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Inequality

What to do (and not do) about inequality

 Jan 20th 2011 | from PRINT EDITIONT THE ECONOMIST

APART from being famous and influential, Hu Jintao, David Cameron, Warren Buffett and Dominique Strauss-Kahn do not obviously have a lot in common. So it tells you something about the breadth of global concerns about inequality that China’s president, Britain’s prime minister, America’s second-richest man and the head of the International Monetary Fund have all worried, loudly and publicly, about the dangers of a rising gap between the rich and the rest.
Mr Hu puts the reduction of income disparities, particularly between China’s urban elites and its rural poor, at the centre of his pledge to create a “harmonious society”. Mr Cameron has said that more unequal societies do worse “according to almost every quality-of-life indicator”. Mr Buffett has become a crusader for a higher inheritance tax, arguing that America risks an entrenched plutocracy without it. And Mr Strauss-Kahn argues for a new global growth model, claiming that gaping income gaps threaten social and economic stability. Many others seem to share their concerns. A new survey by the World Economic Forum, whose annual gathering of bigwigs in Davos begins on January 26th, says its members see widening economic disparities as one of the two main global risks over the next decade (alongside failings in global governance).
Equally muddled
The debate about inequality is an old one. But in the wake of a financial crisis that is widely blamed on Wall Street fat cats, from which the richest have rebounded fastest, and ahead of public-spending cuts that will hit the poor hardest, its tone has changed. For much of the past two decades the prevailing view among the world’s policy elite—call it the Davos consensus—was that inequality itself was less important than ensuring that those at the bottom were becoming better-off. Tony Blair, a Labour predecessor of Mr Cameron’s, embodied that attitude. His New Labour party was famously said to be “intensely relaxed” about the millions earned by David Beckham (a footballer) provided that child poverty fell.
Now the focus is on inequality itself, and its supposedly pernicious consequences. One strand of argument, epitomised by “The Spirit Level”, a book that caused a stir in Britain, suggests that countries with greater disparities of income fare worse on all manner of social indicators, from higher murder rates to lower life expectancy. A second thread revisits the macroeconomic consequences of income disparities. Several prominent economists now reckon that inequality was a root cause of the financial crisis: politicians tried to counter the growing gap between rich and poor by encouraging poorer folk to take on more credit (see article). A third argument is that inequality perverts politics, with Wall Street’s influence in Washington often cited as exhibit A of the unhealthy clout of a plutocratic elite.
If these arguments are right, there might be a case for some fairly radical responses, especially a greater focus on redistribution. In fact, much of the recent hand-wringing about widening inequality is based on sloppy thinking. The old Davos consensus of boosting growth and combating poverty is still a better guide to good policy. Rather than a sweeping assault on inequality itself, policymakers would do better to take on the market distortions that often lie behind the most galling income gaps, and which also impede economic growth.
Begin with the facts about inequality. Globally, the gap between the rich and the poor has actually been narrowing, as poorer countries are growing faster. Nor is there a monolithic trend within countries (see article). In Latin America, long home to the world’s most unequal societies, many countries—including the biggest, Brazil—have become a bit more equal, as governments have boosted the incomes of the poor with fast growth and an overhaul of public spending to improve the social safety-net (but not by raising tax rates for the rich).
The gap between rich and poor has risen in other emerging economies (notably China and India) as well as in many rich countries (especially America, but also in places with a reputation for being more egalitarian, such as Germany). But the reasons for this differ. In China inequality has a lot to do with the hukou system of residency permits, which limits internal migration to the towns; by some measures inequality has peaked as rural labour becomes more scarce. In America income inequality began to widen in the 1980s largely because the poor fell behind those in the middle. More recently, the shift has been overwhelmingly due to a rise in the share of income going to the very top—the highest 1% of earners and above—particularly those working in the financial sector. Many Americans are seeing their living standards stagnate, but the gap between most of them has not changed all that much.
The links between inequality and the ills attributed to it are often weak. For instance, some of the findings in “The Spirit Level” were distorted by outliers: strip out America’s high murder rate (which many would blame on guns, not inequality) or Japan’s longevity (diet, not equality), and flatter societies no longer look so much healthier. As for the mooted link to the financial crisis, the timing is dodgy: America’s poor fell behind in the 1980s, the credit bubble took off two decades later.
Message to Davos
These nuances suggest that rather than fretting about inequality itself, policymakers need to differentiate between its causes and focus on ways to increase social mobility. A global market offers far bigger returns to those at the top of their game, be they authors, lawyers or fund managers. Modern technology favours the skilled. These economic changes are themselves often reinforced by social ones: educated men now tend to marry educated women. The result of all this, as our special report this week shows, is the rise of a global elite.
At heart, this is a meritocratic process; but not always. Rules and institutions are often rigged in ways that limit competition and favour insiders at the expense both of growth and equality. The rules can be blatantly unfair: witness China’s limits to migration, which keep the poor in the countryside. Or they can involve more subtle distortions: look at the way that powerful teachers’ unions have stopped poorer Americans getting a good education, or the implicit “too big to fail” system that encouraged bankers to be reckless and left the rest with the tab. These are very different problems, but they all lead to wider inequality, fewer rungs in the ladder and lower growth.
Viewed from this perspective, the right way to combat inequality and increase mobility is clear. First, governments need to keep their focus on pushing up the bottom and middle rather than dragging down the top: investing in (and removing barriers to) education, abolishing rules that prevent the able from getting ahead and refocusing government spending on those that need it most. Oddly, the urgency of these kinds of reform is greatest in rich countries, where prospects for the less-skilled are stagnant or falling. Second, governments should get rid of rigged rules and subsidies that favour specific industries or insiders. Forcing banks to hold more capital and pay for their implicit government safety-net is the best way to slim Wall Street’s chubbier felines. In the emerging world there should be a far more vigorous assault on monopolies and a renewed commitment to reducing global trade barriers—for nothing boosts competition and loosens social barriers better than freer commerce.
Such reforms would not narrow all income disparities: in a freer world skill and intellect would still be rewarded, in some cases magnificently well. But the reforms would strike at the most pernicious, unfair sorts of income disparity and allow more people to move upwards. They would also boost growth and leave the world economy more stable. If the Davos elites are worried about the gap between the rich and the rest, this is the route they should follow.






Unos 57 millones de jóvenes están desempleados o sin escuela


Claudia Herrera y Juan Antonio Zúñiga
Periódico La Jornada

Martes 23 de marzo de 2010, p. 27
Cancún, QR, 22 de marzo. Los países de América Latina y el Caribe se encaminan a alcanzar este año un avance cercano a 4.5 por ciento del producto interno bruto regional, pero “sigue siendo la zona más inequitativa del planeta”, contrastó el presidente del Banco Interamericano de Desarrollo (BID), Luis Alberto Moreno.
Éste es “un hecho que no sólo nos avergüenza, sino que afecta nuestra capacidad de progresar, pues será imposible lograr el desarrollo si muchos tienen poco y pocos tiene mucho”, advirtió al comenzar la 51 reunión de accionistas de este organismo.
En tanto, el secretario de Hacienda, Ernesto Cordero Arroyo, planteó en su calidad de presidente de la asamblea de gobernadores del BID que desde mediados del año pasado “se observa una tendencia clara hacia la recuperación económica en América Latina y el Caribe, impulsada por un mayor dinamismo de las exportaciones no petroleras, el incremento en la competitividad y el impulso en la demanda interna”.
Esto, sostuvo, “se ha traducido, poco a poco, en una recuperación del empleo, en la expansión del crédito, la inversión en infraestructura y la implementación de reformas estructurales”.
Durante su intervención en la sesión inaugural, el presidente del BID abordó la realidad económica y social de la región desde una perspectiva dual, en la que abundaron los claroscuros.
Por un lado afirmó que América Latina y el Caribe mostraron mayor capacidad de resistencia a la recesión mundial que en crisis anteriores, lo cual demostró que “somos más fuertes que antes”. Pero por otro lamentó que “57 millones de jóvenes estén desempleados, subempleados o fuera de las corrientes escolares” en esta región.
En los claros sostuvo que, a diferencia de lo ocurrido en otras latitudes, durante esta recesión “no hubo crisis bancarias ni mucho menos cambiarias” en la zona, como sucedió en épocas pasadas. Esto se debió a que “tanto la regulación financiera como la prudencia en el manejo de la deuda pública, y un adecuado nivel de las reservas de divisas, impidieron contagios indeseables”, dijo.
Pero los oscuros matizaron el optimismo de Luis Alberto Moreno. Ninguna tarea es más urgente, enfatizó, “que la lucha contra la pobreza, que afecta a casi un tercio de los latinoamericanos y caribeños, en la cual retrocedimos el año pasado, pues casi 8 millones de personas engrosaron la lista, después de que en el lustro previo unos 50 millones hubieran salido de ella”.
El presidente del BID hizo diversas puntualizaciones: “tampoco avanzaremos rápido si se mantienen la desigualdades de género que afectan a la población femenina”; “es necesario arrancar de las garras de la pobreza a 200 millones de latinoamericanos y caribeños que no tienen un techo digno, un trabajo formal o una alimentación adecuada”; “hoy, 46 millones de niñas y niños no tienen acceso a la educación temprana”; “un sondeo reciente reveló que 40 por ciento de los residentes en las principales ciudades (de la región) han sido víctimas de algún delito en los pasados 12 meses”.
Por su parte, Cordero Arroyo reconoció que “la recesión económica significó un retroceso en muchas áreas en las que habíamos estado avanzando”, y advirtió que “recuperar el terreno perdido tomará tiempo”.
Pero mantuvo el tono que ha caracterizado sus intervenciones de los últimos días. “Tenemos la enorme oportunidad de tomar las decisiones que nos permitan, no solamente recuperar el terreno perdido por el choque financiero internacional y los desastres naturales, sino incrementar la competitividad y desarrollar el potencial económico de nuestras economías y de toda la región”, y cerró con estas palabras la sesión inaugural de la 51 asamblea anual del BID.


“ARGENTINA ES UNO DE LOS PAÍSES DE LA REGIÓN QUE MÁS REDUJERON LA DESIGUALDAD Y LA POBREZA”

ENTREVISTA EXCLUSIVA ALICIA BARCENA Secretaria ejecutiva de la Cepal
La mexicana Alicia Bárcena recuperó la mística y concepción originaria de la Cepal, dejando atrás una etapa tibia de ese organismo regional en relación con la corriente neoliberal dominante en las décadas del ’80 y ’90. Destaca el legado de los gobiernos progresistas de América latina. Rescata la idea de construir un pensamiento propio, con densidad nacional. Defiende los estímulos fiscales para enfrentar la crisis. Propone la diversificación productiva para superar la estructura económica basada en materias primas. Se manifiesta a favor de los controles de capitales especulativos. Y elogia con énfasis el proceso económico iniciado en el país en 2003.

Por Tomás Lukin (Cash, 19 diciembre 2010)