
Economics Can’t Answer Why Inequality Sometimes Declines - mazsa
http://peterturchin.com/blog/2015/11/01/economics-cant-answer-why-inequality-sometimes-declines/
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yummyfajitas
This article is a little odd - it mentions Branko Milanovic yet completely
dismisses without argument Milanovic's primary and extremely well supported
result: globalization drastically reduces inequality.

Before globalization, some people (e.g. American auto workers) held extremely
privileged positions by virtue of threats of violence against economic
competitors - particularly those overseas. Globalization has reduced (though
not eliminated) these violent threats and has drastically reduced inequality.

This is one of Milanovic's key graphs:
[http://www.demos.org/sites/default/files/imce/fig2_0.png](http://www.demos.org/sites/default/files/imce/fig2_0.png)

This is his other key graph:
[http://2.bp.blogspot.com/-0we_c3Ob8Ds/UrDEMjcK3MI/AAAAAAAAEb...](http://2.bp.blogspot.com/-0we_c3Ob8Ds/UrDEMjcK3MI/AAAAAAAAEb8/Izydk1Hsi8I/s1600/milanovic+1.jpg)

One of his more detailed arguments:
[http://siteresources.worldbank.org/INTPOVRES/Resources/47722...](http://siteresources.worldbank.org/INTPOVRES/Resources/477227-1142020443961/Module5_chap9_10.pdf)

Economics has already answered why inequality has dropped drastically in the
past 20-30 years. Some folks just don't like the fact that the answer is
capitalism.

~~~
asgard1024
> globalization drastically reduces inequality

Maybe it reduces inequality between countries, but does it reduce inequality
between people (different social classes within countries)?

> some people (e.g. American auto workers) held extremely privileged positions
> by virtue of threats of violence against economic competitors - particularly
> those overseas

Really? I thought they produced cars mainly for the internal market.. I don't
see much evidence of any "threats of violence" coming from auto workers to the
rest of the world.

To make myself more clear, I am willing to accept the globalization (or
capitalism) reducing inequality globally as a positive thing, if it wouldn't
increase inequality inside the developed countries. But that's not what really
happened (profits of Western corporations are all-time high) and that's why
it's a cause for concern.

~~~
yummyfajitas
It reduces inequality between people, such as an American auto worker and a
Chinese auto worker.

 _I don 't see much evidence of any "threats of violence" coming from auto
workers to the rest of the world._

Think about what happens when a Mexican attempts to walk to Detroit and apply
for a job at GM. Violence will be used against him, and against GM, if they
voluntarily transact.

Or think of what happens today when a Brazilian sugar manufacturer attempts to
sell sugar to willing purchasers in the US.

If you care so much about inequality within political boundaries, why not just
move the boundaries to reduce inequality?

~~~
blfr
_Think about what happens when a Mexican attempts to walk to Detroit and apply
for a job at GM. Violence will be used against him, and against GM, if they
voluntarily transact._

GM and Mexicans can't also voluntarily transact in my kitchen or in the foyer
of my building regardless of what impact it would have on inequality. Violence
would be used against them if they tried.

Other citizens have certain rights, that are a lot like property rights in
condominiums or HoAs for example, to decide what happens in their country. If
GM and Mexicans want to voluntarily transact, they can do it in Mexico, should
Mexicans allow it, or some third country where they're both welcome.

Your argument is basically an argument for communism (as in common ownership,
not any particular political system): if some people have what others need,
why not just redistribute it?

~~~
yummyfajitas
No one can transact in your home without your permission, but the issue here
is that I can't transact with a Mexican in my home either.

I'm arguing for capitalism, and against economic protectionism. Where do you
get the idea that I favor redistributing wealth?

~~~
blfr
Right. The issue is analogous to the shared foyer of a building (where you
also often cannot transact with random non-residents).

You argue that people who currently have a right to their country (citizens)
should abolish its borders and allow anyone to move in. Which would be like
residents of a building allowing anyone into the shared space. The value of
access to that shared space is what would be redistributed from residents to
non-residents (leaving its depreciation in the process aside). The step from
this intangible to more concrete wealth is minor, especially since, as you've
pointed out, it has significant dollar value.

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RobertoG
Lately I have the feeling that, because Marx have so bad press, people is
reinventing Marxism with other name.

The author say: "In Piketty’s view, the only reason we don’t see such extremes
is because some kind of random event always intervenes before we get to it"

And then: "I think Walter is on to something, and his theory can be made
endogenous. That is, when inequality becomes too high, the chance of a state
collapse or transformative revolution increases."

What are those but crisis of capitalism?

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kybernetikos
I agree that technology probably works to increase inequality overall.

The whole point of technology is to increase the power of the individual
wielding it. As such, military and surveillance technology enables smaller
groups of elites to maintain their position in the face of larger and larger
groups of revolutionaries.

~~~
bjshepard
what do you think the result of the printing press on social stratification
was?

~~~
AnimalMuppet
Not the OP, but I'll take a stab at it: In increased the separation between
those who could read, and those who could not, _because there was more to
read_. Note well: that separation was along a skill line, not along a class
line (though the skill was largely but not completely correlated with class at
that time).

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bjshepard
interesting comment from Peter Richerson:

 _It seems to me that political struggle can reduce inequality without
necessarily [much] violence. Labor agitation in the US from the late 19th
century through the 1950s played a large coercive role in reducing inequality.
The US elite faced a choice, give labor a fairer share of the economic pie or
eventually face revolution. Led by FDR and like minded actors, the political
elite pushed the business elite to reduce inequality to avoid revolution.
Whether this would have happened without two mass mobilization wars is an open
question, but union organizing and the agitation of radical political parties
struck fear into the elite, hence the Palmer Raids and Edgar Hoover’s
excesses. But those creeps were middle class boys on the make, scaremongering
the elites in the pursuit of elite position for themselves. They may have help
the egalitarians be exaggerating the power of the “Reds.” A credible threat of
revolution can coerce elites pretty effectively.

Even Gandhian non-violence can be very effective. If you can organize a large
mass of non-elites fanatically committed to non-violence, the elite has to
worry what might happen if the non-violent fanatics suddenly got violently
angry. The CP of China seems to really fear apparently harmless mass
organizations like Falun Gong. Apolitical mass organizations are a threat to
elites if inegalitarian or otherwise unfair treatment of commoners is common.
Any such organization can morph into violent resistance at the drop of an
atrocity._

link to richerson's work:
[http://www.des.ucdavis.edu/faculty/richerson/richerson.htm](http://www.des.ucdavis.edu/faculty/richerson/richerson.htm)

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mazsa
"as the population gets larger wealth gets more concentrated. Even so, the
very richest person holds a smaller fraction of the total wealth."
[http://www.overcomingbias.com/2012/01/future-wealth-
inequity...](http://www.overcomingbias.com/2012/01/future-wealth-
inequity.html)

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asgard1024
This is so true and I wish economists and other social scientists would
research that more.

In general, we know many factors that decrease general level of trust
(sometimes called "social capital") in the society. This is sometimes tied to
inequality. But we don't know many reliable factors of how to actually
increase trust, yet we intuitively understand that it is very closely related
to well-being.

Heck, we don't even know how to reliably increase trust between individuals,
for example in failing relationship. I think this is one of the biggest open
problems in psychology and sociology.

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elmar
There is a Very interesting talk about inequality and risk by Paul Graham.

[https://www.youtube.com/watch?v=RpD_Sz_ZWPk](https://www.youtube.com/watch?v=RpD_Sz_ZWPk)

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vilda
Question is whether we measure in/equality correctly. Is wealth really a good
metrics of how equal we are? I would argue that it doesn't.

Look at a simple example - health care. In developed contries, does an
idividual "worth" 10x receive 10x better health care? Not realy. Is it 2x
better? I doubt. Sould you get a cancer, wealth buys you comfort, but not
chances for survival.

~~~
Mikeb85
> In developed contries, does an idividual "worth" 10x receive 10x better
> health care? Not realy. Is it 2x better? I doubt.

They do use life expectancy (which is a result of health standards) as a
measure of inequality. Using my wife's country of origin as an example, their
life expectancy is nearly 20 years less than Canada, France, or Japan.

