparametric test is one that can be carried out on data that doesn’t fit a neat bell curve, as the outcomes of coin flips or dice tossing do. A difference-in-differences analysis is a common way of eliminating causes of confusion. It looks at the difference over time in the income inequality of Country A, which had a big tax cut, and the difference over time in the inequality of Country B, which did not, and then looks at the difference between those two differences.
There are lots more statistical methods in the paper, but one deserves special mention because its history is so bizarre. The Mahalanobis distance method, which the authors use to compare tax-cut countries and non-tax-cut countries, was developed in the 1930s by Prasanta Chandra Mahalanobis from Bikrampur in Bengal, now part of Bangladesh. He used it to compare people’s skulls, which he studied with a device of his own invention called the profiloscope.
It’s common to warn in statistics that correlation doesn’t imply causation. But by combining the Mahalanobis distance technique, difference-in-differences analysis, and so on, Hope and Limberg were able to get at causation. Their bottom line:
“We find that major tax cuts for the rich push up income inequality, as measured by the top 1% share of pre-tax national income. The size of the effect is substantial: on average, each major tax cut results in a rise of 0.8 percentage points in top 1% share of pre-tax national income. The effect holds in both the short and medium term. Turning our attention to economic performance, we find no significant effects of major tax cuts for the rich. More specifically, the trajectories of real GDP per capita and the unemployment rate are unaffected by significant reductions in taxes on the rich in both the short and medium term.”
bbc.co.uk 2019 Inequality driving ‘deaths of despair’ By Sean Coughlan, David Brown
Widening inequalities in pay, health and opportunities in the UK are undermining trust in democracy, says an Institute for Fiscal Studies report. The think tank warns of runaway incomes for high earners but rises in “deaths of despair”, such as from addiction and suicide, among the poorest. It warns of risks to “centre-ground” politics from stagnating pay and divides in health and education. The report says such widening gaps are “making a mockery of democracy”.
The Institute for Fiscal Studies (IFS), one of the country’s leading research institutes, is launching what it says is the UK’s biggest analysis of inequality. That will be chaired by Nobel Prize-winning economist Prof Sir Angus Deaton. ‘Taking rather than making’
He said “people were troubled by inequality” more than at any time since the 1940s – and the impact was so serious that it suggested “democratic capitalism is broken” …”
nationalgeographic.org 2019 Water Inequality Lack of safe drinking water and adequate sanitation effects countries around the globe. – More than 70 percent of Earth’s surface is covered in water, yet lack of access to clean water is one of the most pressing challenges of our time. As of 2015, 29 percent of people globally suffer from lack of access to safely managed drinking water. More than double that number are at risk for water contamination from improper wastewater management. Poor water quality affects various aspects of society, from the spread of disease to crop growth to infant mortality. In some regions of the world, lack of sanitation infrastructure, water treatment facilities, or sanitary latrines lead to dire clean water crises.
theconversation.com 2019 How the language we use entrenches inequalities by Olivia Stevenson, Clare Stainthorp and Siobhan Morris
europarl.europa.eu-pdf 2015 QE – What are the Side Effects?
opendemocracy.net/ 6/11/2020 Replacing rentier capitalism is one of the defining challenges of our age – Two new books reveal how our economy is increasingly oriented around the interests of asset owners and increasingly uncaring about the fates of everyone else. Christine Berry
goodreads.com 2020 Rentier Capitalism: Who Owns the Economy, and Who Pays for It? 2020 by Brett Christophers
How did Britain s economy become a bastion of inequality? In this landmark book, the author of the acclaimed The New Enclosure provides a forensic examination and sweeping critique of early-twenty-first-century capitalism. Brett Christophers styles this as rentier capitalism , in which ownership of key types of scarce assets – such as land, intellectual property, natural resources, or digital platforms – is all-important and dominated by a few unfathomably wealthy companies and individuals: rentiers. If a small elite owns today s economy, everybody else foots the bill. Nowhere is this divergence starker, Christophers shows, than in the United Kingdom, where the prototypical ills of rentier capitalism – vast inequalities combined with entrenched economic stagnation – are on full display and have led the country inexorably to the precipice of Brexit. With profound lessons for other countries subject to rentier dominance, Christophers examination of the UK case is indispensable to those wanting not just to understand this insidious economic phenomenon but to overcome it. Frequently invoked but never previously analysed and illuminated in all its depth and variety, rentier capitalism is here laid bare for the first time.
goodreads.com 2020 Unions Renewed – by Alice Martin, Annie Quick
Unions face a once in a generation opportunity for renewal. Decades of decline have been compounded by a global elite who increasingly generate profit from financial engineering in ways that side-step labour and undermine the power of organised workers.
However, as this economic system begins to falter, there are signs of a renewed union movement emerging. Debt-laden firms – from supermarkets and nursery chains to outsourcing giants – are collapsing, and workers are organising to determine what comes next. Unionised bank cashiers are refusing to push predatory loans, teachers are striking against the exploitative housing market, and manufacturing workers are pooling redundancy pay to buy-out plants and become worker owners.
Alice Martin and Annie Quick argue that these are seeds of union renewal. To be effective in an age of finance, the union movement must set its ambitions beyond narrow wage-bargaining, and towards the financial systems that have infiltrated workplaces and impoverished communities. By doing so, they can play a critical role in ushering in a new, democratic economy.
No-one committed to economic justice can afford to miss this urgent, highly original book and its radical vision for unions.
blogs.imf.org 2020 Reduce Inequality To Create Opportunity – By Kristalina Georgieva – عربي, Español, 中文, Français, 日本語, Português, Русский
“Over the past decade, inequality has become one of the most complex and vexing challenges in the global economy. Inequality of opportunity. Inequality across generations. Inequality between women and men. And, of course, inequality of income and wealth . They are all present in our societies and—unfortunately— in many countries they are growing. The good news is we have tools to address these issues, provided we have the will to do so. Despite the political difficulty of implementing reforms the payoffs for growth and productivity are worth the effort.”
TAX
washingtonpost.com 2019 people-like-estate-tax-whole-lot-more-when-they-learn-how-wealth-is-distributed/
researchgate.pdf 2019 The Inequality Crisis – Edward Fullbrook, Jamie Morgan, Robert H. Wade, Jayati Ghosh et al
Piketty´s best-seller book has brought distributional issues to the fore of economic debate. This is perhaps its main contribution. Piketty centers his analysis on inequality, which, under capitalism, goes hand in hand with economic growth, according to his analysis. In my critical review of the book (Beker, 2014) I asked whether reduction of inequality or reduction of poverty should be our main concern, warning that the relationship between inequality and poverty is a rather complex one. In this paper I refer to poverty as absolute poverty, which I think is the concept that better let us analyze the situation in the low-income countries where most of the world´s population lives. The main conclusion is that because the relationship between inequality and poverty is not a simple one policies addressed to fight inequality have to take into consideration their side effects on poverty and vice versa. There is still a vast field open for research on this subject. An Addendum is devoted to the analysis of inequality and poverty after coronavirus.
bloomberg.com/2021-01-21/swedish-millionaires-on-the-rise-put-finance-minister-on-edge
rte.ie/news/ Irish billionaires’ wealth up €3bn since pandemic began -A new report from Oxfam claims the fortunes of Ireland’s billionaires has risen €3.3bn since the start of the Covid-19 pandemic. The Inequality Virus report also finds that the wealth of the planet’s ten richest men has grown by half a trillion dollars since Covid-19 began sweeping the globe.
ons.gov.uk/household income inequality 2020
jasonhickel 2019 how-not-to-measure-inequality
“There are two primary methods for measuring inequality – relative and absolute. In the discipline of economics, the former has become dominant by far. It is embodied in the standard Gini index, in the famous “elephant graph”, and in logarithmic distribution graphs … The dominance of the relative metric is interesting, because it has been wielded by powerful figures (Bill Gates, World Bank economists, etc) to insist that the world is becoming fairer even as the income gap between rich and poor, North and South continues to widen. … When we look at inequality from the perspective of the poor … it becomes clear that the relative metric is inappropriate as a tool for assessing distribution. Certainly if our objective is to end poverty, this is the conclusion we must draw, as an additional dollar going needlessly to the rich could have been used to reduce poverty, and yet was not. The absolute metric allows us to see this effect…”
voxeu.org/ 3/2021 Inequality benchmark incomes: A neglected tool for analysing income distributions by Laurence Roope
Nearly all income inequality measures are associated with a benchmark income or position, above which income gains increase inequality, and below which income gains decrease inequality. Looking at ten contrasting countries, this column finds that the benchmark incomes associated with the Gini coefficient ranged from the 62nd percentile to the 85th percentile. Knowledge of benchmark incomes could be used to predict the impact on inequality of subsidies to incomes in particular parts of the distribution, or to identify the richest person for whom it might be deemed fair to subsidise income financed by taxation and the poorest person for whom it is just and fair not to subsidise income.
raconteur.net Is property inheritance widening the wealth gap?
camelbackventures.org GENERATIONAL INHERITANCE: WE PASS DOWN MORE THAN WEALTH
bloomberg.com The Wealth Tax Is Going Global
thehill.com worlds-richest-people-added-18t-to-their-combined-wealth-in-2020
theguardian 2021 richest-1-have-almost-a-quarter-of-uk-wealth-study-claims
thetimes 2021 thumbs-up-for-a-wealth-tax-to-help-the-poor-just-dont-touch-the-family-home – Two-thirds of readers who supported a wealth tax said they believed the gap between rich and poor had become too great during the pandemic, and that a new levy was the best way to improve income equality – by James Coney
gailfosler.com Wealth Inequality Is Not Income Inequality By Edward Logan
To date, the debate over inequality has concentrated on income inequality and solutions such as increasing the marginal tax rates for high-income individuals or increasing taxes on estates at death. Freshman congresswoman Alexandria Ocasio-Cortez’s proposal to raise taxes on incomes of over $10 million to 70 percent reignites the debate on how to solve income inequality. Income inequality, however, is not the same as wealth inequality. Not all income is earned as salaries and wages, especially not for the rich. Senator Elizabeth Warren, recognizing that fact, has a different approach. She proposes a wealth tax on Americans with more than $50 million in assets, shifting the debate from income to wealth. When we tax assets, what are we really taxing? And is it not just a more opaque and less efficient way of taxing high incomes?
cnbc.com 2020 the-covid-recession-brought-extreme-inequality-in-2020
youtube 2020 Income Of The Poor Has Not Improved : Abhijit Banerjee On Malnutrition Report
ips-dc.org/ 2019 A Lesson from West Africa, a Global Inequality Ground Zero To end poverty at the bottom of our economic orders, we need to stop wealth from concentrating at the top. by Sam Pizzigati
conversableeconomist what-should-be-included-in-income
onlinelibrary.wiley.com 2019 Economic inequality and the rise of far‐right populism: A social psychological analysis – It is argued that far‐right (FR) populism in the West is fuelled by inequality – by Sarah Jay, Anatolia Batruch, Jolanda Jetten, Craig McGarty, Orla T. Muldoon
bloomberg 2020 don-t-just-blame-billionaires-for-wealth-inequality
newscientist.com 2018 The inequality delusion: Why we’ve got the wealth gap all wrong – A dislike of economic inequality supposedly runs deep in our psychology, but the evidence suggests that we actually prefer it that way – by Mark Sheskin
…”…Laboratory studies confirm that inequality aversion is a strong motivator of behaviour. For example, when people are asked to divide money among themselves and fellow subjects in experiments, they have a clear preference for equal distribution. This desire for equality is so powerful that people often choose to receive smaller but more equal rewards over larger but more unequal ones, and in other cases prefer surplus resources to be thrown away rather than distributed unequally. There is, however, a paradox. A separate body of research finds something quite different. When people are asked about the ideal distribution of wealth in their country rather than among a small group of individuals in the lab, they are actually quite relaxed about inequality.
In one influential study, for instance, researchers asked a representative sample of 5500 Americans about their ideal distribution of wealth in the US. On average, people said that the richest 20 per cent should hold 30 per cent of the wealth, and the bottom 20 per cent just 10 per cent. When forced to choose between high levels of inequality and complete equality, most chose the former.
The authors concluded that most Americans desire greater equality, but not to the extent of living in a completely equal society. Similar results have been found in many other countries, and in people from all points on the political spectrum. This body of research casts serious doubt on inequality aversion. In fact, my colleagues and I argue there is no evidence that people are actually bothered by economic inequality.
How can these apparently contradictory findings be reconciled? Is one wrong and the other right? No. We think they are both correct. They can be explained by a dislike not of inequality, but of something that is often confounded with it: economic unfairness. …”…
hbr.org/ 2019 Do People Tolerate Income Inequality? – by Lucia Macchia, Anke C. Plagnol, and Nattavudh Powdthavee
“With income inequality rising considerably around the world, understanding why income inequality persists has never been more important. By knowing that income disparities can breed strong incentives for people to participate in a race to the top of the income ladder, while at the same time turning a blind eye to its negative consequences, leaders may be more motivated to tackle inequalities and improve overall well-being.”
“Brazil is Synonymous with Inequality”: Aerial Images Reveal Wealth Gap in Brazilian Cities
https://www.nationalgeographic.co.uk/photography/2019/03/want-visualise-inequality-view-cities-above
https://bthechange.com/picturing-inequality-via-drone-views-around-the-world-5f21614359bc
advances.sciencemag.org Polarization under rising inequality and economic decline “Our model shows that under conditions of economic decline or increasing inequality, some members of the population benefit from adopting a risk-averse, in-group favoring strategy. Moreover, we show that such in-group polarization can spread rapidly to the whole population and persist even when the conditions that produced it have reversed.”
politico A better way to share the wealth
forbes 7 Myths About Income Inequality And How We Think About It
forbes To Fix Income Inequality, Stop Redefining It Out Of Existence
euractiv Inequalities of chances, income and capital are destroying society
cnbc 5 ways to fight wealth inequality, according to economists
ourworldindata Is income inequality rising around the world?
The Guardian Will coronavirus lead to fairer societies? Thomas Piketty explores the prospect
peoplespolicyproject Market Incomes Will Always Produce Hideous Inequality
https://voxeu.org/article/heterogeneous-employment-vulnerability-and-inequality-japan
https://jacobinmag.com/2020/04/david-brooks-inequality-family-conservatives-rich-poor
“How do commentators like David Brooks account for the undeniable rise in inequality? Not by analyzing the dynamics of wealth distribution and power that would help us address the problem, but by pointing the finger at the rest of us.”
https://tribunemag.co.uk/2021/01/britains-skyrocketing-income-inequality by Joe Bilsborough “In the 1980s, CEOs in Britain earned 20 times average worker salaries. Today, it is 120 times. This explosion in income inequality is not an accident – it is the direct result of policies pushed by our political and economic elites.”
cnbc.com/2021/01/26/oxfam-report-the-global-wealthy-are-main-drivers-of-climate-change.html
The Consequences of Inequality Can Be Fatal JULY 31, 2020 BY RICHARD D. WOLFF
https://www.thenews.com.pk/print/695508-consequences-of-inequality
https://tribunemag.co.uk/2021/01/britains-skyrocketing-income-inequality
https://www.scientificamerican.com/article/is-inequality-inevitable/
https://blog.usejournal.com/is-income-equality-possible-b1f54d295489
https://ourworldindata.org/income-inequality
https://voxeu.org/content/what-happening-global-inequality
