Populism

Thursday, 26 October 2017 3:41 PM

• Left unresolved, income inequality may lead to "losers" from

globalization expressing discontent through the ballot box
○ Economic populism: blame trade for lost jobs (especially in
manufacturing), migration for increased competition for
low-wage work, MNCs for sending work abroad,
conventional politicians for allowing globalization to
happen in the first place
○ Populists (Brexiteers, Trump) capitalize on this discontent
by promising to roll back globalization's frontiers. (British
jobs for british workers, make america great again, build
the wall)
• Removes complexities of technologies, changing nature of work,
demographics, savings, etc. to lay blame on easy targets
(foreigners, migrants, etc.)

Inequality between countries

• Higher growth rates in middle income developing countries like
China have contributed to significant declines, especially forming
the 'elephant's head'
• Simultaneous growth in all developing regions has helped
improve results at the global level after assorted slowdowns
○ African shocks, Asian financial crisis, transition of Soviet
bloc countries, Latin American debt crisis
• B: Commodity exporters' fate less certain, especially those in
sub-Saharan Africa

Inequality within Countries

• Common especially among larger OECD nations
• Generally rising in Asian nations
• Milanovic proposes "Kuznets waves" with inverted u-shaped
patterns
○ Industrialization's onset increases inequality, backlash
causes governments to take action to reduce this inequality
• Ravallion believes initial conditions matter (endowment
distribution, market competitiveness, etc)
 patterns
○ Industrialization's onset increases inequality, backlash
causes governments to take action to reduce this inequality
• Ravallion believes initial conditions matter (endowment
distribution, market competitiveness, etc)
• Mixed evidence on whether trade openness, financial integration
increase inequality

Policies can impact Inequality

• M/B: Reduce endowment differences in human financial capital
○ Education, inheritance taxes, worker equity in firms,
financial inclusion
• Labor market policies can have mixed results, and outcomes are
not uniformly favorable
○ France: lower income inequality from inflexible labor
markets but higher unemployment. Reforms may reduce
unemployment but increase income inequality, "in-work
poverty"
○ Greater international migration would probably reduce
global inequality, but there are several restrictions due to
political factors
• Role of safety nets from downside risks of globalization in
wealthy countries can cushion the impact of greater international
integration
• That said, temporary unemployment benefits and the like have
mixed evidence
○ Trade adjustment assistance in the US that provides
funding for those who have lost their jobs for retraining in-
demand skills
• Welfare state is believed to be vulnerable to globalization
(reduced tax base due to mobility of skilled workers/capital)

What kind of Inequality matters more?

• Internationalists would say global or between countries
○ Wider perspective than immediate surroundings
("cosmopolitan view")
○ Religions ascribe responsibility to all of "mankind"
• Nationalists would say within countries
○ More self aware compare themselves with peers/those they
encounter everyday
○ The farther away others are, the less we are aware of their
situations (less salient for comparison purposes)
 • Nationalists would say within countries
○ More self aware compare themselves with peers/those they
encounter everyday
○ The farther away others are, the less we are aware of their
situations (less salient for comparison purposes)
• Inequality is not a welfare judgment but it factors socially into
considerations of relative deprivation, social exclusion

Atkinson: What kinds of Inequality are of concern?

• Equality of opportunity can be desired by removing
circumstances (matters out of your personal control) from
resulting outcome
○ Based solely on individual effort
• Yet, inequality of outcome matters as well
○ Bad luck may work against effort on the part of the poor
○ Social construction of competitive activities
○ It affects prospects for the next generation absent
intergenerational mobility (lessens incentives to put in
effort
Economists and Inequality
• Until relatively recently, distribution has not ebeen a central
concern economists
○ More political scientists
○ Economists: growth before its distribution (otherwise there
is nothing to distribute)
• Why be concerned?
○ Social cohesion is affected
○ Total production is affected by distribution
Inequality needs "unpacking: as a term
• Unequal life opportunities tend to be disliked by everyone
abstracting from their own position
• Material deprivations for the poor are objectionable on similar
grounds
• However, rising inequality may be tolerated if it brings sufficient
benefits to the least advantaged ("trickle down")
• Inequality of opportunities may matter less than lack of
opportunities

Inequality as a "Gateway" Topic

• Group projects
○ Populism resulting from economic inequality
○ Automation increasing economic inequality
 opportunities

Inequality as a "Gateway" Topic

• Group projects
○ Populism resulting from economic inequality
○ Automation increasing economic inequality
○ Dominance of US techonology firms employing few
workers in shaping the world economy
• Previous topics, especially trade liberalization
• Forthcoming topics
○ Global supply chains' economic consequences for home,
host nations
○ True extent of globalization
○ Controversies over further economic migration