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Friday, January 02, 2015

Paul Krugman: Twin Peaks Planet

There's more to the inequality story:

Twin Peaks Planet, by Paul Krugman, Commentary, NY Times: In 2014, soaring inequality in advanced nations finally received the attention it deserved, as Thomas Piketty’s “Capital in the Twenty-First Century” became a surprise (and deserving) best seller. ...
But that’s a story about developments within nations... You really want to supplement Piketty-style analysis with a global view...
So let me suggest that you look at a remarkable chart ... produced by Branko Milanovic... What Mr. Milanovic shows is that income growth since the fall of the Berlin Wall has been a “twin peaks” story. Incomes have ... soared at the top, as the world’s elite becomes ever richer. But there have also been huge gains for what we might call the global middle — largely consisting of the rising middle classes of China and India. ...
Now for the bad news: Between these twin peaks ... lies what we might call the valley of despond: Incomes have grown slowly, if at all, for ... the advanced-country working classes...
Furthermore..., soaring incomes at the top were achieved, in large part, by squeezing those below: by cutting wages, slashing benefits, crushing unions, and diverting a rising share of national resources to financial wheeling and dealing.
Perhaps more important..., the wealthy exert a vastly disproportionate effect on policy. And elite priorities — obsessive concern with budget deficits, with the supposed need to slash social programs — have done a lot to deepen the valley of despond. ...
The problem with these conventional leaders, I’d argue, is that they’re afraid to challenge elite priorities, in particular the obsession with budget deficits, for fear of being considered irresponsible. And that leaves the field open for unconventional leaders — some of them seriously scary — who are willing to address the anger and despair of ordinary citizens.
The Greek leftists who may well come to power there later this month are arguably the least scary of the bunch... Elsewhere, however, we see the rise of nationalist, anti-immigrant parties like France’s National Front and the U.K. Independence Party, or UKIP, in Britain — and there are even worse people waiting in the wings. ...
I’m not suggesting that we’re on the verge of fully replaying the 1930s. But I would argue that political and opinion leaders need to face up to the reality that our current global setup isn’t working for everyone..., that valley of despond is very real. And bad things will happen if we don’t do something about it.

    Posted by on Friday, January 2, 2015 at 12:24 AM in Economics, Income Distribution | Permalink  Comments (55)


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