The Inequality That Matters

Kerry Howley | July 17, 2008

Global inequality is declining:

Linked to the current mood, commentators often depict an embattled and shrinking middle class, with sharply rising financial inequality. However, globally, this is simply not true. One of the most startlingly positive phenomena for many generations continues to unfold around the world. We are in the middle of an explosion of the world’s middle class.

As two of my colleagues, Dominic Wilson and Raluca Dragusanu, showed in a paper Goldman Sachs published last week (The Expanding Middle: The Exploding World Middle Class and Falling Global Inequality), about 70m people a year globally are entering this wealth group, as defined by those on incomes of between $6,000 and $30,000 (€3,800-€19,000, £3,900-£15,000), in purchasing power parity terms.

The phenomenon may continue for the next 20 years, with this global middle accelerating to 90m a year by 2030. If this happens, an astonishing 2bn people will have joined the ranks of the middle class. This demonstrates that, contrary to widespread opinion, global inequality is declining significantly, not increasing.

Andrew Leonard of Salon's excellent How the World Works says Americans don't care because "localism always prevails."

Working class voters in Ohio, for example, are unlikely to care that the world is getting richer, when in their own country, the concentration of wealth is progressively skewed towards the top end of the spectrum. For global inequality trends to make any kind of psychological difference to the psyche of those "in the west" a sense of a shared global identity is required. But we don't have that. We are riven by nationalist, cultural, and racial identity politics. We do not see ourselves as one world.

Sure, localism often trumps globalism, but who gets to define the boundaries of "local"? Coalitional solidarities are malleable. My great grandparents thought of themselves as Neapolitan, and had they stayed in Italy, they would have come to see themselves as Italian. Their great great grandchildren might well have called themselves European. Christian minorities in Northern Burma don't willingly identify with any particular nation state, but they do identify with a global religious network. The hypothetical Ohio voter probably has no way to relate to the Indian middle class right now, and he isn't going to vote differently because Goldman Sachs says standards of living are rising in China. But there is nothing necessary or permanent about that.

Comments

Naga Sadow|7.17.08 @ 12:44PM|#

Most of the people I know think economics is a zero sum game. They seem to think wealth is transferred, never created. Good luck reaching working class voters with the "good" news.

|7.17.08 @ 12:49PM|#

I can't remember who said it, but: "One of the constants of history is that the middle class is, always and everywhere, rising."

Orange Line Special|7.17.08 @ 12:52PM|#

One World, One People!

But, comrades, we must start with the bourgeoisie in the U.S. first. They must be trained to think of themselves as part of a much larger community. Only then can our true plans be revealed.

Josh|7.17.08 @ 12:52PM|#

Of all the different kinds of inequality in the world, the only kind anybody cares about is the economic kind. Funny how noboby wants a world like the one Harrison Bergeron lived in, where all forms of inequality were fixed through the Handicapper General, but using the arm of the government to fix income inequality is still seen as noble.

|7.17.08 @ 1:00PM|#

Funny how noboby wants a world like the one Harrison Bergeron lived in, where all forms of inequality were fixed through the Handicapper General

You've never been to a grade school track meet where everyone got the same ribbon. That's exactly what some want, they just never read the story. They spent college reading Beloved for the ninth fucking time.

|7.17.08 @ 1:09PM|#

Oh -- here's where lonewacko is hanging out.
Come on over to the Brent Tracts thread. We need you to fight Satan. (I suspect he's a wetback - and teh gay to boot.)

Conservationist|7.17.08 @ 1:17PM|#

Wealth is created, but since it is dependent on consumer purchases, it is also finite.

That's why we had to globalize, to expand to new countries for workers and customers.

It's a giant ponzi scheme. Localization makes good sense: I don't invade Iraq, I also don't care if they starve.

Episiarch|7.17.08 @ 1:21PM|#

We need you to fight Satan. (I suspect he's a wetback - and teh gay to boot.)

According to Matt Stone and Trey Parker, he is in fact teh gey but is a redskin.

Federal Dog|7.17.08 @ 1:26PM|#

"Funny how noboby wants a world like the one Harrison Bergeron lived in, where all forms of inequality were fixed through the Handicapper General"


Please. College faculty these days are all "handicappers general." As Sugar Free notes, this is an essential part of education now, from grade school through grad school.

squarooticus|7.17.08 @ 1:36PM|#

While it initially sounds great that global inequality is falling, it sounds less great when you consider that the debt built up by the US over the last 40 years is going to result in much tighter living standards for Americans as the dollar continues to drop relative to other fiat currencies, with all the consequences of that falling share of the world's wealth (lower-paying, lower-skill jobs; fewer economic opportunities; more crime; and increased socialism as the pig-headed answer to the problems caused by the previous three).

When you do the math, no other solution is possible: dollar holders are going to take it in the chin, and the vast majority of dollar holders are American citizens.

One thing to keep in mind is that inflation itself-simply defined as an increase in the money supply-while the ultimate cause of the difficulties we face, is actually not the immediate problem here: the Federal Reserve has been inflating the currency steadily for decades, which hasn't caused dollar devaluation relative to other currencies because there has been sufficient demand for those dollars to offset the increased number of them.

The problem comes when those dollars we printed suddenly are in much lower demand, as a result of a combination of shifting global economic and political power, a recently-increased rate of inflation, and a slowly-dawning consciousness among foreign dollar holders that the interest on Treasury bonds realistically can be paid for only through more inflation rather than taxes. That is the situation that has been slowly brewing for the last 6 years and that is about to get a lot worse.

|7.17.08 @ 1:39PM|#

"How The World Works" is excellent?

I'm amazed Sullivan does not use the phrase "free market fundamentalist" in the article linked.

But I do see he put "free market" in scare quotes.

\"Free Market\"|7.17.08 @ 1:41PM|#

Boo!

Alan Vanneman|7.17.08 @ 1:43PM|#

Dunno if things are as dire as squarooticus predicts. People in the Rust Belt are upset because they used to be one of the wealthiest areas of the country and now are dropping to average or even below.

Michigan is really a special case, getting near depression levels while most of the rest of the country is scarcely in a recession.

By and large, the Rust Belt states are the only big states that are in play during a presidential election (because they're mad about their economic decline) which means they get lots of attention, though not much real relief, because the best thing many of those people can do is move to high-growth areas.

|7.17.08 @ 1:44PM|#

Sorry, that should have read:

He put "free trade" in scare quotes.

|7.17.08 @ 2:06PM|#

Naga Sadow | July 17, 2008, 12:44pm | #
Most of the people I know think economics is a zero sum game. They seem to think wealth is transferred, never created.

Speak and they shall appear!!

Orange Line Special | July 17, 2008, 12:52pm | #
One World, One People!

But, comrades, we must start with the bourgeoisie in the U.S. first. They must be trained to think of themselves as part of a much larger community. Only then can our true plans be revealed.

Too funny!

Cool Cal|7.17.08 @ 2:06PM|#

Technically (though the salary ranges are so very vague and overlapping) I count as lower-middle class, myself (though young and hopefully upwardly mobile). Full Disclosure ... I own shares in Tata Motors, the Indian car company that's set to produce the world's cheapest car for the world's largest growing middle class. So in this sense global income equality will serve me just fine.

Josh|7.17.08 @ 2:15PM|#

Please. College faculty these days are all "handicappers general." As Sugar Free notes, this is an essential part of education now, from grade school through grad school.

Hardly. Count how many ugly kids get the lead role in the school play some time. If everybody gets the same ribbon, it's only because the teachers link athletic competition with free market competition (and this isn't a particularly hard link to make, where who wins and who loses are so easily quantifiable).

A professor might go on an off-topic rant about how you don't need money to be happy, and what really matters is your friends, family or hippy commune. Rarely do they consider that we are not all equally beautiful, equally popular, equally respected, equally funny, or any of the other things that define a person besides their wealth.

Josh|7.17.08 @ 2:16PM|#

Michigan is really a special case, getting near depression levels while most of the rest of the country is scarcely in a recession.

Obviously Allah hates Michigan.

Naga Sadow|7.17.08 @ 2:24PM|#

Josh,

Don't you mean Krishna?

|7.17.08 @ 2:28PM|#

Most of the people I know think economics is a zero sum game. They seem to think wealth is transferred, never created. Good luck reaching working class voters with the "good" news.

Sadly, most Ron Paul supporters I've met in the meetups think exactly the same thing. EVEN those who profess that they love Mises, Rothbard and Rockwell. Huh? I can understand unwashed Obama/McCain supporters bemoaning the fate of the middle class, but it drives me nuts when self-professed libertarians complain that "our jobs are going overseas."

The biggest hurdle on the way to a free society isn't neocon warfarism or cosmo welfarism, but old fashioned economic ignorance. Educate the public on economics and they'll see the light on everything else.

Federal Dog|7.17.08 @ 2:30PM|#

"Rarely do they consider that we are not all equally beautiful, equally popular, equally respected, equally funny, or any of the other things that define a person besides their wealth."


That's not what I am saying. I am saying that they react to obvious inequalities in all of those areas by handicapping those they consider unfairly advantaged to raze everyone to the same level. I have dealt with this resentment for decades. Ask an academic sometime about excellence or merit and see how that person reacts. He's apt to deny that the concepts even exist.

Federal Dog|7.17.08 @ 2:33PM|#

I'd better immediately clarify: When I say that I have dealt with the issue for decades, I mean as faculty trying to help students excel.

Elitist Prick|7.17.08 @ 2:37PM|#

How can I gloat about my good fortunes if inequality disappears?

squarooticus|7.17.08 @ 2:39PM|#

Sadly, most Ron Paul supporters I've met in the meetups think exactly the same thing.

You need to be careful to distinguish between people who are truly economically ignorant and those who realize that even though total wealth is not static, there do exist places with negative growth that have negative growth for a reason.

The notion that wealth destruction or outflow might occur in the US as a result of macroeconomic and political forces is not a priori false. The notion that "Surely it can't happen here!" falls under the "wishful thinking" and "permabull" categories, and is just as irrational as screaming "The sky is falling!" for 30 years straight.

Cool Cal|7.17.08 @ 2:42PM|#

Brandy ---

Thank you. I've always said the same thing. Even a basic understanding of economics (101, that is) can clear away so much of the murky ideology-driven pabulum that people who actually do come out of higher education are imbued with. I suppose this is blowback from the culture war of the sixties and its victors; crypto-socialist (or as Ms. Coulter dubbed them "Pinko") professors packing our universities teaching classes on Neo-Marxist Post-Modern Expressionist Woodshop ... sorry.

P1t|7.17.08 @ 2:50PM|#

"Sadly, most Ron Paul supporters I've met in the meetups think exactly the same thing. EVEN those who profess that they love Mises, Rothbard and Rockwell. Huh? I can understand unwashed Obama/McCain supporters bemoaning the fate of the middle class, but it drives me nuts when self-professed libertarians complain that "our jobs are going overseas.""

Well, consider you had some neo-nazis and those who believed the US gvt was involved in the 9/11 attacks supporting Ron Paul, it is not all that shocking some people would believe in economic fallacies. Besides, how many of them have actually read any of those economists before supporting Ron Paul? I never heard of Hayek or Mises until like last year. The only one I remember from high school was Keynes. For an intro to economics, may I suggest "Principles of Economics" by Carl Menger? It is old, but relevant. You can get it for free to, on mises.org (I know, it sounds like I am advertizing a website, but it is educational).

Bay Area National Anarchist|7.17.08 @ 2:53PM|#

"Sure, localism often trumps globalism, but who gets to define the boundaries of "local"?"

Easy: the locals.

|7.17.08 @ 3:16PM|#

While there are surely some ron paul supporters who express much concern about "losing our jobs to foreigners"....not all of them are xenophobes or out of work auto plant workers.

Many understand that if you have a developing world that it is unrealistic to expect relatively unskilled american workers to continue making 10 times the wage of a foreign worker with the same skills.

However, the US government helps make this problem worse when overburdensome taxes and regulations increase the relative costs of American workers even more.

It is especially discouraging to blue collar americans to see the welfare/healthcare sandbags applied to the cost of their wages(making them less employable as far as GM is concerned)...while illegal aliens are able to get around the system and then still collect welfare or use the tax funded schools. I personally love mexicans(some of my best friends are mexican) and illegal aliens and I do support the underground economy. That doesn't mean that Milton Friedman was an idiot when he stated that a welfare state and open borders don't work well together.

"xenophobic hick" attacks coming in 3...2...

DannyK|7.17.08 @ 3:16PM|#

So... let me paraphrase. We're supposed to surrender our "localist" preferences that our home towns not dry up and blow away because overall, the system is working to raise millions of people (people in different countries, whom we've never met) out of poverty. Meanwhile, we can see some of our fellow countrymen getting richer and richer, but again, not to worry, because some poor people in a different country are benefiting from all this.

Wow.

This is probably the least appealing political-economic argument I've every seen on the Internet, and that's saying something. How exactly is this supposed to work in a democracy? And what happened to the primacy of enlightened self-interest?

Mike Laursen|7.17.08 @ 3:20PM|#

Hey, Lonewacko, which do you think a person should care more about -- extended family or one's nation-state? I'm askin' because by marriage a big chunk of my extended family are folks in Hong Kong.

|7.17.08 @ 3:29PM|#

I actually am encouraged when I think that there is a rising middle class in China, India and elsewhere....the discouraging part comes from where I agree with squarerooticus. Any bad things we see happening in the US now will be blamed on "free markets" and we will get ever more socialism proposals from the establishment. The mere fact that the media, educational and political elite are so uniformly proposing nothing but socialism/facism in response to every new problem is downright scary(becuase I don't believe so much stupidty can be an accident)

Maybe with the rising middle classes elsewhere humanity will see through these lies and demand individual liberties and stand up to socialism. Mises.org is a international treasure in this regard.

|7.17.08 @ 3:42PM|#

Globalization is a manifestation of the natural division of labor and the advancement of ocean going steam ships (100 years ago).

The proponents of central planning interfered with the natural division of labor, and we free market proponents have been trying to overcome that interference.

Market price conveys more information about market supply and demand than any central planning commitee can figure.

How many sixteen penny nails shall we allow to be manufactured this year, commrade? (think about it)

Josh|7.17.08 @ 4:03PM|#

That's not what I am saying. I am saying that they react to obvious inequalities in all of those areas by handicapping those they consider unfairly advantaged to raze everyone to the same level.

That's not what I was saying either, so I guess that's where the misunderstanding is. That the "obvious inequalities" aren't so obvious to everyone in what I was driving at.

|7.17.08 @ 4:04PM|#

Reason, you should have explained these "purchasing power parity terms" instead of glossing over it like you don't know what you're talking about. If it makes you feel better, I don't understand it either, at least in the vague way you're talking about it... then again, I'm not a paid journalist editorializing on geopolitical economics.

|7.17.08 @ 4:15PM|#

Purchasing Power Parity (PPP) is a concept that says you should make money count for more where it buys more. Foreign exchange rates aren't a perfect reflection of what your money can buy overseas. Adjusting the value of money according to the stuff normal people actually buy in their day-to-day lives gives a better impression of someone's standard of living in a foreign country than taking their monetary income and applying the current exchange rate to it.

PPP is in many ways like an international "cost of living" adjustment. Just as goods are cheaper in some parts of the US (like Des Moines) and more expensive in others (like Manhattan), many things are cheaper in poorer countries than in richer ones.

|7.17.08 @ 4:22PM|#

The libertarian philosophy of wealth is that I *as an individual* have the responsibility to look after the well-being of me and mine. So long as I do not commit crimes of violence, fraud, theft, etc., the libertarian ethic is that I am not only free to but supposed to go for whatever gusto I can grab. Everything is supposed to balance out among the multiple gusto-grabbers. According to this libertarian ethic, the last thing I want to do is develop some kind of "class consciousness" that substitutes class "success" for my own personal success. To do so robs me of success and, furthermore, damages the world in general, because it provides a disincentive for me to strive to my fullest.

But instead of dissatisfaction at running into an economic wall, I am to take comfort in a collective increase in a "world middle class"? Hrm, advocating collectivism. Collectivism is hardly libertarian. However, this kind of argument would be something I would expect from a plutocrat who is trying to prevent some rather upset people from figuring out ways to redivide the pie in their own favor.

Josh|7.17.08 @ 4:33PM|#

What is unlibertarian about pointing out the facts?

|7.17.08 @ 4:39PM|#

It's true that there are similarities between libertarian universalism and Marxism. Neither are explicitly nationalist. It's not that interesting a point.

|7.17.08 @ 5:07PM|#

This made it to the Fark front page, and the thread has more dumb than you'd expect. Where exactly do people get the idea that the middle class is disappearing, anyway? Is it some retarded Dobbsean fantasy, or is there something to it?

|7.17.08 @ 5:12PM|#

Yes the WORLD middle class is probably rising but is the middle class in the United States rising, static, or falling. Remember Americans are the least likely, in the OECD, to rise above their economic station in life.

|7.17.08 @ 5:19PM|#

Interesting how this article shows only one thing ... that the dollar lost more than 50% of its value since 2002. And getting into the so called 'middle-class' does not necessarily means being wealthier. Look at Europe for instance, since 2002 about 100% of the working class got richer (in dollars); nevertheless more and more people are struggling to barely pay their rent and eat.
This article is a moo point.

|7.17.08 @ 5:26PM|#

Where exactly do people get the idea that the middle class is disappearing, anyway?

From politicians and useful idiots who hope to gain power by peddling this myth.

This article is a moo point.

A slow day for RC'z Law until now.

Jhutt|7.17.08 @ 6:01PM|#

This is just more reactionary crap.

The sad thing is that people will believe this kind of nonsense.

Communism is the only way.

Joey Tribbiani|7.17.08 @ 6:29PM|#

"Yeah, it's like a cow's opinion. It just doesn't matter. It's moo."

Tim|7.17.08 @ 11:21PM|#

I haven't had a chance to read all the previous comments but I will say that there is a massive difference between the US and Global middle class. There is no doubt that globally, we are making progress in middle class growth, but domestically in the US, that same class is shrinking. I am a huge supporter of a global increase in wealth but I think the author's point is a bit off base with regard to what the common media refer to as a decline in the middle class. The US middle class is absolutely declining while the global middle class is absolutely increasing. We seem to be arguing about two different subjects here...

|7.18.08 @ 12:16AM|#

"as defined by those on incomes of between $6,000 and $30,000"

Yeah, poor choice of ranges. i too can torture numbers enough to make them say anything.

Next time choose a range which suits the environment. The U.S. is not a third world country. Inflation is up, job creation is down.
A spade is a spade even if you have a blindfold on.

|7.18.08 @ 9:27AM|#

DannyK | July 17, 2008, 3:16pm | #
So... let me paraphrase. We're supposed to surrender our "localist" preferences that our home towns not dry up and blow away because overall, the system is working to raise millions of people (people in different countries, whom we've never met) out of poverty. Meanwhile, we can see some of our fellow countrymen getting richer and richer, but again, not to worry, because some poor people in a different country are benefiting from all this.

Wow.

This is probably the least appealing political-economic argument I've every seen on the Internet, and that's saying something. How exactly is this supposed to work in a democracy? And what happened to the primacy of enlightened self-interest?

Perhaps you should realize that the United States is not a democracy. We are a republic. Nowhere in the founding documents is the word democracy found. There's a reason for that. Majority rule does not equate to liberty.

The amount of wealth envy on this board is deplorable. Why are so many people upset that someone else worked harder and earned more than them? America is the only country in the world where everyone has an equal opportunity to advance through the "classes". If you are unhappy with where your station in life is, then do something about it! There's nothing stopping you except yourself.

Our liberties are individual freedoms. When you become so jealous as to wish those who work and earn more should give you some of their wealth, then the whole concept of freedom is lost. You are wanting to take someone else's property because you don't have it. How is that American? How can you live with such bitterness and still call yourself a freedom lover?

|7.18.08 @ 9:45AM|#

The left claims the PIE of wealth is shrinking. This is America, you make your own pie as big as you want. Many are finding that out. Why does government feel the need to get in the way.

|7.18.08 @ 10:34AM|#

"Who is John Galt"? And where, oh, where is Ragnar Danneskjold when we need him?

Only going to a complete lassiez faire capitalism will save us from the socialists. The FairTax might be a good start.

|7.18.08 @ 1:33PM|#

""Perhaps you should realize that the United States is not a democracy. We are a republic. Nowhere in the founding documents is the word democracy found. There's a reason for that. Majority rule does not equate to liberty.

The amount of wealth envy on this board is deplorable. Why are so many people upset that someone else worked harder and earned more than them? America is the only country in the world where everyone has an equal opportunity to advance through the "classes". If you are unhappy with where your station in life is, then do something about it! There's nothing stopping you except yourself.
Our liberties are individual freedoms. When you become so jealous as to wish those who work and earn more should give you some of their wealth, then the whole concept of freedom is lost. You are wanting to take someone else's property because you don't have it. How is that American? How can you live with such bitterness and still call yourself a freedom lover?""

WOWWWWW This is got to be the most well thought out post I have seen in a long time. Thank you! There is

Why is it so difficult for people to get off of their lazy azzes and get an education, and get to work? NO ONE.. not even "da man" is holding you back. As this poster said it is YOU holding YOURSELF back. NO ONE ELSE!

STOP BLAMING OTHERS!

|7.18.08 @ 3:42PM|#

Our Constitution defines the boundaries of "localism." We are a sovereign nation and precluded from being part of a world order. Furthermore, it is our tax dollars (that our government gives away in violation of our Constitution) that are raising the world's poor up to middle class. Why would we not be concerned about that?

|7.18.08 @ 3:57PM|#

Great news if it is true, but is this only people rising into these ranks, and not wealthier persons falling down? The article isn't very clear either way.
___

Besides, liberals don't give a rats ass if China is getting wealthier. The question is, can Walmart cashiers afford a summer home, or wallow in poverty with a sub 43" tv?

GILMORE|7.18.08 @ 7:23PM|#

Theresa Jones | July 18, 2008, 3:42pm | #

Letting people emigrate is not a 'world order'

The growing wealth of the rest of the world is not a net fuck in the ass to the USA. We simply have more potential customers.

The gov throws money around for lots of stupid things, but there is no policy of enriching others at our own expense. We do it accidentally all the time. but not through liberalizing trade. An auto worker might feel otherwise, but the US failed to build a better Ford, and so it goes. We'd be a richer world (and US) overall if we simply dropped tarrifs, opened borders for employment needs, simplified the tax code (and lowered the burden), and stopped associating patriotism with economic self destruction. Open trade and allowing people to work here doesnt dilute "american culture". wealth disparity isnt a matter of money shifting from the poor up to the rich or vice versa= its when changes in the macro environment happen faster than the economy adapts. Manufacturing went overseas because they got better and cheaper and we got more taxed and regulated. We became a services and information and innovation economy. The demand shifted to labor that was intellect-heavy, highly adaptive /innovative. Suddenly we need millions of people specializing in math, science, engineering, medical research, etc to make our economy move. Companies that adapt explode and grow horrendous amounts of wealth, pouring down among the populations who work in these areas, the communities they live in, the companies serving that group. The new money is spent on emerging products and services targeting them. These markets grow while older ones servicing declining groups peter out. So new sectors grow, and others wither. The total size of the economy gets larger, but many are fucked by their circumstances and personal choices and abilities. Some get crazy rich by proportion, and others go on the dole. Its not new, and it's not going to change. Any debate about "globalization" or "isolationism" is mostly a waste of breath. The same forces apply, and ignoring external realities isn't going to help anyone. The markets are what they are, and growing the sum total of wealth in the world is to everyone's benefit. Proportionally, many of the poorest in the US are so much "richer" by comparison to the rest of the world that the simplistic notions we have of "class" in the developed world is a total anachronism. Any time I hear Americans bitching about "middle class" issues I think of the historical definition =

"as distinct from both the titled nobility and the landed gentry on the one hand and the agricultural and (increasingly) industrial labourers on the other"

…And wonder what the fuck they mean, given we don't really have either of the above social strata poles anymore.
I think they might mean, "the wide spectrum of people who can afford computers and SUVs and occasionally wear GAP-produced clothes" or something.

Sorry for the screed, i've been working 70hr weeks and cant regularly post "lonewacko is a fag" anymore, so this is like compensatory in a way

DannyK|7.18.08 @ 7:54PM|#

@Libertarian:

Our liberties are individual freedoms. When you become so jealous as to wish those who work and earn more should give you some of their wealth, then the whole concept of freedom is lost. You are wanting to take someone else's property because you don't have it. How is that American? How can you live with such bitterness and still call yourself a freedom lover?


Hey, you called me bitter! I get to drink now! Or something.

I think you should re-read my post. I wasn't arguing with the idea of globalization per se, I was arguing that Ms. Howley's article is a crappy defense of globalization.