Inequality, migration and economists

by Chris Bertram on November 8, 2014

Tim Harford has a column in the Financial Times claiming that citizenship matters more than class for inequality. In many ways it isn’t a bad piece. I give him points for criticizing Piketty’s default assumption that the nation-state is the right unit for analysis. The trouble with the piece though is the immediate inference from two sets of inequality stats to a narrative about what matters most, as if the two things Harford is talking about are wholly independent variables. This is a vice to which economists are rather prone.

Following Branko Milanovic, Harford writes:

Imagine lining up everyone in the world from the poorest to the richest, each standing beside a pile of money that represents his or her annual income. The world is a very unequal place: those in the top 1 per cent have vastly more than those in the bottom 1 per cent – you need about $35,000 after taxes to make that cut-off and be one of the 70 million richest people in the world. If that seems low, it’s $140,000 after taxes for a family of four – and it is also about 100 times more than the world’s poorest people have. What determines who is at the richer end of that curve is, mostly, living in a rich country.

Well indeed, impressive stuff. And as Joseph Carens noticed long ago, and Harford would presumably endorse, nationality can function rather like feudal privilege of history. People are indeed sorted into categories, as they were in a feudal or class society, that confine them to particular life paths, limit their access to resources and so forth. But there’s a rather obvious point to make which rather cuts across the “X matters more than Y” narrative, which is that citizenship isn’t a barrier for the rich, or for those with valuable skills. It is the poor who are excluded, who are denied the right to better themselves in the wealthy economies, who drown in the Mediterranean, or who can’t live in the same country as the love of their life. Citizenship, nationality, borders are ways of controlling the mobility of the poor whilst the rich pass effortlessly through. It isn’t simply an alternative or competitor to class, it is also a way in which states enforce class-based inequality.

{ 123 comments }

1

Sasha Clarkson 11.08.14 at 11:08 am

It strikes me that the nation state is a right unit for analysis, if only one of several.

However, if one does question the validity of the nation state as a unit of analysis, one should certainly question the use of income translated into US dollars to measure prosperity, irrespective if the purchasing power of this income. At various times in my life I have been in countries where people had very low income by this standard, but still had enough for the necessities of life. They could not of course afford imported goods, but could survive without them.

An extreme example of what I mean is the case, during the chaotic aftermath of the Yeltsin years, when doctors in a Russian city were paid in manure. Naturally they weren’t pleased, but manure did have an economic value in the local economy, even if it wasn’t convertible to the dollar.

I am certainly not advocating “shit pay” as a general principle, but on a hypothetical isolated island, iron would be valuable, and so would manure, but gold – or dollars – would not help feed or clothe anyone!

http://news.bbc.co.uk/1/hi/world/europe/1331944.stm

2

Zamfir 11.08.14 at 12:21 pm

When I hear these stories, I always wonder: what’s your step 2? Countries are not the right unit to tackle inequality, because they privilege and disprivilige their citizens. True.

So, the FT is going to organize the 5th International to give workers powernon a global scale? No? Something else? No?

Could it possibly be that that they just want to sooth the conscience of rich people? It’s OK to squeeze as much cash as possible out of your position of power , because there are poor people in Africa.

3

Brett Bellmore 11.08.14 at 12:36 pm

To endorse what you’re saying, while my wife was still in the Philippines, I was paying her rent. She had a nice 3 bedroom apartment… $80 a month rent. Cost of living is typically very low in the poorer countries. But only for some things. Other things, that have to be imported, can be even more expensive. For instance, I could mail her a DVD player, express, as a Christmas gift, cheaper than one could be purchased locally.

But most of the poor in poor countries will live lives much better than any hunter-gatherer society ever produced, even if they’re not lives somebody in a first world society would aspire to. Because that pittance goes a long way if everybody around you is poor, too.

Here’s the thing, though. It’s not so much that this country is wealthy, and that country is poor, by luck of the draw. Countries represent experiments with culture and legal systems, as much as they do places on the globe. And some cultures and legal systems just work better than others.

It isn’t that North Korea has had a run of bad luck relative to South Korea. It’s that it has been badly run. The US didn’t get wealthy just because we were lucky to have good natural resources; There are poor countries with good natural resources. We got wealthy because our culture and legal system permitted them to be exploited effectively, and built upon. It didn’t discourage productivity, and encourage theft. (Legal or otherwise.)

Note the past tense. I think we’re living on our seed corn now, to some extent.

So, sucks to be poor, in a poor nation, but it’s not an offense against Man and God that people who are doing things right do better than people who are doing things wrong. It’s an offense that we pretend the problem is in the country doing things right, not the ones doing things wrong.

The really serious problem, IMO, is that what works for creating wealth in a society is not necessarily what is going to be popular, or looks “just” to somebody who already has the benefit of that wealth, and is more concerned about it’s distribution than it’s creation.

You can kill the golden goose if you get too concerned about who gets the eggs, rather than that they get laid. And refuse to connect the neighbor’s goose dinner last month to their present shortage of golden eggs.

4

ZM 11.08.14 at 12:46 pm

Brett Bellmore,

“It isn’t that North Korea has had a run of bad luck relative to South Korea. It’s that it has been badly run. The US didn’t get wealthy just because we were lucky to have good natural resources…”

I rather think that the U.S. bombing and use of chemical and perhaps biological weapons on North Korea might have had something to,do with both North Korea being poor and the U.S. Being wealthy, no?

5

Barry 11.08.14 at 12:46 pm

“You can kill the golden goose if you get too concerned about who gets the eggs, rather than that they get laid. And refuse to connect the neighbor’s goose dinner last month to their present shortage of golden eggs.”

Ah, yes, what the elites and their servants have been saying for the past few decades in the US, decades of slow growth. It’s straight-up projection, of course – they worry 100% about who gets things, and want it all for themselves, and resent the peasants getting anything.

6

engels 11.08.14 at 12:52 pm

You can kill the golden goose if you get too concerned about who gets the eggs

Yes, because one thing that defenders of capitalism are not at all concerned about is ‘who gets the eggs’.

7

engels 11.08.14 at 1:15 pm

Back on topic: has Milanovic ever done this with some metric other than money (capabilities, happiness, etc) as the basis for his comparison? Presumably that would bring the within-state variation closer to the fore?

8

Zamfir 11.08.14 at 1:38 pm

Did Brett just write that the US got rich because its institutions did not encourage theft of natural resources?

9

jake the antisoshul soshulist 11.08.14 at 2:08 pm

I think he was saying it was not theft.
If one were to suggest to a neoliberal that the business plan of the extraction industry was to steal from the commons and sell it back to the people, they would have an apoplectic seizure. Never mind suggesting that all real property was at some time, likely in the remote past, stolen from the commons.

10

Ze Kraggash 11.08.14 at 2:19 pm

There is a view (not sure how controversial) that inequality is not a huge evil by itself, but only when it’s a result of exploitation: slavery, extraction of surplus value, or, more relevant in this context, some form of tribute extraction. If this makes sense to you, wouldn’t it make sense to concentrate on exploitation, rather than (arguably) on a symptom, and difficult, very limited, and potentially loaded with negative side-effects attempts to relieve this symptom.

11

hix 11.08.14 at 2:45 pm

Even most of the upper class kids im studying with that will certainly make a lot more than that in 10 years think 1000 Euro a month is a fortune right now. Dadys new Porsche is often more important than giving the kids some money. To make things worse, they see all those status goods at home and so just keep buying them anyway for themself even if their parents try to experiment with tough love for no reason. Then they get jeaulous at me because i dont have to work 20 hours during the term. But my comp is 250€ theirs 1500, my phone 80, theirs 600, my cloth 10 year old from Aldi, theirs from the newest Prada collection. Thing is, not joining that status good competition does have negative consequences for me that a person who does not buy them somewhere in Africa does not face.

12

Brett Bellmore 11.08.14 at 2:46 pm

Theft from the people doing the extraction.

Theft of natural resources from people just sitting on them may be a bit too Georgist for my tastes, but it doesn’t inhibit economic growth. Theft from the people who do the actual work of changing resources in the ground into something actually usable? That DOES inhibit economic growth, by discouraging future work to extract resources.

13

jake the antisoshul soshulist 11.08.14 at 3:00 pm

I am not sure where to enter the argument. The question is not so much that there is inequality, but how widespread it is and how wide are the gaps. I don’t even think the questions is so much about the causes of inequality. A certain amount of inequality may be inevitable. Even the apologists of Capitalism admit it as a “side effect” while minimizing it.
However, I think there is a substantial subset of Capitalists and apologists who see inequality as a feature, not a bug.

14

J Thomas 11.08.14 at 3:08 pm

Inequality is not a good measure of the problem, just like GDP is not a good measure of the kind of productivity we’d like to measure.

If inequality was the problem, we would have the issue of how many resources we should devote to taking away stuff from people who have too much. If we spend too many resources on that, it’s probably a bad investment.

Various societies have done that before, one well-documented version was the scottish inquisition. The torturers would come into a town and start accusing a few poor people that nobody liked much of bad things. They’d torture them to get confessions and accusations of other poor people that nobody liked much, and then kill them. Then they’d go after the next batch. Gradually they would get accusations about people who were more respectable, and people started to get scared. They couldn’t very well say it was all a scam after they approved the previous killings. Finally when they killed the richest people and took their property, nobody objected.

In Russia and China, after the revolution they could leave out the superstition. Accusing people of having wealth was enough.

I figure, it might be useful to have some people with special privileges, provided it doesn’t get out of hand. If there are too many of them, or they get too much power, and particularly if it turns hereditary or they get clubs or organizations that indoctrinate new members too much, then it’s likely to get bad. The world might be better off if there are a few places like that, but NIMBY.

But if you already have a society like that, powerful people may get upset with you if you talk about it directly. So we talk about things like “inequality” instead. And we can look at statistics. X% of the people in the top 20% will be in a lower quintile later, or their children will be, so there’s nothing to worry about. Kind of like saying that an army is not unequal because lots of privates become corporals or even sergeants, and sometimes sergeants get busted back to private again. Let’s just ignore those generals….

15

Rakesh Bhandari 11.08.14 at 3:23 pm

Can’t read Harford’s piece, but Bertram’s point is well-taken. Of course it is not only the poor in the poor nations who suffer relatively; and it is not only the poor in the rich nations who do the excluding. Those opposed to immigration may not be the upper-class in the rich countries; though they may prefer anti-immigrant populist sentiment to other forms of political expression, e.g. higher inheritance taxes.

On Milanovic’s data, we could use box plots. So using Milanovic’s data, if we take 13 countries and put them side by side on the horizontal axis and we take world income distribution on the vertical axis we see that the box plots for each country were much closer to each other in 1850 than they are in 1990. What this shows graphically is that even if we were to equalize income within countries today, at least half of global inequality would remain because much of one’s position is determined today by the global position of the nation in which one is born rather than where in the income distribution one lands in the country into which s/he is born. Milanovic refers to this as a non-Marxist world

16

Rakesh Bhandari 11.08.14 at 3:26 pm

oops meant it is not only the rich in the rich nations who do the excluding. Do think box plots would be an interesting way to represent the ANOVA analysis that Milanovic does using the Theil index to show that national belonging accounts for more of an individual’s income today than inherited class position, which is the opposite of the situation 150 years ago.

17

engels 11.08.14 at 3:54 pm

An old CT post where Chris makes similar point to the one I was trying to make above ‘Position in local rather than global hierarchies is what matters for health outcomes and self-esteem.’

http://crookedtimber.org/2006/11/13/relativities-local-and-global/

18

Bruce Wilder 11.08.14 at 3:54 pm

Is it too late to prevent the flamewar?!

Brett has a useful point as well as an indefensible provocation — it’s skill to combine these so well, Brett, and to mix them seamlessly with personal resentment, an art!

Nevertheless, income is production; to produce high incomes requires that a society be organized to be highly productive. By itself, being highly productive is not virtue, nor is being highly productive rewarded. Power is rewarded. But, both productivity and power are the consequences of being highly organized.

For the leaders of highly productive organization, there’s a temptation: enhance elite power at the expense of the productivity of the organization. The elite leadership can use their position of domination to make the organization more effective and productive and share in that enhanced and efficient production, or they can use their power to extract a larger share of production for themselves, and sacrifice total output to get both a larger share of output and a more intensely superior status, because of greater relative income and power.

It’s socially hazardous this paradoxical potential of domination to be productive or exploitive. Along several dimensions.

A society in which the corruption of power has run riot can become horrifyingly poor and degenerate for large numbers, who are either exploited or cast aside into abandonment and neglect.

Historically, the nation-state seemed like a political framework to address these dilemmas, to promote fairness as justice, to counter-balance private power with public interest. The democratic state was the means for the provision of public goods and social insurance and the conservation of natural resources.

We live in a neoliberal era, when the dominant ideology of the corrupt or palsied elite is to dismantle or disable the nation-state. The provision of public goods is privatized; social insurance and mutual finance is replaced by the financial innovations of debt peonage and usury. A wealthy person in an advanced country gets cash back on their credit card; a poor person is saddled with interest rates that are double-digit multiples of the rates offered “credit-worthy” corporations. But, I digress.

Or do I digress? Globalization and supra-national bureaucracy has been a primary means for the neoliberal descent. Concern about increasing inequality within nations is met with statistical sleight of hand showing the greater inequality between nations.

When there is no nation-state, what will be the means of protection available to the common man in this world of open borders?

19

TM 11.08.14 at 4:16 pm

The premise that intra-country inequality in First-World countries pales when considering how “good” even the poor in the rich countries have it compared to the poorest globally is such an old chestnut. It’s transparent apologetics.

I’m just reading Matt Taibbi’s The Divide: American Injustice in the Age of the Wealth Gap. The US is not a First-World country. A large part of its population are reduced to Third-World status. The “feudal privilege” that affluent Americans think comes naturally with US status doesn’t in fact extend to the poor and the world highest incarceration rate is powerful proof of this fact.

20

Main Street Muse 11.08.14 at 4:45 pm

Nations as the enforcers of inequality – yes, I suppose, to a degree.

What about the role of business in bribing national government officials to allow the exploitation of resources? What about corrupt state leaders of third world nations who fill their bank accounts and fail to build the nation’s economy? How influential was United Fruit Company in the devastation of Guatemala?

And what about a third world city in the middle of America? (Detroit) Is the nation alone responsible for the poverty found in Detroit?

The jobs that are being added in the US today are apparently minimum wage jobs. Productivity is up. Wages are stagnant. The median income in America, up a bit since the crash, is still lower than pre-crash. The average family is making do with less than before GW Bush took power http://cnnmon.ie/1Er6w6f

Poverty in America is defined as a family of four living on an income of $24,000. How is that even possible to live on that income? How many people are living on just a bit more – but are not considered “poor” by the US government?

But yes, there is certainly the luck of the draw when one is born into a first world nation, rather than the third world.

21

Brett Bellmore 11.08.14 at 4:53 pm

“Historically, the nation-state seemed like a political framework to address these dilemmas, to promote fairness as justice, to counter-balance private power with public interest.”

To others, the nation-state seems like a good way to exploit the masses, while pretending to promote fairness. These others are the people who actually run the government.

Seriously, Presidents live like kings, and retire to lives of wealth. People get elected to Congress, and, magically, their net worth skyrockets. Even the bureaucracy, which formerly traded security for wealth, now get both. The median federal salary is close to $80K, meaning that the MEDIAN federal employee earns at the 90th percentile for US wages.

It’s a scam: Tell the poor they need the government to fight the rich, and the government becomes the rich. The wealthiest communities in the US? They’re clustered around D.C., populated by government employees and those who cater to them.

When people advocate government as a solution to income equality, the term that comes to mind is “useful idiot”. You’re being used.

22

Dr. Hilarius 11.08.14 at 5:10 pm

Brett@3: No dispute that even the poorest people in modern states have more stuff than those in hunter-gatherer societies. But to conclude ownership of stuff equals a better quality of life is debatable. We can’t reconstruct the daily life of extinct hunter-gatherer societies but studies of the few still extent show people leading self-directed lives with a good deal of free time and a lot of joy.

I don’t know the current status of Marshall Sahlins’ work in the academic world but the uncritical equation of consumer goods with well-being doesn’t seem to have much foundation.

Conservatives are in the habit of celebrating abstract values (self-determination, pride, autonomy) when it suits their needs. When it comes to inequality or poverty these values are replaced with “they have televisions and cell phones, what more could they want?”

23

TM 11.08.14 at 5:54 pm

“The median income in America, up a bit since the crash, is still lower than pre-crash. The average family is making do with less than before GW Bush took power”

It’s worse than that. Real median worker earnings have all but stagnated for the last forty (40) years), during which GDP has of course increased substantially. Check out the Census tables, especially P43, at https://www.census.gov/hhes/www/income/data/historical/people/. American workers haven’t got a real raise in 40 years (the average increase, according to the trend line, has been less than $100 real dollars a year), yet they are undoubtedly buying more stuff – much of it on credit.

Household income increased a bit more substantially up to the late 1990s, then declined quite steeply. Most of the increase, while it lasted, was due to the expansion of the workforce. Likewise, the decrease reflects the shrinking of the workforce and this started way before the Great Recession. 2013 median household income was on a par with 1988 in real terms.

24

TM 11.08.14 at 5:55 pm

Moderation is getting ridiculous. How many other posts are held up for no reason?

25

Ze Kraggash 11.08.14 at 5:57 pm

“Nevertheless, income is production; to produce high incomes requires that a society be organized to be highly productive.”

The organization itself doesn’t have to be productive. In fact, it doesn’t pay to be productive (as you yourself hinted), or it does only at the beginning. An effective organization is one organized to rob other people. First inside their own society, then outside, mostly outside.

26

mattski 11.08.14 at 6:03 pm

Bruce 17

So Somoza was a neo-liberal? Who knew!

27

Bruce Wilder 11.08.14 at 6:07 pm

Ze Kraggash: An effective organization is one organized to rob other people. First inside their own society, then outside, mostly outside.

Organizations can be very effective at robbery, though robbery does not produce goods and discourages the production of goods.

28

mattski 11.08.14 at 6:10 pm

I want to echo Dr. Hilarius. It is difficult indeed to try and compare material advances and spiritual losses. It’s great to have a refrigerator, a hot shower and a smartphone. I wouldn’t give mine up. But, modern industrial society is an existential wasteland of loneliness.

I come to CT in part to alleviate that loneliness, and holy shit, I’m betting Brett does too!

29

Bruce Wilder 11.08.14 at 6:13 pm

Brett Bellmore @ 20

He, who makes the rules, gets the gold, proving that he, who has the gold, makes the rules.

No rules, bad rules, or fair rules — the hardest political choice to make is the last.

30

Layman 11.08.14 at 6:51 pm

“The median federal salary is close to $80K, meaning that the MEDIAN federal employee earns at the 90th percentile for US wages.”

Even accepting the claim (?), this could mean that public workers are overpaid, or it could mean that private workers are underpaid. A quick look at private wage stagnation should be enough to answer which is the case, though of course visiting the same emiseration on public workers is your own personal flavor of choice.

31

jake the antisoshul soshulist 11.08.14 at 6:51 pm

Brett Bellmore #20. Accepting your assumptions about the state, what is the alternative?
Assuming that you are the propertarian style libertarian you appear to be, then is government’s only function is to protect your property? Apparently, you think you would always be the one with property and the state always your client, or perhaps, you are so
competent and skillful that you will always be able to obtain that property?
The basic fallacy of libertarianism is that its proponents never consider the possibility that they could be on the low end of power discrepancies, without wealth, power, or status.

32

Brett Bellmore 11.08.14 at 6:58 pm

“But, modern industrial society is an existential wasteland of loneliness.”

I wouldn’t rule out a lot of bare subsistence societies being the same, with hunger thrown in as a bonus.

Anyway, you must be living in a different modern industrial society. I’m certainly no lonely.

33

prasad 11.08.14 at 7:25 pm

“The premise that intra-country inequality in First-World countries pales when considering how “good” even the poor in the rich countries have it compared to the poorest globally is such an old chestnut. It’s transparent apologetics. “

There’s a next step in the argument, which makes it less transparently silly. The neoliberals will say their preferred policies help reduce the large (global) inequality while raising the small one. And surely the Piketty style leap, to the thought that rising inequality within states warrants a global wealth tax, deserves to be harried by people who say that globally this is about as good as it’s ever gotten. Also glad to echo the point above from Milanovic about it being a very non-Marxist situation.

34

prasad 11.08.14 at 7:29 pm

‘One should certainly question the use of income translated into US dollars to measure prosperity, irrespective if the purchasing power of this income. ‘

I’m pretty sure all these numbers are PPP to begin with. Which may or may not be correcting appropriately for differences, but the “global inequality” folks aren’t complete idiots!

35

TM 11.08.14 at 7:42 pm

34: PPP is for many reasons very unreliable. It is based on comparing the price of a basket of goods between countries but the fundamental problem is that consumption in different societies is structured differently, and perhaps more to the point it is structured differently depending on socio-economic status even within a society. The price of food affects poor people far more than it does rich people. In poor countries, personal services are comparative cheap because wages are low. When a typical Western middle class basket of goods is used as the basis of calculating PPP of a poor developing country, the results are close to meaningless. These problems are of course well known to technical experts (they are not idiots) and they are fundamentally impossible to solve. The PPP estimates we have may still be better than nothing but they must be taken with more than a grain of salt. The idea that we can with any reliability distinguish whether a poor Bangaldeshi’s real income is below or above “1 dollar a day” is ludicrous.

36

TM 11.08.14 at 7:49 pm

33: “The neoliberals will say their preferred policies help reduce the large (global) inequality while raising the small one.”

There is just no evidence for the claim that increasing intra-country inequality is related with decreasing global inequality. That the latter is in fact decreasing is also an open question. The statistics usually cited in favor are per capita GDP. But we know that per capita GDP is a very poor measure of the actual living standard of the general population. In the US, growing per capita GDP in the last forty years has led to exactly no discernible increase in living standards. Inequality has increased along with GDP almost everywhere.

37

TM 11.08.14 at 7:51 pm

[Was posted long ago, caught in moderation]
19: “The median income in America, up a bit since the crash, is still lower than pre-crash. The average family is making do with less than before GW Bush took power”

It’s worse than that. Real median worker earnings have all but stagnated for the last forty (40) years), during which GDP has of course increased substantially. Check out the Census historical income tables, especially P43. American workers haven’t got a real raise in 40 years (the average increase, according to the trend line, has been less than $100 real dollars a year), yet they are undoubtedly buying more stuff – much of it on credit.

Household income increased a bit more substantially up to the late 1990s, then declined quite steeply. Most of the increase, while it lasted, was due to the expansion of the workforce. Likewise, the decrease reflects the shrinking of the workforce and this started way before the Great Recession. 2013 median household income was on a par with 1988 in real terms.

38

Ronan(rf) 11.08.14 at 8:20 pm

“The statistics usually cited in favor are per capita GDP. “

Doesnt a lot of the research claiming a decrease in inequality between countries (at least when looked at in certain ways) – for example Milanovich – look at peoples income not GDP ?

39

TM 11.08.14 at 8:57 pm

Not sure about Milanovich. Usually when economists refer to “per capita income” they mean per capita GDP. There are of course those who track the number of people making $1 per day. There are serious methodological problems with that (see 35). Generally speaking, it isn’t at all obvious how best to measure global inequality. If we look at the global top 1% compared to the global bottom 1% or even 10%, I doubt the gap is getting smaller.

40

Ze Kraggash 11.08.14 at 9:03 pm

I think loneliness might be related to materialism and secularism, rather than dishwashers and refrigerators. Here religious conservatives definitely have an advantage. Their church is a club, and, from what I’ve seen, they have vibrant social life. Gym is a poor substitute. Maybe this explains, to an extent, the “they have televisions and cell phones, what more could they want? attitude.

41

mattski 11.08.14 at 9:13 pm

Anyway, you must be living in a different modern industrial society. I’m certainly no lonely.

You may find this objectionable, but based on my experience debating with you (and it goes back a pretty long way, Balkinization included) I wouldn’t trust your descriptions of your emotions. Not dishonesty, only lack of awareness is indicated.

But if you care to why not tell us why you like to post here? (Or perhaps you don’t like to post here, but do it anyway!)

42

prasad 11.08.14 at 9:16 pm

Re. PPP – we agree cross national income inequality comparisons aren’t easy, but a) that cuts both ways; and b) doesn’t by itself imply that differences over time are not measurable. IMO the rise in living standards of the Chinese in particular is impossible to gainsay, and there seem to be a large number of them, so that can weigh a lot in global inequality.

More straightforwardly, there were two commentators above who thought PPP corrections weren’t being made in the numbers quoted here. They are, and the corrections are very large. North/south income differences would be much larger still in dollar terms.

There is just no evidence for the claim that increasing intra-country inequality is related with decreasing global inequality. That the latter is in fact decreasing is also an open question. The statistics usually cited in favor are per capita GDP.

-> I think you’re mistaken re per capita GDP, since the typically used metric is the gini coefficient. The question is whether global gini is actually decreasing or merely plateauing after two centuries of rise, and that seems like cheering news all by itself.
-> As for whether the two trends – rising within state and falling between state/aggregate inequality – are connected: at the very least, it’s child’s play [*] to come up with toy scenarios where that inverse relation holds, indeed harder to make the opposite stick.

[*] I’ll make good -> initially, rich country has two people making 100 each and poor country has two making 10 each. Then there’s globalization, and rich country wages become 100 and 80, while poor country wages become 10 and 30. (I made this zero sum, but it needn’t be). Within each country you’ve become more unequal, and yet 100,100,10,10 is more unequal than 100,80,30,10.

43

Rakesh Bhandari 11.08.14 at 9:19 pm

TM,
I don’t know of adjustments to PPP numbers that would undermine Milanovic’s broad conclusions. So, as summarized by Sarah Dykstra, “the new PPP numbers [from the ICP project], do suggest a lot of poor countries are richer than we thought. For example, The Economist now estimates that China’s economy will be bigger than the US economy by year’s end. (This much to the delight of Eclipse author and colleague Arvind Subramanian, whose forecasts now look better than anyone else’s.) But it isn’t just China. India’s 2011 current GDP PPP per capita from the World Bank World Development Indicators is $3,677. The new ICP number: $4,735. Bangladesh’s 2011 GDP PPP per capita according to the WDI is $1,733; the ICP suggests that number should be $2,800. Nigeria goes from $2,485 to $3,146.”
How did the ICP deal with the problem that since different goods are being consumed in different countries no meaningful comparison is possible. As I understand it, they deny that there is no substantial overlap in goods consumed; and then take steps to weigh goods for countries in terms of how widely consumed they are.
Against the concern that PPP adjustments still result in exaggerated sense of global inequality, I think the opposite could be true if we pay attention to differences in qualities in services and goods and greater substitution possibilities in the first world.

44

Rakesh Bhandari 11.08.14 at 9:29 pm

While Milanovic may agree that the globalization of production has widened inequality in the rich nations and reduced international inequality, he’s not a neo-liberal. He would seem to be in favor of inequality-attentuating policies within the rich nations. In fact he argues that in absence of such policies , growth will remain anemic, and dangerous financial speculation will remain the vent for the surplus capital of the top 1% (or top 12% since he thinks 12% of AMericans are in the global top 1%).

45

Bruce Wilder 11.08.14 at 9:31 pm

Using mathematics to take the politics or economics out of the analysis of income inequality is an interesting parlour trick, and one that seems to serve.

Whether we think of wealth as a good and necessary thing qua capital, to be invested and accumulated in order to enable higher production and incomes, or wealth as bad thing, the tool of extractive rent-seeking or financialization, would still seem to matter. Shall we inquire into whether the 1st worlder reduced from 100 to 80 lost his union job? Shall we wonder whether the 3rd worlder leaping to 30 did so by forcing his less fortunate brethren to earn that 10 in a sweatshop, working 70 hours a week while living in a favela without public services?

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prasad 11.08.14 at 9:59 pm

Bruce – shall we also inquire into the motives of the people who would cloak themselves in glory over stopping exploitation? Am I permitted to wonder if a lot of anti-sweatshop chatter in the first world is actually aimed at benefiting either the guy in the poor country picking up trash, or his cousin who’s moved up to the sweatshop job? Like, could not that fellow who lost his union job (and his sympathizers) be motivated largely by a desire to help himself, sweatshop worker be damned?

Which may well be fine, depending on your views about moral community, patriotism and the like. But there’s more than one way to make disingenuous arguments that use the poor as rhetorical cudgels. Anyway, my point above with the 100/80/30/10 example was largely mathematical – considerations involving within and between variances are rather easy to make tug in opposite directions.

Cycling back via exploitation to migration, I think this article in the New Republic might be relevant. It makes the gadfly point that Qatar does more for the world’s poor, in letting in lots of migrants even at the cost of treating them horribly, than Norway does with its flashy and humane charitable giving and human rights talk, but with lots less migration.

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Bruce Wilder 11.08.14 at 10:11 pm

the Guardian: North Koreans working as ‘state-sponsored slaves’ in Qatar

http://www.theguardian.com/global-development/2014/nov/07/north-koreans-working-state-sponsored-slaves-qatar

But, of course, mathematics could never be the basis for a “disingenuous argument” and World Bank economist Branko Milanović just wants us to know how slippery a concept inequality really is.

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ZM 11.08.14 at 10:29 pm

Australia does avoid migration by very poor people by preferring skilled immigrants and investors. This is coupled with an very cruel refugee policy, which is about to get worse if the current legislation passes.

The world generally needs to agree to resettle the proportion of the 50 million refugees and displaced people who want resettlement (some would prefer to stay in camps waiting til they can return home at a later date).

I am not really in favour of having no borders at the present time however. I do not see it as a great improvement that poor people could could choose to stay in their home countries and face being poor, or have to move to wealthy countries to have a chance at being less poor.

At the moment migrant labourers are often exploited by wealthy countries to do lots of work at very row rates for the country. And they often live transitorily in wealthy countries in poor low standards of accomodation or overcrowding etc. Australua generally takes a bit over 100,000 of migrants a year – this is quite a high amount and has caused problems in terms of appropriate development of area for housing and the related infrastructure and provisions , which are not currently being managed very well.

At the same time we have sustainability and climate change problems and most people in advanced economies consume unsustainable amounts and contribute disproportionately highly to biodiversity loss, climate change, ocean acidification etc. so overall in the world consumption needs to be constrained to sustainable levels and energy use should be constrained to what can be produced by RET.

So advanced economies need to stop consuming such extravagant amounts, and then poor countries can consume a bit more, and the rest of the cut in consumption returns to assisting biodiversity etc. This solution would therefore even out the differences between advanced economies and poor countries.

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Brett Bellmore 11.08.14 at 10:34 pm

“I wouldn’t trust your descriptions of your emotions. Not dishonesty, only lack of awareness is indicated.”

Not so much lack of awareness, I just rate fairly high on the Asperger scale. Not everybody is all touchy feely, you know; That diversity liberals claim to believe in doesn’t stop at the skin.

I’ve been lonely enough of my life to know that I’m not lonely now. The contrast IS rather stark.

As for why I post here, I like arguing, and I like domestic tranquility. This mandates that I find somebody outside my family to argue with. Going out of my way to find people I disagree with facilitates this, as I’m not much for arguing points I don’t believe in.

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prasad 11.08.14 at 10:39 pm

Okay I’ll dial back my rhetoric a bit, since I don’t think there’s something intrinsically disingenuous about raising loss of union security or sweatshops as you did. Though putting those two together, without noticing that that those two groups may have very different interests, is rather amusing. I won’t make any concession about say US union reps or democratic politicians who weep over factory exploitation in Asia. People outside the university setting tend not to be cosmopolitan in self-perception, and have no trouble seeing these different interests clearly!

But you should attend to Rakesh Bhandari above on Milanovic, he really is not a neo-liberal (and wrote a glowing review of Piketty’s book.) If you want a brief psycho history, his angle on this research has always been rather ‘look how terrible north-south disparities are.’ I don’t think he went in expecting such a between vs within-state issue would crop up, but there it is. His most recent work actually says the global trend is not an inverted U, since the ultra-rich are being under-counted. But he does seem to take his research and results seriously, and he does think much looser immigration would be a good thing. (He isn’t advocating for Qatari standards either, though you are dismayingly quick to lunge for the easiest way to reject what seems like it should be a troubling contrast no matter what you hold politically. I’d say ‘try UAE instead,’ but maybe that’d just cause a scramble to find articles about construction workers in Dubai)

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Ze Kraggash 11.08.14 at 10:40 pm

“working as ‘state-sponsored slaves’ in Qatar”

Yes, and wasn’t it a common (of the compassionate kind) justification for slavery that they were better off picking cotton on a plantation than surviving in a jungle? Though of course the sweatshop has the important ideological advantage of being (technically speaking) chosen voluntarily.

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William Timberman 11.08.14 at 10:53 pm

Randy Newman had it about right, I think:

In America you’ll get food to eat
Won’t have to run through the jungle
And scuff up your feet
You’ll just sing about Jesus and drink wine all day
It’s great to be an American

Ain’t no lions or tigers ain’t no mamba snake
Just the sweet watermelon and the buckwheat cake
Everybody is as happy as a man can be
Climb aboard little wog sail away with me

This, at any rate, is how the white folks would have preferred to remember it — had it not been for killjoys from Frederick Douglass to James Baldwin.

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prasad 11.08.14 at 11:06 pm

Poor Milanovic, he wants higher immigration, and not in the rights denying middle eastern way. I say _even that_ isn’t obviously worse for the people who become economic migrants, and yes, you can’t entirely wish away the voluntary nature of people from Kerala going to the Gulf as nurses or brick layers. They’d very much rather come to Boston instead, but at least Dubai lets them in.

Or as Weyl and Posner put it – “We citizens of OECD countries take pride in our political and civil rights, and our generous welfare systems. Yet we maintain our high standard of living by giving no rights and trivial money to people who live outside our arbitrary borders. While we fuss over whether we should raise or lower our marginal tax rates, we ignore the plight of the most desperate people in the world. And yet we are surprised that leaders of China and the GCC accuse us of hypocrisy when we criticize their records on human rights.”.

And now poor Milanovic is an apologist for slavery because he wants the US and Europe to let in more immigrants. Yes, that’ll work…

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William Timberman 11.08.14 at 11:27 pm

For the record, I don’t think that Milanovic is an apologist for slavery. I do think, however that in the past the glass-half-full advocates have as often as not been drafted into serving as shills for the wealthy and powerful even when the intent of their arguments was considerably less malignant. Not their fault, of course, unless, once it was offered to them, they welcomed the role. (Milton Friedman springs immediately to mind.)

Even though dismissing such arguments out of hand may sometimes lead us astray in our judgments, we should nevertheless be wary of accepting them at face value, just we should be wary of arguments that President Obama had no intention of committing war crimes. Maybe not — and in any case, we have no way of judging his intentions — but the pious and oft-repeated assurances of his various mouthpieces to the effect that, under the circumstances, he could hardly have done otherwise should ring far more alarm bells than they apparently do.

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mattski 11.08.14 at 11:28 pm

As for why I post here, I like arguing

Why thank you for the frank response, Brett! And thanks for sharing re Aspergers. That helps me with interpreting your comments, I think.

I do think it’s useful to take some time out from our ‘normal’ everyday mindset to ask “why do I like such and such?” I mean, when I ask myself why I like arguing–which clearly I do–I feel the answer is a mixture of trying to get clear as to what I believe, trying to get through vague and muddled ideas to something better, but also enjoying the heat of competition and (unfortunately?) releasing aggression. And it’s the aggression component which, from my perspective, is the animating spirit of much of your commentary. So, I wonder to what extent you agree with that assessment? And I wonder how you regard your own aggressive impulses?

That diversity liberals claim to believe in doesn’t stop at the skin.

Fair enough. And…

Is it that you don’t think liberals actually believe in diversity (although it would be nice if they did)? Or, perhaps that you, as a non-liberal, don’t believe in diversity and don’t think anyone else needs to either?

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Layman 11.09.14 at 12:06 am

I’ve traveled a good deal and thought I’d seen tremendous poverty. I’m relieved to discover how wrong I was; that in fact there’s apparently no way to demonstrate global inequality; and that, in the face of that argument, the poor have simply vanished. Well done! Also, too, semicolons!

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P O'Neill 11.09.14 at 1:24 am

While it’s correct that global mobility is the preserve of a small share of the population, there’s a lot of welfare improvement to be had from more internal mobility in developing countries. We’re probably all based in countries where we take it for granted that we can move around within the jurisdiction as much as we please, but for many people that’s just not true. And it’s not just a china issue. Egypt has massive differences in welfare between upper and Nile delta and it suits a lot of people in the latter to keep it that way. Both formal and informal restrictions are used to keep the rural population out of the big cities. International migration has to be placed in the context of domestic mobility restrictions.

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Bruce Wilder 11.09.14 at 1:30 am

Also, Egypt has a government, supposedly.

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Matt 11.09.14 at 4:29 am

Off-topic, and fairly deeply so, but following Engels link in 17 t0 a now about 8 year old post by Chris, and from there to one from a year earlier by Maria, I’m really struck by how the population of commenters has changed. Engels was there, and a few others (me, I guess), some now under different names from that time show up from time to time, but the “regular” crowd from that point is probably 70% different from the “regular” crowd now. (I’m not even sure if I’m part of the “regular” crowd anymore. I think that’s mostly due to being very busy these days, but it’s hard to say for sure.)

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gianni 11.09.14 at 5:17 am

If were to take the rhetoric at its word, wouldn’t the neo-liberal order involve the free movement of labor? Sure, you would be paying a toll at the border on your way to work, no doubt. But if all that stuff about flexibility, being liquid, etc were true, isn’t a free labor market the counterpoint of free capital movements? This is one of those cases neo-liberalism’s closet authoritarian impulse really shines through.

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Brett Bellmore 11.09.14 at 12:14 pm

“Is it that you don’t think liberals actually believe in diversity (although it would be nice if they did)? Or, perhaps that you, as a non-liberal, don’t believe in diversity and don’t think anyone else needs to either?”

It is my experience that liberals certainly believe in cosmetic diversity, that people don’t all look alike. But their belief in diversity *inside* the skin is very limited. Liberals will routinely assert, for instance, that no woman would seek a purely elective late term abortion. Or advance arguments based on the premise that their adversaries actually agree with them, and are just being contrary for some reason, usually despicable.

I’m told that everybody is actually, when pressed, some kind of utilitarian. That all women feel oppressed by traditional sex roles. That conservatives actually think liberal programs are good for minorities, and oppose them out of racism.

Nobody believes this, nobody does that. If liberals believe in diversity, it’s an awfully superficial sort of diversity.

Now, I believe in diversity. The range of human opinion and thought processes is essentially unbounded, it ranges into extremes that are madness and/or evil. Which is to say that diversity is real, very real, but that doesn’t imply that it ought always be respected or even tolerated.

I believe that some expressions of human diversity are pathology. Belief in diversity doesn’t imply approval. Not for individuals, or for cultures. Some modes of thought work. Some don’t.

But, diversity? Very, very real, even when liberals don’t want to acknowledge it.

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Sasha Clarkson 11.09.14 at 1:17 pm

My first comment certainly wasn’t arguing that poverty isn’t real. I will be honest and admit that I was unaware that the figures quoted had been adjusted to attempt to reflect purchasing power parity. I was, and still am, dubious about attempts to relate poverty directly to monetary income.

About thirty years ago, I had a visit from some distant US relatives. I showed them to their bedroom and offered them tea, and the reply of my sort of cousin was “I’ll just have a Coke.” I was embarrassed, because Coke was something I wouldn’t even consider keeping in the house. I kept all sorts of beverages, but I never bought any of what the American’s called “sodas”, because I regarded them as unhealthy synthetic muck. A number of years later, on my first visit to the US, I saw the size and contents of an affluent family’s refrigerator with shock and awe, (also a little horror!) The family was very nice, but all of them were somewhat overweight and I regarded their lifestyle as horrifically wasteful. Even if I had the money, I would not choose to live like that (I hope!) They did not even regard themselves as particularly wealthy: they certainly debts, but their conspicuous consumption was much greater than that of some French friends of mine where the father was CEO of a company making rocket motors for the European Space Agency.

A contrast with all of us, is the lifestyle in the moving YouTube video below, of Cocoa farmers in Côte d’Ivoire. They had never tasted the end-product of their own cash crop. Indeed, they did not even know what it was used for.

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Chris Bertram 11.09.14 at 3:21 pm

Thanks Sasha. Great video!

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J Thomas 11.09.14 at 3:26 pm

#61 BB

It is my experience that liberals certainly believe in cosmetic diversity, that people don’t all look alike. But their belief in diversity *inside* the skin is very limited.

I think there’s some truth to that. IME liberals are ready to believe that different people think differently, but they want to believe that everybody can get along anyway. Or at least all the good people can.

Like, liberal atheists are likely to believe that most of the poor deluded fools who believe in religion are nice guys underneath it all, and will usually do the right thing even if it’s for the wrong reasons, and they should be free to practice their superstitions as long as they don’t hurt people with them.

Liberals will routinely assert, for instance, that no woman would seek a purely elective late term abortion.

In their defense, while such a thing is possible, late-term abortions are very very rare and so women who get them for purely elective reasons are rarer. Maybe a lot of women try to get them are aren’t allowed to? But if that’s so (I don’t have any numbers on it, my guess is that it is not so) we don’t know how many of those women would actually go through with it if they could, versus women who are acting out some sort of drama with people they have conflicts with.

Anyway, the hope is that almost all of us can get along even though we don’t think the same, and that the few who don’t can perhaps receive psychotherapy or something to help them past their issues.

On the other side, the stereotypical conservative recognizes that other people are different, and that our way is best. Or if it isn’t best still it’s ours and so we must value it. We will try to make sure that in any difference of opinion, our way prevails. There are a lot of evil people out there and whenever possible we should kill them before they kill us.

These attitudes start to overlap when liberals see people who just refuse to stop doing evil. Things like female genital mutilation. Capital punishment. Sexual slavery, or just slavery. Crony capitalism. NAMBLA. Dictators. You know, evil people. Then liberals get upset and insist that nobody say anything good about the evil people, and at some point they might be ready for the army to attack them or something.

When it comes down to the crunch the difference is not that large.

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MD 11.09.14 at 3:34 pm

Brett: “So, sucks to be poor, in a poor nation, but it’s not an offense against Man and God that people who are doing things right do better than people who are doing things wrong. It’s an offense that we pretend the problem is in the country doing things right, not the ones doing things wrong.”

But it is an offense if the people doing better are doing so partly because they act (and have long acted) in ways that support those in power doing things wrong. In buying resources from corrupt and undemocratic regimes who suppress and exploit their people, e.g., we both enable them to maintain power and incentivize the development of such regimes and attendant civil wars in resource-rich places that don’t yet have them.

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jake the antisoshul soshulist 11.09.14 at 3:50 pm

@J Thomas
I suppose that you are at least mostly correct, though I would not put it in those terms.
I would start the argument from egalitarianism. My attachment to “liberalism” comes through my egalitarianism. I would express that by saying that all people are equal but not the same. Libertarian type Capitalists tend to see pure Capitalism as a true meritocracy.
If someone is rich, they have earned that wealth through merit (Capitalism rewards success!). if someone has little or nothing, they have earned that (Capitalism punishes failure!). However, if Capitalism were actually a meritocracy, wealth/income would sort itself naturally, ie. the notorious “Bell Curve”. Under that scenario, there would be a very few very rich people, which we do see. But there would also be very few extremely poor people, which we do not see. And the great majority would cluster around the average, which we rarely do see. As I have mentioned before, economic libertarians are perfectly happy with the pyramid we now have, since they seem to believe they will always be near the top.
As far as diversity, we will have to live with each other. The alternative is of course, killing each other off.

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engels 11.09.14 at 4:05 pm

Good to see you, Matt. I think my commenting tapered off a little in recent years too but I see Brett Bellmore is still his irrepressible self.

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mattski 11.09.14 at 5:34 pm

Thank you, Brett. Going back to loneliness for a moment, would you agree that ‘arguing’ is a social activity? And if you like to argue, and for some reason you’re not able to argue, then you are deprived of a social experience that you would prefer to have? So, maybe loneliness does apply here, though like most of experience, it’s a matter of degrees.

Maybe you’ve even had occasional thoughts like, “I actually kind of like those liberal assholes on CT.” :^) [That provokes an ancillary question: would you agree that liberals tend to be a kinder, gentler, more-pleasant-to-be-around sort than conservatives? …think of Jonah Goldberg fighting off the urge to stab eager fans asking about his next book!]

As for diversity, do you think liberals are unique in their shortcomings, or only more hypocritical than conservatives?

And it would probably help to distinguish the normative and descriptive uses of the word. People are quite different from each other. That’s a fact. It would be nice to respect those differences, that’s a prescription. But that doesn’t mean respecting all differences, since you’re obviously right that some differences are pathological. And at the same time, is it unreasonable to say that, for example, everybody wants to be happy? Is it unreasonable to say that everybody needs food & shelter or everybody wants to feel loved? And, isn’t it interesting to get a little bit embroiled in psychology over what it means to feel loved, and whether it’s possible for a person who wants to feel loved to loudly and–to some extent–logically protest that he/she doesn’t care about feeling loved? (That’s a tricky one, isn’t it??)

I think we agree that people’s differences should be respected as long as no one is being harmed, right? But is disagreeing about what constitutes harm the same as not respecting or acknowledging diversity?

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Brett Bellmore 11.09.14 at 6:23 pm

“That provokes an ancillary question: would you agree that liberals tend to be a kinder, gentler, more-pleasant-to-be-around sort than conservatives?”

Not in my experience, no. As you might expect, given that I come here for *conflict*. For instance, can we agree that this is not about a *conservative* professor? That SEIU is not a notably conservative organization?

In my experience liberals aren’t that bad to be around so long as you don’t disagree with them. But their worldview is manichean enough that a whiff of disagreement can make them turn very nasty indeed.

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Bruce Wilder 11.09.14 at 6:52 pm

jake the antisoshul soshulist: Libertarian type Capitalists tend to see pure Capitalism as a true meritocracy. If someone is rich, they have earned that wealth through merit . . .

There’s a dichotomy of worldviews that breaks on the relative effects on outcome, of effort and luck. There’s a second dichotomy of worldviews on the merit of merit — that is, for example, on whether wealth, per se, is always a good thing.

It is easier for people of a conservative-libertarian bent to take the first dichotomy lightly, than to see the problems identified by the second.

In Brett Bellmore’s rant @ 3 (with most of which I generally agree; I am going to quibble only with his last two paragraphs), his penultimate paragraph kinda clunks for me, I think because maybe he doesn’t get dichotomy #2 :

The really serious problem, IMO, is that what works for creating wealth in a society is not necessarily what is going to be popular, or looks “just” to somebody who already has the benefit of that wealth, and is more concerned about it’s distribution than it’s creation.

I cannot quite puzzle out what attitude he’s attributing resentfully to somebody-who-already-has-the-benefit-of-wealth: what’s the bad attitude and how does he think the benefit-of-wealth generates that bad attitude? Because I do not follow the argument here, his peroration makes little sense to me:

You can kill the golden goose if you get too concerned about who gets the eggs, rather than that they get laid. And refuse to connect the neighbor’s goose dinner last month to their present shortage of golden eggs.

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Layman 11.09.14 at 7:25 pm

If I may, Brett is saying that everybody in America enjoys wealth (compared to most people on the planet); and the bad attitude is among those Americans who enjoy less-of-the-American-wealth, and want to redistribute it, killing the system which made them wealthy (compared to most people on the planet) in the first place. Those people should instead celebrate the system which makes them poor Americans because it makes them better off than most non-Americans. Or so I think.

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mattski 11.09.14 at 8:37 pm

In my experience liberals aren’t that bad to be around so long as you don’t disagree with them.

How do they compare to conservatives in that respect? (Do you feel at home at a convention of “DON’T TREAD ON ME” people? What happens when you accidentally step on somebody’s foot?)

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mattski 11.09.14 at 8:40 pm

Here’s an hypothesis:

Maybe… Liberals have sharper tongues than conservative because it’s understood that we’re not as prone to going postal.

!

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Rich Puchalsky 11.09.14 at 8:49 pm

Maybe after everyone explains what Brett means in some super-responsible and consistent way, we’ll have a super-Brett. Super-Brett will be great at explaining himself to liberals in ways that liberals find vaguely familiar.

For the record, I think that real Brett is mostly in the right when he talks about how liberals generally have no idea of how to deal with actual diversity of thought. The liberals (and, to be fair, most leftists) here can’t even understand the concept that everyone doesn’t think like they do, and that what they think of as rational argument really only makes sense if described as “argument in the style of liberals who hold to a base of certain implicit, shared assumptions.”

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Bruce Wilder 11.09.14 at 9:06 pm

The function of inequality of incomes, and the relationship of income to wealth, lies behind our interpretation of the fact of both economic inequality within and the fact of inequality among countries and individuals (or families). The kind of simple dichotomies that may divide the worldviews of libertarians from socialists or conservatives from liberals figure in how people construct an interpretations.

Branko Milanovic adopts the polar dichotomy of the capitalist as innovator/saver and the capitalist as rentier to explain how he views (the views of others about) the relationship of inequality to efficiency and growth:

How does inequality affect economic efficiency? We care about inequality, or perhaps we care mostly about inequality, because we believe that it affects some important economic phenomena—notably, economic growth: Do more unequal countries grow faster or slower? Historically, the pendulum has swung from a rather unambiguous answer that inequality is good for growth to a much more nuanced view that favors the opposite conclusion.

Why has this been the case? To understand it, look at inequality, as far as economic efficiency is concerned, as cholesterol: There is “good” and “bad” inequality, just as there is good and bad cholesterol. “Good” inequality is needed to create incentives for people to study, work hard, or start risky entrepreneurial projects. . . . The benevolent view of economic inequality—that it provides incentives for individuals to excel—dominated when economists believed that only the very rich save and that without them, there would be no investments and no wealth creation. Workers (or the poor) were thought apt to spend everything they earned. If everybody then had the same (relatively) low income, there would be no saving, no investment, and no economic growth. . . . But the world was also full of another type of capitalist rentiers who would do very little but sit back, relax, and let money “do the work” for them. . . . From this perspective, the rich looked less indispensable as “receptacles” for savings and as possible investors; they appeared much more like parasites living well while clipping coupons and doing little else.

From this caricature of what I think he sees as 19th century or early 20th century views of the dichotomy, Milanovic sees a different view developing in the late 20th century. (This is where, imho, we can see Milanovic go spinning off into neoliberal fairy tale land.)(emphasis added)

Yet the view of inequality as harmful, which began to dominate in the past couple of decades, did not develop from that ethical perspective [rich capitalist as rentier drone]. Curiously, it shares the same starting point with the view of inequality as a benevolent force—namely, that there should be people who are willing to invest—yet it reaches very different conclusions.

Here’s how the argument flows: People (rich, middle class, and poor) vote for how high they want their taxes to be, taking into account that the advantages from government spending (funded from taxes) accrue mostly to the poor. Very unequal societies will tend to vote for high taxation simply because there are a lot of people who benefit from government transfers, pay nothing or little in taxes, and would always outvote the few rich. Now, such high taxation reduces the incentives to invest and to work hard, and this lowers the rate of economic growth. The mechanism is similar to the nineteenth-century fear that people without property, if given half a chance to vote, would expropriate the wealthy. Here the same thing happens except that the expropriation is a bit gentler: It operates not through outright nationalization but through taxation. In both cases—the benign and the malevolent views of economic inequality—the important thing is to have people who are willing to invest. But in the first case, rich investors require high inequality. In the second case, the introduction of political democracy is the monkey wrench that makes high inequality politically unsustainable. Even if the rich could somehow promise the poor that they would not consume but invest surplus income, and that the rich are thus indispensable for economic growth, there is no way that this promise could be enforced. It will not be credible, either. Consequently, the capitalist system must generate on its own a pre-tax income distribution that is sustainable and will not encourage people to choose extortionary tax rates. For this to happen, assets among people need to be distributed relatively evenly. We cannot, over the short or medium term, affect the distribution of financial assets much, but we can affect the distribution of education (what economists call “human capital”)—hence the emphasis on better access to education for everybody. This is not only because education may be thought desirable in itself, not even because higher education may be directly helpful for economic growth, but also because wider distribution of that asset would equalize distribution of pre-tax income and make even those relatively poor think twice before deciding to vote for high taxes.

What probably seems like a rather odd (and thoroughly unrealistic) theory of politics is Milanovic’s version of the median voter hypothesis. He handles the rather obvious counter scenario of a corrupt democracy where the rich lobby to protect themselves in a footnote.

It could even happen that there is no real redistribution but that the effects on growth still remain negative. For example, in order to prevent the political takeover by the poor, the rich can combine and through lobbying buy votes and legislation, thus preventing the redistribution. But this effort at lobbying, a non-productive activity par excellence (because it is a zero-sum game, concerned only with redistribution and not creation of new wealth), will be a sheer waste from the point of view of economic growth, and a slower growth will ensue again.

I apologize for the long quotations, but I don’t think I can make my point about Milanovic’s views without them. Milanovic summarizes his view (following the above quotations, but before launching into discussion of justice issues) with a rather cliched and anodyne dichotomy:

. . . in some places and times, inequality may hamper economic growth (through its monopoly element) and in others help it (through its incentive element). Suffice it to say that our view regarding the positive versus negative effects of inequality on economic efficiency will always depend on how much weight we put on one or the other element in the essential dilemma: social monopoly versus incentives. . . . in those cases where we think that the leveling of incomes—the absence both of the carrot of success and of the stick of failure—has gone so far that people will not try harder unless allowed to keep the fruits of their labor or investment more fully, we should, as odd as it may seem, opt out and call forth greater inequality.

The deeper quotation exposes some things the anodyne summary does not make so clear. The most alarming, it seems to me, are the apparent absence from Milanovic’s economics of either private predation or public goods. One can excuse this as a simplification, but, if so, it’s a dangerous over-simplification, imho. From such simplifications and elisions, neoliberalism draws its power as mind-numbing propaganda.

Milanovic, Branko (2010). The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality. Basic Books.

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Bruce Wilder 11.09.14 at 9:12 pm

I got so obsessed with getting the blockquotes and bolding right that I didn’t notice how I had screwed up agreement in subject-object number in my first paragraph. It’s embarrassing.

P.S. I promise to focus more on adding extraneous commas and semi-colons in the future.

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gianni 11.09.14 at 11:13 pm

“It could even happen that there is no real redistribution but that the effects on growth still remain negative. For example, in order to prevent the political takeover by the poor, the rich can combine and through lobbying buy votes and legislation, thus preventing the redistribution”

BREAKING: The wealthy might choose to use their power to stymie democratic attempts at redistribution. It could even happen here people!

You heard it here first people. Glad we have the World Bank to keep us informed about economics and politics and stuff.

Oh goodness gracious, I wonder if this is going to come to pass. I hope not, sounds pretty undesirable. Maybe if we could politely inform these wealthy oligarchs of the inefficiencies associated with this strategy they will politely assent and choose instead to re-invest their fortunes into new production lines.

“the important thing is to have people who are willing to invest”

High inequality is necessary for investment people! I mean, just look at the US today – inequality has gone through the roof and business investment has never been higher! Watch out, all you leftists and redistributionistas – you are killing our pro-investment moment! Who wants to invest in productive capacities when people at the middle and bottom of the economic distribution actually have the disposable income to buy your crap? Where is the fun in that?

“We cannot, over the short or medium term, affect the distribution of financial assets much, but we can affect the distribution of education (what economists call “human capital”)—hence the emphasis on better access to education for everybody.”

Education (human capital) is super exceptional people – it doesn’t even follow the laws of supply and demand! Lets get everyone a degree so everyone can get paid the premium for having a degree! Luckily there are no distinctions of prestige between different degrees from different institutions that might work to reproduce these same inequalities among the nominally educated. #solutionsforourtime

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ZM 11.09.14 at 11:24 pm

As well as cacao small farmers and labourers not eating chocolate, it is important to note that most Ivory Coast cacao is farmed with forced trafficked labour and child labour.

http://youtu.be/4Gktid0YO9s

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Brett Bellmore 11.09.14 at 11:57 pm

“As well as cacao small farmers and labourers not eating chocolate,”

I find it somewhat hilarious that, whenever my wife puts together a box of stuff to send to her family, she always makes a point of including a lot of chocolate bars, because they really do enjoy eating chocolate. Love the stuff.

Hilarious because they’ve got a cacao tree. But understandable because there’s a lot of work between the fruit of the cacao, and anything a westerner would recognize as “chocolate”.

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Bruce Wilder 11.10.14 at 12:20 am

gianni @ 76

Earlier, in a different section of his book, in talking about the Kuznets’ 1955 hypothesis that economic development would produce an inverted U of inequality — first, increasing inequality as capital accumulated to fund initial industrialization and then increasing equality as countries developed further, Milanovic briefly explained how economists had “augmented” Kuznets’ hypothesis to adapt it to the details of what happened in various countries in the course of the latter half of the 20th century, adding in factors like the extent of government employment or the development of the financial sector. One of the “augmentations” he identifies might be revealing of his thinking:

. . . a more efficient and broader financial sector would allow poor individuals to borrow to finance their own educations, and this would reduce inequality as the doors of educational advancement are thrown open to all and not reserved only for the rich.

He labeled this idea, a rationale, but it was striking to me that he would come up with this example, rather than, say, the historic expansion of public education, which accompanied economic development in the now most advanced countries. And, it was also striking that he didn’t question the implications for inequality of the math involved in borrowing to finance education.

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gianni 11.10.14 at 12:41 am

Bruce Wilder –
Not much to say by way of reaction, but I do want to note that I appreciate you going through his work here as it is quite interesting . doubt I am the only one thinking such, so no need to apologize for all the block quotes above, etc.

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William Timberman 11.10.14 at 1:05 am

These seem to me to be the principles American neoliberalism was designed to defend:

1) I earned my money. What I do with it is none of the &#%^#& government’s business, or yours.
2) If I pay your salary, I get to tell you what to do.
3) If I pay for your education, I get to say what you get taught.
4) If I fund your congressional campaign, see no. 2 above.

As quoted above by Bruce Wilder, Milanovic’s view of the principles involved appears to be a bit more, shall we say, nuanced, but but also slightly befuddled in just the way that Bruce suggests. Reading these excerpts, I have a hard time telling whether Milanovic is merely an ironist, or actually part of the enemy’s baggage train. In fairness to him I suppose I should read his whole book, and not just the snippets found here and elsewhere on the Intertubes.

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sPh 11.10.14 at 1:19 am

mattski @ 5:34 “But that doesn’t mean respecting all differences, since you’re obviously right that some differences are pathological. And at the same time, is it unreasonable to say that, for example, everybody wants to be happy? Is it unreasonable to say that everybody needs food & shelter or everybody wants to feel loved?”

Um, no. There is a fairly substantial number of people in the United States who believe that the purpose of life is discipline under an authoritarian leader plus heaps of suffering for those who follow the leader and suffering + severe punishment for those who step outside the boundaries. And also punishment plus the “consequences” of starvation and death by lack of medical care for those who ‘fail’, which is to say those who for any reason whatsoever are unable to earn a minimum salary working for wages under one of the elite. Happiness ain’t got nuttin to do with it.

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mattski 11.10.14 at 2:03 am

82

What are you talking about?

Good grief.

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Peter T 11.10.14 at 2:13 am

Economists, and most of the rest of us, think of equality in terms of consumption. Which is fair enough, because that’s the end game. But there is no consumption without production, and production is not, as is often pretended, a matter of specialised exchange but of cooperation necessarily involving hierarchies. So inequality is baked in. What’s not baked in is how much and who. I’m not a big fan of models, but perhaps a story one makes the point:

The standard Econ 101 pictures a fishing village as populated by fisherfolk who each go out and catch fish (presumably in coracles). Each is rewarded for his/her luck, skill and diligence with some quantity to trade in the market for apples or whatever. There is some inequality resulting from natural factors (these figure large in modern libertarian discourse). If you think about this, there’s no room for investment: what would you invest in in such an economy? More coracles? In return for what?

But in fact our fishing village gets its fish with 12 person schooners. The schooner and crew as a unit, not any individual, pulls the fish in. One captain, two mates, two four-man watches and a cook. Who is the least dispensable member of the crew? The cook. Will they be paid more than the captain? No, not even if captains line the strand and ships lie idle for want of cooks. Pay and privileges will reflect the working hierarchy that keeps the schooner functioning. But the differential between captains and seamen will reflect the outcome of political bargaining, not individual merit. It could, as on whalers and pirate ships, be as low as 4 or 5 to one, or it could be much higher. Unions, access to external sources of power, the demands of solidarity and much else will all go into the ongoing wrestle. In such an economy there is not only room for investment but for rent-seeking, wealth-extraction, cost-shifting and much else. All the games we play.

In cooperative production, inequality is a social given, but the level and type is not. That’s our dilemma, even as we have gone beyond schooners to the 50,000 people or more who make a car factory run. If you want to see how thin the story about individual effort and reward is, read Mark Twain’s account of the Mississippi pilot’s union and ask – who was harmed when they raised their share of the collective output?

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sPh 11.10.14 at 2:16 am

mattski @ 2:03 “What are you talking about?
Good grief.”

I hate to be the one to break the news to you, but out here in the center of the US there are substantial numbers of people whose personal and political philosophy revolves around authoritarianism and punishment (both figurative and literal), and to whom “happiness” is at best unimportant and at worst evil. If you’ve never encountered such good on you, but unfortunately I’m not so lucky.

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Collin Street 11.10.14 at 2:20 am

> Watch out, all you leftists and redistributionistas – you are killing our pro-investment moment!

You can’t lend people money if they have enough money.

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Brett Dunbar 11.10.14 at 2:21 am

@4

I think you are thinking of Vietnam not Korea, the two wars were very different, one was a simple conventional war the other was a guerilla war, your description fits Vietnam it doesn’t fit Korea. The Korean War did roughly equal damage to both parts of the peninsular. The North invaded and briefly occupied everything except the small area around Pusan, the UN then authorised a military operation in which a US led force defeated the North Koreans and advanced almost to the Yalu river, the Chinese then invaded and pushed to a line a little south of Seoul the UN then counter-attacked and pushed to pretty much the current frontier by the middle of 1951. That was in the first year, the two armies then sat there for two years while negotiating and not doing much else. The south suffered, if anything, slightly more damage as a bit more of the land warfare took place in what is now the south. Seoul was occupied twice by the North while Pyongyang was occupied once. A fairly broad band along the northern part of South Korea changed hands three times. I don’t think that it is reasonable to attribute the difference between them to the war. Their position at the end was roughly equal materially and both were ruled by extremely obnoxious tyrants. The differences emerge later. It really isn’t reasonably to blame the war for the differences.

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ZM 11.10.14 at 2:35 am

Brett Dunbar,

My understanding is that MASH misrepresents the sort of warfare the U.S. engaged in against North Korea. As China supported North Korea the U.S. realised it could not defeat them with conventional ground warfare and used bombing and chemical and perhaps biological weaponry against North Korea .

This was very unequal as North Korea was very behind in technology and did not have a similar technological capacity, and nor did China at the time.

i think it quite likely a big reason the North became the paranoid isolated country with an oversized military is in part due to this egregious use of modern weapons against it. The South Korean regime at the time if the North’s invasion/attempt at reunification was if I remember correctly led by Japanese collaborators, and even Soth Koreans disliked them.
It was quite unfair to divide Korea up into North and South.

“Twenty years later I was about to cross the Yalu River on a Chinese train. At Sinuiju, I was welcomed onto the sacred soil of the DPRK with a bunch of flowers. Standing in front of a life-size statue of Kim Il-sung, my host told me that he was a bit disturbed by the scale of the personality cult in China. In Pyongyang a Young Pioneer gave me another bouquet of flowers. I was shocked at what I saw as we drove through the city: we could have been in Eastern Europe after the Second World War. Then I remembered that what General Curtis LeMay had threatened to do to North Vietnam had already been done to North Korea: it had been bombed into the Stone Age. There were no protests in the West against the heavy bombing of Pyongyang at only 15 minutes’ notice: 697 tons of bombs were dropped on the city, 10,000 litres of napalm; 62,000 rounds were used for ‘strafing at low level’.

Three years earlier in Phnom Penh the Australian journalist Wilfred Burchett had told me that what I had seen in Vietnam was ‘nothing compared to what they did to Korea. I was there. There were only two buildings left standing in Pyongyang.’ It was alleged that the US had used germ warfare, and although the US dismissed these claims as ‘outrageous’, on 9 August 1970 the New York Times reported that chemical weapons had been considered after ‘American ground forces in Korea were overwhelmed by Chinese Communist human wave attacks near the Yalu River’. Pentagon policymakers wanted to ‘find a way to stop mass infantry attacks’, so ‘the army dug into captured Nazi chemical warfare documents describing sarin, a nerve gas so lethal that a few pounds could kill thousands of people in minutes if the deadly material were disbursed effectively.’ Was it used in Korea? Probably not, though germ warfare tests were conducted in US cities. In one test ‘harmless’ bacteria were introduced into the Pentagon’s air-conditioning system.”
http://www.lrb.co.uk/v34/n02/tariq-ali/diary

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ZM 11.10.14 at 2:54 am

This article says the destruction of the North was greater than the South, and overall greater than that of Japan during WW2 and included great amounts of civilian infrastructure

“The Korean War, a “limited war” for the US and UN forces, was for Koreans a total war. The human and material resources of North and South Korea were used to their utmost. The physical destruction and loss of life on both sides was almost beyond comprehension, but the North suffered the greater damage, due to American saturation bombing and the scorched-earth policy of the retreating UN forces.

The US Air Force estimated that North Korea’s destruction was proportionately greater than that of Japan in the Second World War, where the US had turned 64 major cities to rubble and used the atomic bomb to destroy two others.

American planes dropped 635,000 tons of bombs on Korea — that is, essentially on North Korea –including 32,557 tons of napalm, compared to 503,000 tons of bombs dropped in the entire Pacific theatre of World War II.

The number of Korean dead, injured or missing by war’s end approached three million, ten percent of the overall population. The majority of those killed were in the North, which had half of the population of the South; although the DPRK does not have official figures, possibly twelve to fifteen percent of the population was killed in the war, a figure close to or surpassing the proportion of Soviet citizens killed in World War II.

The act which inflicted the greatest loss of civilian life in the Korean War by far, one which the North Koreans have claimed ever since was America’s greatest war crime, was the aerial bombardment of North Korean population centers.

American control of the skies over Korea was overwhelming. Soviet MIGs, flown by Soviet, Chinese, and North Korean pilots, were sometimes effective against American air power. But under Stalin’s orders, the Soviet fighter planes were strictly limited in number and in the range they were allowed to fly, lest US-Soviet air battles lead to a larger war.

And in any case, Soviet air support did not come until the end of 1950. During the summer and fall, North Korean air defenses were virtually non-existent. Lightly armed, local self-defense units in occupied South Korea could only watch and suffer as their towns and villages were obliterated from the air.5 By the end of the war, North Korea claimed that only two modern buildings remained standing in Pyongyang.

For the Americans, strategic bombing made perfect sense, giving advantage to American technological prowess against the enemy’s numerical superiority.

The American command dismissed British concerns that mass bombardment would turn world opinion against them, insisting that air attacks were accurate and civilian casualties limited.

Russian accusations of indiscriminate attacks on civilian targets did not register with the Americans at all. But for the North Koreans, living in fear of B-29 attacks for nearly three years, including the possibility of atomic bombs, the American air war left a deep and lasting impression.

According to DPRK figures, the war destroyed some 8,700 factories, 5,000 schools, 1,000 hospitals and 600,000 homes.

Worse was yet to come. By the fall of 1952, there were no effective targets left for US planes to hit. Every significant town, city and industrial area in North Korea had already been bombed. In the spring of 1953, the Air Force targeted irrigation dams on the Yalu River, both to destroy the North Korean rice crop and to pressure the Chinese, who would have to supply more food aid to the North. Five reservoirs were hit, flooding thousands of acres of farmland, inundating whole towns and laying waste to the essential food source for millions of North Koreans….”

http://www.japanfocus.org/-charles_k_-armstrong/3460

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Brett Dunbar 11.10.14 at 3:26 am

I’m fairly sure I’ve never seen an episode of MASH. I have read some histories of the war.

While the use of nuclear weapons was considered, MacArthur was in favour. Non conventional weapons weren’t actually used, weapons that aren’t used cause no damage. After the large scale mobile warfare of the first year was over, in which the south suffered more than the north. The front was static for the rest of the war. While the UN had an advantage in the air it wasn’t especially large and as they were not seriously attempting to win they didn’t subject the north to heavy bombing, all the serious effort was in the first year, which had fairly comprehensively devastated both.

The two parts of Korea ended the war in roughly equal positions, the north possibly slightly better off as less of the large scale ground warfare took place there. And that does much more damage than conventional bombing could. The economic performance post war was initially similar only diverging rather later, the GDPs remained roughly equal until about 1973, during the early 1970s the North’s was, if anything, higher. The divergence occured more than twenty years after the war, so blaming it seems rather perverse.

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Brett Dunbar 11.10.14 at 3:58 am

The North was devastated during the war, but so was the South, the large scale land warfare ended in the middle of 1951, the bombing continued until mid 1953, there wasn’t much infrastructure in either at the time, Japan hadn’t developed Korea’s economy much and the Royal regime before it had been medieval. The point is that in the immediate aftermath of the war the North actually recovered better, it was only over twenty years later that the South started outperforming the north. The GDPs remained almost identical until the mid 1970s. If it were war damage you would expect to have seen the south with a large advantage in 1954 (when the bombing had entirely ceased) and retain it. This is not what is seen the divergence occurred about 1973. Until then both had a steadily accelerating growth rate. At that point the South continued the trend while the North’s economic growth ceased, flatlined until about 1992 then dropped by about half and then stayed there.

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mattski 11.10.14 at 5:14 am

85

OK, my friend. I still don’t know what you’re talking about, and don’t know what your claims have to do with my remarks. But if your goal is to enlighten then why not provide some specific information, links, etc.

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ZM 11.10.14 at 7:29 am

Brett Dunbar,

You do not give the names of any of these history books you say you have read about the Korean war. I am doubtful they are reputable given what you tell us you know of the war.

“While the use of nuclear weapons was considered, MacArthur was in favour. Non conventional weapons weren’t actually used, weapons that aren’t used cause no damage. “

I did not say anywhere that nuclear weapons were used on North Korea — although the US did threaten to use them.

What do you consider as “coventional” and “unconventional” warfare? I will quote from an article on the Korean War, now I am in a grim mood indeed having read two lengthy articles on war and airbombing of civilians today.

“As an historian of that war, what, to me, is indelible in its history is the extraordinary destructiveness of the American air campaigns against North Korea, ranging from the widespread and continuous use of firebombing (mainly with napalm), to threats of the use of nuclear and chemical weapons, and finally to the destruction of huge North Korean dams in the final stages of the war. Yet this history is almost unknown…

It is now clear that, from the first days of the Korean War, Washington contemplated the use of atomic weapons in what historians like to call this ‘limited’ war. On 9 July 1950 – a mere 2 weeks into the war, it is worth remembering – the United Nations commander, General Douglas MacArthur, sent General Matthew Ridgway a ‘hot message’ which prompted the Joint Chiefs of Staff (JCS) ‘to consider whether or not A-bombs should be made available to MacArthur…

At a famous news conference on 30 November, President Truman threatened use of the atomic bomb, saying the US might use any weapon in its arsenal; it was a threat based on contingency planning to use the bomb, rather than the fauxpas so many assumed it to be.

Curtis LeMay remembered correctly that the JCS had earlier concluded that atomic weapons would probably not be useful in Korea, except as part of ‘an overall atomic campaign against Red China’. But, if these orders were now being changed because of the entry of Chinese forces into the war, LeMay wanted the job: he told Stratemeyer that his headquarters was the only one with the technical and ‘intimate of experience, training, knowledge’ delivery methods. The man who directed the firebombing of Tokyo in March 1945 was again ready to proceed to the Far East to direct the attacks

Without the use of ‘novel weapons’ – although napalm was very new at the time, introduced just at the end of World War II, and unprecedentedly big conventional bombs were dropped – the air war nonetheless levelled North Korea and killed millions of civilians before the war ended. Before the Chinese entry into the war, the best evidence of the destructiveness of this air campaign is to be found in personal observations of the war. Reginald Thomson, a British journalist provided an unforgettable account of the nature of this war in his much-neglected eyewitness account, Cry Korea (1951 ).

Thomson was sickened by the carnage of the American air war, with the latest machined military might used against ‘an almost unarmed enemy, unable to challenge the aircraft in the skies’. In September 1950, he wrote, ‘handfuls of peasants defied the immense weight of modern arms with a few rifles and carbines and a hopeless courage … and brought down upon themselves and all the inhabitants the appalling horror of jellied petrol bombs’. Every enemy shot, he said, ‘released a deluge of destruction Every village and township in the path of war was blotted out’. In such warfare’, the slayer needs merely to touch a button, and death is on the wing, blindly blotting out the remote, the unknown people, holocausts of death, veritable mass productions of death, spreading an abysmal desolation over whole communities’.

On 8 November, 70 B-29s dropped 550 tons
of incendiary bombs on the Sino-Korean border city of Sinnfiju, ‘removing [it] from off the map’; a week later Hoeryong was hit with napalm ‘to burnout the place’; by 25 November, ‘a large part of [the] North West [sic] area between Yalu River and southwards to enemy lines… [was] more or less burning’. Soon the area would be a ‘wilderness of scorched earth’

This was all before the major Sino-Korean offensive that cleared northern Korea of UN forces. When that began, the Air Force, on 14-15 December, hit P’yongyang with 700 500-pound bombs, napalm dropped from Mustang fighters, and 175 tons of delayed-fuse bombs, which land with a thud and then blow up at odd moments when people are trying to rescue the dead from the napalm fires.

At the beginning of January Ridgway again ordered the Air Force to hit the capital, P’yongyang, ‘with the goal of burning the city to the ground with incendiary bombs’ (in
two strikes on 3 and 5 January) . At about the same time American B-29s dropped ‘tarzon’ bombs on the town of Kanggye, where the Kim II Sung leadership was bunkered; the tarzon was an enormous new 12,000-pound bomb never used before.

As Robert Lovett later put it, ‘If we keep on tearing the place apart, we can make it a most unpopular affair for the North Koreans. We ought to go right ahead’. The Americans did go right ahead, and in the final act of this barbaric air war hit huge irrigation dams that provided water for 75 percent of the North’s food production.

By this time agriculture was the only major element of the Korean economy that was stilll functioning; the attacks came just after the laborious, backbreaking work of rice-transplantation had been done in the spring of 1953. The AirForce was proud of the destruction it created: “The subsequent flash flood scooped clean 27 miles of valley below, and the plunging floodwaters wiped out [supply route etc….]. The Westerner can little conceive the awesome meaning which the loss of [rice] has for the Asian -starvation and slow death.”

The ‘lessons’ adduced from this
experience ‘gave the enemy a sample of the totality of war… embracing the whole of a nation’s economy and people’ . In fact this was a war crime, recognised as such by international law; in the latter stages of World War II American leaders had declined to bomb agriculture dams and dikes in Holland precisely because they knew it to be a warcrime.

Hungarian Tibor Meray had been a correspondent in North Korea during the war, and left Budapest for Paris after his participation in the 1956 rebellion against communism. When a London television team interviewed him in 1986, he said that however brutal Koreans on either side might have been in this war: “I saw destruction and horrible things committed by the American forces… Everything which moved in North Korea was a military target, peasants in the field often were machine gunned by pilots who I [thought] , this was my impressions, amused themselves to shoot the targets which moved…. We traveled in moonlight, so my impression was that I am traveling on the moon , because there was only devastation…every city was a collection of chimneys… I went through a city of 200,000 inhabitants and I saw thousands of chimneys and that – that was all.”

This was Korea, ‘the limited war’. We may leave as an epitaph for this unrestrained air war the
views of its architect General Curtis LeMay. After the war started he said:

“We slipped a note kind of under the door into the Pentagon and said, ‘Look, let us go up there… and burn down five of the biggest towns in North Korea – and they’re not very big – and that ought to stop it’ Well the answer to that was four or five screams — ‘you’ll kill a lot of non-combatants’, and ‘it’s too horrible’. Yet over a period of three years or so … we burned down every [sic] town in North Korea and South Korea too… Now over a period of 3 years this is palatable, but to kill a few people to stop this from happening – a lot of people can’t stomach it.””

From: CUMINGS, B. On the strategy and morality of American nuclear policy in Korea, 1950 to the present. Social Science Japan Journal. 1, 1, Apr. 1998. ISSN: 13691465.

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gianni 11.10.14 at 9:03 am

Yeah Brett Dunbar, big *citation needed* at the end of your posts there, at least if you want to argue with ZM who is clearly providing what seem to be fine sources.

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Bruce Wilder 11.10.14 at 10:04 am

William Timberman @ 81: I have a hard time telling whether Milanovic is merely an ironist, or actually part of the enemy’s baggage train.

You remember the old saw about knowing the price of everything and the value of nothing? Well, Milanovic has reproduced that concept as methodology.

Branko Milanovic isn’t an American conservative libertarian or even a Chicago school economist. He is closely identified with the work he did as a World Bank economist. His Wikipedia page includes this descriptive crediting: “His 2005 book (“Worlds Apart”) about global income disparity introduced three concepts of international inequality: unweighted inequality between mean country incomes, population-weighted inequality between mean country incomes, and global income inequality between all individuals in the world.” He is, as international civil servants tend to be, nothing if not earnest; he’s done a lot of research on poverty — or at least poverty statistics — and he’s against poverty, just so you know.

He’s bright and articulate, and the book I quoted from is readable and charming, being mostly a collection of light, but intriguing and illuminating stories, some of them a bit off-beat by academic standards — not freakonomics, thank god, but not preachy or didactic either.

His discussion of the economic pressure behind migration from the developing world to the first world, and the increasingly rigid resistance to it, is factual, moderately well-informed, eloquent and eminently humane.

I think Milanovic doesn’t actually know much about the functional analysis of the distribution of income or the theory of economic development or the historic course taken by the Industrial Revolution. When he cites the economic historian Gregory Clark, it is not for the survey of economic history,A Farewell to Alms, it’s for a new data series of English real wages. This is a guy, who wants us to know (emphasis added):

Two additional points deserve our attention before we engage further. First is the issue of the increase in the number of nations. If there are more countries in the world—however we measure income differences between them—the overall inequality will appear larger. . . . This is indeed a real problem when we compare the present with, say, the early nineteenth century, when both the number of countries in the world was less . . . .

Which is to say that mathematical artifacts loom larger in his outlook than any sort of theory or ideology of economic causality. When he writes about economic causality, as in the sections I quoted earlier, he is trying to summarize what he understands of the mainstream consensus and Econ 101, without being critical or controversial. I think he’s trying to satisfy the World Bank’s standard for diplomatic and tactful authority, and, indeed, he thanks a World Bank colleague, an expert on equity in development, for his help.

In one of the “vignettes” he presents later in the book, he writes about his view of the financial crisis in the U.S. and attributes the crisis to increasing inequality of income.

The current financial crisis is generally blamed on feckless bankers, financial deregulation, crony capitalism, and the like. Although all of these elements may have contributed, this purely financial explanation of the crisis overlooks its fundamental reasons. They lie in the real sector, and more exactly in the distribution of income across individuals and social classes. Deregulation, by helping irresponsible behavior, just exacerbated the crisis; it did not create it. . . .

American income inequality over the past hundred years thus basically charted a gigantic U, going down from its 1929 peak all the way to the late 1970s, and then rising again for thirty years. What did the increase mean? Such enormous wealth could not be used for consumption only. There is a limit to the number of Dom Pérignons and Armani suits one can drink or wear. And, of course, it was not reasonable either to “invest” solely in conspicuous consumption when wealth could be further increased by judicious investment. So, a huge pool of available financial capital—the product of increased income inequality—went in search of profitable opportunities in which to invest. . . . But this is only one part of the equation: how and why large amounts of investable money went in search of a return on that money.

The second part of the equation explains who borrowed that money. There again we go back to the rising inequality. The increased wealth at the top was combined with an absence of real economic growth in the middle. The real median wage in the United States has been stagnant for twenty-five years, despite an almost doubling of GDP per capita. About one-half of all real income gains between 1976 and 2006 accrued to the richest 5 percent of households. The new “Gilded Age” was understandably not very popular among the middle class who saw their purchasing power not budge for years. Middle-class income stagnation became a recurrent theme in American political life, and an insoluble political problem for both Democrats and Republicans. Politicians obviously had an interest in making their constituents happy, for otherwise they may not vote for them. Yet they could not just raise their wages. A way to make it seem that the middle class was earning more than it did was to increase its purchasing power through broader and more accessible credit. People began to live by accumulating ever-rising debts on their credit cards, taking on more car debts or higher mortgages. President George W. Bush famously promised that every American family, regardless of its income, would be able to own a home. Thus was born the great American consumption binge that saw the household debt increase from 48 percent of GDP in the early 1980s to 100 percent of GDP before the crisis. . . .

The root cause of the crisis is not to be found in hedge funds and bankers who simply behaved with the greed to which they are accustomed (and for which economists used to praise them). The real cause of the crisis lies in huge inequalities in income distribution that generated much larger investable funds than could be profitably employed. The political problem of insufficient economic growth of the middle class was then “solved” by opening the floodgates of cheap credit. And the opening of the credit floodgates, to placate the middle class, was needed because in a democratic system, an excessively unequal model of development cannot coexist with political stability.

So, this is how he applies the theory he laid out earlier, and it sounds superficially reasonable. In fact, it sounds a bit like Josh Mason in some respects. You just have to overlook the way inequality, a mathematical artifact, has become a fundamental causal agent, and the mechanics of distribution (hello, the credit system is a mechanism of distribution, which he might know, if he had an actual theory of the distribution of income) has become a distraction. He says the “fundamental reasons . . . lie in the real sector” but never expands on that curious assertion, while tracing the dynamics of money seeking investment outlets. And, you kind of have to ask yourself, if politicians “could not just raise their wages”, but they could open “the floodgates of cheap credit”, what it is that circumscribes policy choice, and why it is he’s so intent on letting bankers off the hook. It is not quite at the abysmal level of “anticipation of ObamaCare caused business confidence to plummet”. It might even be better than the current Krugman line — “we economists recognize a bank run when we see one; have model, will travel” — since Krugman insists that any plausible degree of inequality is theoretically compatible with full employment.

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Bruce Wilder 11.10.14 at 10:04 am

Branko Milanovic on migration

In a recent World Bank study, people from seven countries were asked whether they would move to another country (permanently, temporarily, or “just to try it out”) if it were legally possible.3 A whopping 62 percent of Albanians expressed interest in moving permanently or temporarily out of their country; for Romanians, the percentages were 79 percent for males and 69 percent for females; for Bangladeshi, 73 percent for males and 47 percent for females. In this small sample, we see that countries that have done economically poorly would, if free migration were allowed, remain perhaps without half or more of their populations. With fully open borders, we would witness enormous migration flows that would almost empty out some parts of the globe. There is little doubt that a large share of the African population, particularly the youth, would inundate West Europe, the part of the world that is colloquially known in some Congolese languages as “the heaven.” . . .

Whether it is under the pressure of domestic labor or out of fear of cultural heterogeneity, the rich world has begun a process of walling itself in, creating de facto gated communities at the world level. The most infamous of them is the U.S.-Mexican border fence that is supposed to run for seven hundred miles. It is, at times, a twenty-foot cement wall, reinforced by barbed-wire obstacles and equipped with numerous cameras and sensors. The Mexican Wall should, when fully constructed, be seven times as long as the Berlin Wall and twice as high. Nevertheless, it is estimated that more than 200,000 Mexicans enter the United States illegally every year,4 and that at least 400-500 die trying to cross the border. . . .

These people who try to leave their countries of birth for the uncertain pleasures of Europe are not only poor; they do not see any future, any place for themselves, in their own societies. Their desperate bids to reach Europe are silent accusations leveled against the governments that are unable to provide any social and economic perspective to the growing multitudes of the young. They are also an indictment of the economic failure of Arab and sub-Saharan Africa, a testimony to the increasing income gap between the two shores of the Mediterranean. In reality, as Ali Bensaad, a Franco-Algerian sociologist, says, “one should salute the tenacity and courage of the harraga. Lacking any channels of political … expression, those are the youth who react with the elements they have constructed from a devastated cultural and political space, emptied of all meaning by their governments.”

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Ze Kraggash 11.10.14 at 10:57 am

@3 “You can kill the golden goose if you get too concerned about who gets the eggs, rather than that they get laid. “

I’ll note that this worry — a-la James Madison’s of the dangerous “symptoms of a leveling spirit” — is probably best addressed by a preemptive, timely, and sufficient appeasement of that spirit. Or is there any other way? If not, then everyone here should be on the same side. Of course the devil is in the details, the methods. A global wealth tax/redistribution? Opening the borders? Not terribly convincing, let alone realistic.

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Chris Bertram 11.10.14 at 10:58 am

“for Romanians, the percentages were 79 percent for males and 69 percent for females;”

Of course, the Romanians do have freedom of movement within the EU, so we don’t have to rely on opinions expressed in unreliable surveys but can look at what they actually choose to do. And when we look at that we see that though many choose to leave, much higher numbers remain than these quotes suggest.

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Brett Dunbar 11.10.14 at 11:30 am

Mainly Max Hastings account. And checking some comparisons of the GDPs for example in the Wikipedia article on the North Korean economy. Basically they are consistent in having the performance being largely equal until the mid 1970s, long after the war ended.

ZMs claims are almost totally irrelevant given that the economic performance of the two parts of Korea were hardly distinguishable until twenty year after the war, the north doing perhaps slightly better in any event their wasn’t a big difference. The north was heavily damaged during the war, but so was the south. Korea was a peasant economy with little infrastructure before the war, much of what there was, was destroyed in the first year of the war. In any event bombing entirely ceased in 1953 when the war ended. There was discussion of using chemical and nuclear weapons, they weren’t used so obviously did no damage.

Basically the timing doesn’t work for it being due to the war, the North’s economy stopped growing in about 1973 and then contracted dramatically in the early 1990s. The South’s has grown consistently over the same period and over time that has led to a huge difference in GDP per capita emerging from a position in 1973 when they were pretty much identical.

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bourbaki 11.10.14 at 12:16 pm

@97

I live in Maryland (which has one of the highest — if not the highest — median household incomes in the USA) and a poll that was getting a lot of play before the recent election said that 47% of us would move if we could.

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Layman 11.10.14 at 12:59 pm

“47% of us would move if we could.”

Where have we heard that number before…?

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ZM 11.10.14 at 1:17 pm

Brett Dunbar,

I cannot believe you are arguing that the Korean War (which has resulted in a still ongoing antagonism between the U.S. and North Korea) has no bearing on the North Korean economy?!?!

“There was discussion of using chemical and nuclear weapons, they weren’t used so obviously did no damage.”

Napalm is a chemical weapon and was used by the U.S. on North Korea extensively. I at no point claimed the U.S. did use the atomic bomb on North Korea, despite threatening to do so.

” In any event bombing entirely ceased in 1953 when the war ended. “

Despite the Armistice Agreement there is a permanent presence by the US Army on North Korea’s border, and there are sanctions and threats made against the country too.

“As Cumings [the author of the article I quoted above] elaborates, “The U.S. long ago put North Korea under siege (embargoing its economy since 1950, running huge war games near its borders, observing it by any and all means)”. Nicholas Eberstadt describes North Korea’s economic crisis thusly: “Today, North Korea has the awful distinction of being the only literate and urbanized society in human history to suffer mass famine in peace time”.

However, the North has never truly been at peace since its establishment.

Furthermore, the US maintained nuclear weapons in South Korea until 1991. Even after their withdrawal, North Korea has no assurance that the US will never threaten it with nuclear weapons again. In 2010 when the North shelled South’s island, Yeonpyeong Island, in protest against joint South Korea-US military drills, the US immediately dispatched the nuclear-powered aircraft carrier USS George Washington to the Yellow Sea…. Cumings argues “leaders in Seoul repeatedly sought assurances from Washington that the North would not be attacked over Seoul’s veto. It is my understanding that they never received those assurances”.

he Vietnam War demonstrated that neither China nor the Soviet Union would guarantee North Korean security in case of another war in the Korean Peninsula.35 Nevertheless, the existence of socialist allies was a vital counterbalance to the US-led alliance in East Asia. In this sense, the normal- isation of diplomatic relations between China and the United States in the 1970s and between China and South Korea in the early 1990s along with the collapse of the socialist bloc in Eastern Europe and the Soviet Union, isolated North Korea in its foreign relations and dramatically undermined its security…”

“ZMs claims are almost totally irrelevant given that the economic performance of the two parts of Korea were hardly distinguishable until twenty year after the war”

The experiences of the Korean War were different in North and South, and the international and geopolitical consequences were completely different as well. North Korea is hardly treated by other countries the same as they treat South Korea – and this is to do with the Korean War and the Cold War.

Twenty years after the war, when you not a decline in North Korea’s economy, was, ironically enough, when it started experimenting with global capitalist finance:

“Despite its strong commitment to sovereignty and territorial integrity, North Korea has gradually and carefully promoted some attempts to build up connections with the capitalist world since the early 1970s.

Between 1971 and 1975, North Korea acquired loans from Western countries equivalent to US$1.2 billion. However, like many energy-dependent developing economies, the two oil shocks and the global economic downturn unfavourably affected North Korea’s outward expansion and finally brought about a declaration of debt defaults. North Korea has been avoided by Western capital and financial institutions ever since.”

“Basically the timing doesn’t work for it being due to the war, the North’s economy stopped growing in about 1973 and then contracted dramatically in the early 1990s.”

So, what was happening globally that might have affected North Korea’s economy in the 1990s I wonder?

“The disintegration of the Cold War system not only damaged North Korean security but also its economy. North Korea urgently needed to find a substitute for the socialist world market and aid. A Guidebook on Chosun [North Korea] Investment Laws explains the background for the establish- ment of the special economic zones as follows:

“Since the Soviet Union and Eastern European socialist countries that had been our major trading part- ners collapsed, our country creates the special economic zones to actively promote trade relations with the capitalist countries and to achieve national interests”.”

In the mid-1990s North Korea suffered flooding that resulted in crop failures and famines, while “the collapse of the Soviet Bloc and China’s intensification of reforms in the early 1990s not only led to the disintegration of the socialist market and created a critical shortage of fuels and resources but also radically undermined North Korea’s secu- rity environment”. Additionally, the U.S. increased beligerent threatening of North Korea as “America’s greatest security threat” following the first Gulf War, and Kim Il Sung had died in 1994.

Altogether these events led to North Korea prioritising national security ahead of the economy. North Korea, understandably, sees this as part of its long battle with the U.S. and allies.

“An editorial in the Global Times, which is widely known to speak for official Chinese for- eign policies, also recognised North Korea’s dilemma:

“North Korea has no choice but to secure state power instead of seeking economic development. Having been secluded and antagonized by the international community for many years, North Korea wavers frequently between military expansion and economic development”.

In short, North Korea attempted an economic opening of territory with the establishment of the Rason Economic Zone, going beyond its abiding representation of territory only as a shelter or fortress. Yet, crises during the 1990s forced it to re-strengthen geopolitical territorial practices and discourses with a new political system of military- first.”

George W. Bush called North Korea part of the “axis of evil” and in 2002 U.S. Assistant Secretary of State reported North Korea had admitted to him they were starting a uranium enrichment programme for nuclear weapons, also in 2002 the U.S. government released its new National Security Strategy declaring the U.S.’s right to act preemptively against whoever it decides are its adversaries.

All this intensified the ongoing conflict since the Korean War between the U.S. and North Korea.

It is either wilfully stupid or rhetorically crafty of you to pretend the Korean War and ongoing conflict has no bearing on North Korea’s economy :/

South Korea had made a great effort with its Sunshine Policy to try to normalise relations between the two Koreas, but any good will was spoiled by U.S. war mongering efforts throughout the 2000s and 2010s.

North Korea stated “In the current era with impending invasion schemes by imperialists and reactionaries, we cannot develop the socialist economy comprehensively without reinforcement of military power and develop- ment of the defense industry”.

And it was thought North Korea could become the U.S.’s next target after Iraq (which is now ongoing again). “One North Korean scholar explains the legitimacy of militarisation in the 2000s: “[The] American unilateral invasion into Iraq clearly shows that it is only with strong military deterrent that we can prevent a war and protect security of our country and nation. For this reason, our Republic has no choice but to strengthen military deterrent, fully mobilizing our country’s potential”.”

Apparently now that North Korea (very unfortunately in my view) has progressed with its nuclear program, it has decided it is in a position to concentrate on developing its economy again:

“The success of the nuclear test made North Korean leaders feel safe enough to shift their focus to building the country,” says Zhang Yushan, researcher at the Jilin Academy of Social Sciences. Regarding North Korea’s increasing zeal for economic recon- struction, Delury and Moon term it as “the transition from security-first to security-plus-prosperity””

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ZM 11.10.14 at 1:18 pm

Source: Lee, S. (n.d). The Production of Territory in North Korea: ‘Security First, Economy Next’. Geopolitics, 19(1), 206-226.

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William Timberman 11.10.14 at 1:58 pm

Bruce Wilder @ 96, 97 — Chris Bertram @ 98

Yes, to the limited extent that I’m familiar with Milanovic’s views, mostly from a few short Internet essays and his participation with other economists in a panel discussion about Piketty’s book, I think it’s fair to call him humane. But while it’s tempting, in investigating the economics of inequality, to focus almost exclusively on the historical mechanisms that express en masse individual reactions to particular life experiences, it can also be misleading.

What can be understood by such analyses is important — that there are multiple determining factors in any large scale social phenomenon, such as mass Mexican emigration to the U.S. and the political reactions to it, or the credit cards and liars-loan mortgages that make it easier for corporations to manage their profit margins, not to mention the expectations of their shareholders — it overlooks, in a way that even the crudest of Marxists would not, the extent to which such imbalances are designed and intentionally implemented, and more importantly, by whom, and for whose benefit. What’s missing from Milanovic’s impressively subtle analysis is the role of power, its motivations and the arc of its influence, and how those differ from what society actually requires from it.

Even if I hadn’t said so many times before in these threads, it’s no doubt obvious to any economist that I’m not one of their number, so it doesn’t embarrass me much to ask them dumb questions. In the present context I’d ask this: if in a mature capitalist economy, secular stagnation — a crisis of production and consumption, as I understand it — threatens the yields on the investments of our rentiers, what do they do about it? Product differentiation and demand management via advertising have a limited reach. (Do we really need 57 brands of toothpaste on our supermarket shelves, or organic lettuce right next to the pesticide-laden kind?) The effect of overturning the post-war consensus and letting women into the workforce has long since petered out, and cheap credit for the masses has apparently bitten our financial innovators in the ass much earlier than any economist had expected. What is to be done?

As a non-economist, I’d say that there are still plenty of things to invest in — social goods of all kinds have been going begging some some little while, no? — but not if chasing higher yields for the parasitic rentiers at the top of our collective food chain is still considered a sine-qua-non. If that’s indeed the case, even at this late date, then government-guaranteed casino capitalism is probably the best we can do. Since the 99% can still afford to make payments on a car, if not on a house, how ’bout we invent CDOs for used cars? That’s the trick, surely. And when Carl Icahn’s done blackmailing Apple, maybe he can start thinking about opportunities in renminbi-denominated assets.

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reason 11.10.14 at 4:19 pm

Brett Dunbar @100
And the fact they diverged first in 1973 suggests that it is probably not South Korea’s acceptance of inequality that was the cause of the divergence.

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mpowell 11.10.14 at 4:48 pm

ZM – your argument is basically to concede that the economic circumstance of North and South Korea today are not a result of the war but instead the political circumstances each found themselves in afterwards. Why not be more explicit about it? It is clear that you have no basis to argue that the economic consequences of the relative destruction in the North was worse than for the South unless you have some evidence to dispute the relatively similar economic performance of the two states for the subsequent 20 years.

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Brett Dunbar 11.10.14 at 6:44 pm

106 That is basically my point, the way that the war went left both is roughly the same positions, both basically peasant economies that had had what limited infrastructure built under Japanese rule largely destroyed. Both were ruled by extremely noxious regimes, the North’s was a little more tyrannical the South’s much more corrupt and incompetent.

Colonial period and post World War II

Beginning in the mid-1920s, the Japanese colonial administration concentrated its industrial development efforts in the comparatively under-populated and resource-rich northern portion of Korea, resulting in a considerable movement of people northward from the agrarian southern provinces of the Korean Peninsula.

This trend was not reversed until after the end of World War II, when more than 2 million Koreans moved from North to South following the division of Korea into Soviet and American military zones of administration. This southward exodus continued after the establishment of the Democratic People’s Republic of Korea (North Korea) in 1948 and during the 1950–53 Korean War. The North Korean population as of October 2008 was given as 24 million, compared with 48–50 million in South Korea.

The post-World War II division of the Korean Peninsula resulted in imbalances of natural and human resources, with disadvantages for both the North and the South. By most economic measures, after partition the North was better off in terms of industry and natural resources. The South, however, had two-thirds of the work force. In 1945, about 65% of Korean heavy industry was in the North but only 31% of light industry, 37% of agriculture, and 18% of the peninsula’s total commerce.

North and South Korea both suffered from the massive destruction caused during the Korean War. In the years immediately after the war, North Korea mobilized its labour force and natural resources in an effort to achieve rapid economic development. Large amounts of aid from other communist countries, notably the Soviet Union and the People’s Republic of China, helped the regime achieve a high growth rate in the immediate postwar period.

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J Thomas 11.10.14 at 6:50 pm

It looks to me like ZM says the different development of North Korea versus South Korea developed from the war, but not from the immediate direct destruction of the war.

I could imagine it either way. Oversimplified, imagine the development of both economies as logistic functions. If one of them is knocked back farther, then it will take longer for them to reach the point that the exponential growth is highly visible. But if one grows at a higher exponential rate, it can overcome the destruction easier. Then when the growth slows, one might approach a higher stable plateau than the other.

But they aren’t just functions. If one gets a big glob of outside investment early, that actually does pay off, that can advance them quickly. South Korea did, and North Korea didn’t. That is an indirect effect of the war, but not from the immediate destruction from the war.

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Rakesh 11.10.14 at 9:27 pm

amazing psycho-history that prasad provided of Milanovic.

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TM 11.10.14 at 10:21 pm

Rakesh 43, the GDP per capita numbers you are citing don’t tell us anything about global inequality in terms of the gap between the top and the bottom. I don’t think there is any evidence that globally, the difference in income (let alone wealth) between the top 1%, or 0.1% or 0.01%, and the bottom 10, 20, even 50% of the population is closing. To the contrary, I would wager and I doubt anybody around here would disagree that that gap is increasing globally, just as it is increasing within the US and China and many other countries individually.

It might be that when you compare the middle of the American and the Chinese distributions, the difference is getting smaller. It matters quite a bit how much we trust the PPP adjustments but at least in the case of China, there is little doubt that real improvements in the material living standard of the general population have been achieved (at the cost of considerable social and environmental damage certainly but nevertheless). That still doesn’t answer the question of global inequality.

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Rakesh 11.11.14 at 2:42 am

Yes PPP adjustments may prettify the situation of the poor in the poor countries as they do not capture the disproportionate impact of rising prices and basic goods on the poor. Kaushik Basu has made that point. I would not say that those numbers say nothing. I am not quite sure what implication you are drawing from Chinese growth, but Milanovic already has the top ventile in China above, I think, the bottom two ventiles in the US in terms of global income distribution. .

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ZM 11.11.14 at 2:42 am

mpowell,

“ZM – your argument is basically to concede that the economic circumstance of North and South Korea today are not a result of the war but instead the political circumstances each found themselves in afterwards. Why not be more explicit about it? It is clear that you have no basis to argue that the economic consequences of the relative destruction in the North was worse than for the South unless you have some evidence to dispute the relatively similar economic performance of the two states for the subsequent 20 years.”

You appear not to have followed the argument :/

The argument I made was not about the development of North Korea versus South Korea, but North Korea versus the U.S.A.

Brett Bellmore suggested the divergency between the fates of North Korea and the United States of America was based on the good management of the United States which encouraged productivity and did not encourage theft.

I made a short comment that Brett Bellmore seemed not to have factored in that the U.S. had destroyed North Korea as part of its varied international acts of war after WW2 – and perhaps this U.S. war making had something to do with the economic development of both North Korea and the U.S.

[N.B. I did forget to point out that the U.S. has been colonised by England starting from the late 16th C, whereas the European incursion into East Asia was later and they did not set up colonies in the same way. Brett Bellmore did not note at what historical point we should think of the U.S. and North Korea being at a similar “starting point” , and I doubt he could find a historical point of such similitide]

Entrance: Brett Dunbar

Brett Dunbar argued that the Korean War was fought as a conventional war, with normal weaponary and North and South Korea suffered equally.

I point our with reputable sources that the Korean War is not like MASH suggests, and that the U.S. used extensive aerial bombing including Napalm, which I do not consider as conventional warfare. I also point out it is said North Korea was more extensively destroyed, people relegated to living underground, thanks to U.S. aerial bombing attacking civilian and agricultural infrastructure.

Brett Dunbar argues that the Korean War had no affect on North KOrean economic development, since North Korea and South Korea developed at a simialr rate until the 1970s, and 1990s.

I point out with source that the U.S. and other international actors have treated North Korea as an enemy since the Korean War, and this has had repercussions on North Korean economic development – and detail factors in the 1970s , 1990s, and 2000s.

And bringing South Korea into it is irrelevant.

As I was never arguing about NOrth Korean development versus South Korean development, but about U.S. development versus North Korean development – I still hold my original point to Brett Bellmore that the U.S. attacks on North Korea during the KOrean War and subsequent U.S. treatment of North Korea as an enemy have been a major (if not the major) causal factor in North Korean economic developemnt since the Korean War. And, moreover, that U.S. military interventions in North Korea and elsewhere since WW2 have been a defining element in U.S. economic development in the same period.

What exactly are your points countering these points I am making ?

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gianni 11.11.14 at 3:27 am

When will the broader public start to hold the Bush administration partly responsible for the re-starting of the NK nuclear program in the early ‘oughts? To say nothing of the recognition of the US’s role in perpetuating that odious regime.

Probably never, because as we all know now the North Koreans are the Bad Koreans and the South Koreans are the Good Koreans. But after the North finally falls, and reunification is in the past, I really do wonder what the historians will say regarding the surprising resilience of the NK regime, and how big of a role the US military will have in that drama.

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TM 11.12.14 at 6:13 pm

Rakesh 112:
“I would not say that those numbers say nothing. I am not quite sure what implication you are drawing from Chinese growth, but Milanovic already has the top ventile in China above, I think, the bottom two ventiles in the US in terms of global income distribution.”

These numbers are probably not meaningless but whatever they say, they don’t imply a reduction in global inequality.

116

Brett Dunbar 11.13.14 at 3:41 am

ZM

Napalm is a conventional weapon, that category includes more or less everything except chemical, biological and nuclear weapons. Napalm is a fuel air explosive, it functions as an explosive and incendiary it does not function by means of chemical toxicity, it isn’t being used as a poison that means that it isn’t a chemical weapon.

Comparing North Korea with the USA seems a little absurd as there are so many differences. And indeed no one other than you did. Brett Bellmore compared North and South Korean economic policies and then made a related comment about the USAs success was linked to American governance. He wasn’t comparing North Korea to the USA he was arguing that the reason the South is a success while the North is an abject failure was due to the different politics in each.

I do note that you seem to have tried to imply that the USA was responsible for the Korean war when as a matter of historical fact the North engaged in an unprovoked invasion of the South. The USA had no great regard for Rhee and had quite deliberately restricted his access to heavy weapons in order to prevent any adventurism on his part.

War damage tends to get repaired fairly quickly, so does not have any real effect on events in the 1970s. Also the damage to the South was about as extensive, both had pretty much everything worth destroying destroyed.

Vietnam has done OK despite a really bad situation. After wars with both the USA and China during the 1970s Vietnam was diplomatically more isolated than North Korea, which at least had friendly relations with China. Despite this Vietnam has been able to develop to the point that its GDP per capita is now much higher despite starting from a lower base.

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ZM 11.13.14 at 4:29 am

Brett Dunbar,

“Napalm is a conventional weapon”
I disagree that Napalm was a conventional weapon at the time of the Korean War, since it was only developed in 1942 and first used in war only in 1944. It is only conventional now since horrible people used it so much since 1942, which they should not have.

“”Napalm is the most terrible pain you can imagine,” said Kim Phúc, a napalm bombing survivor known from a famous Vietnam War photograph. “Water boils at 100 degrees Celsius (212°F). Napalm generates temperatures of 800 to 1,200 degrees Celsius (1,500-2,200°F).”[22]”

Anyway, it is very wrong and is now illegal under International law to use Napalm on civilian populations as the US did so often in the Korean War.

“I do note that you seem to have tried to imply that the USA was responsible for the Korean war when as a matter of historical fact the North engaged in an unprovoked invasion of the South.”

Should I suppose you are of the mistaken belief that North Korea and South Korea pleasantly discussed and decided by themselves to divide the country up into North and South following WW2 ?

Wikipedia : “The United States and the Soviet Union agreed to temporarily occupy the country as a trusteeship with the zone of control along the 38th parallel….An initiative to hold general and free elections in the entire Korea came up in the United Nations in the fall of 1947. However this initiative did not materialize because of disagreement between the United States and the Soviet Union…”

It isn’t that North Korea has had a run of bad luck relative to South Korea. It’s that it has been badly run. The US didn’t get wealthy just because we were lucky to have good natural resources; There are poor countries with good natural resources. We got wealthy because our culture and legal system permitted them to be exploited effectively, and built upon. It didn’t discourage productivity, and encourage theft. (Legal or otherwise.)

“The USA had no great regard for Rhee “

Rhee was chosen because of his anti-Communism and connections to the US, despite his corruption and abuse of power.

“Brett Bellmore compared North and South Korean economic policies and then made a related comment about the USAs success was linked to American governance. He wasn’t comparing North Korea to the USA he was arguing that the reason the South is a success while the North is an abject failure was due to the different politics in each.”

To which I pointed out that the U.S. attacks on North Korea and subsequent treatment of North Korea as a mortal enemy for over half a century has had a great effect on the North Korean economy.

As well as pointing out that the U.S. attacking various countries, like Vietnam that you mention, has had a strong effect on the U.S. economy since WW2.

I am not interested in the different national economic policies in South Korea from North Korea, so I wonder that you think I will be interested in you now bringing Vietnam up.

Are you denying that the U.S. with its attacks on North Korea in the Korean War and subsequent treatment of North Korea as an enemy has affected North Korean economic development?

If so – can you provide any evidence of North Korea not being affected by U.S. actions towards it?

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gianni 11.13.14 at 4:54 am

“Rhee was chosen because of his anti-Communism and connections to the US, despite his corruption and abuse of power.”

I think the Christianity played a part too, but obviously this is difficult to confirm.

119

William Berry 11.13.14 at 6:13 am

@ZM:

Oh, FFS. Take a few deep breaths.

What about now?

Do you even care?

Your self-righteous BS is tiresome.

Korea, Vietnam, etc., are ancient history. Most of us here know that shit.

The question is: What is to be done?

You seem to be inspired.

We need you.

We are lost.

Tell us.

120

ZM 11.13.14 at 6:17 am

I am procrastinating today not inspired. I hope you have not been drinking riesling again ;)

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William Berry 11.13.14 at 6:30 am

@ZM:

I am honestly sorry.

I am sick to death by the election results the other day.

Forgive me, please.

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Brett Dunbar 11.13.14 at 5:27 pm

ZM

The Korean war began when North Korea invaded South Korea. Absent a North Korean invasion there would have been no war. The USA did not trust Rhee, they were worried that he might try to start a war. So they deliberately restricted the Southern regimes access to heavy weapons in order to leave the South’s army only capable of defence. It might be more accurate to say the the US state department detested Rhee while the War department was rather supportive of him.

What I was pointing out was that the economic failure of North Korea has little to do with the country’s diplomatic isolation as Vietnam, starting from a worse position, has been a major economic success while North Korea has not.

Both Vietnam and North Korea had unfriendly relations with the USA following a war, Vietnam added unfriendly relations with China following a border war and the occupation of Cambodia (overthrowing the Khmer Rouge in the process).

So Vietnam was in a distinctly worse position than North Korea, as it had fewer friends and a costly occupation. Nonetheless it has been a major economic success since a set of economic reforms in 1986 (prior to that Vietnam’s post war economic performance had been woeful). The effect of US hostility was quite limited, it didn’t stop Vietnam being a success.

North Korea’s problems are that it is still a totalitarian personal dictatorship with terrible economic policies, no rule of law and an appalling human rights record. South Korea went through a series of mostly authoritarian regimes which had generally better economic polices and then had a democratic revolution in 1989 and has become a stable rich democracy. South Korea is a nice place to live, North Korea is not.

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Ogden Wernstrom 11.13.14 at 8:34 pm

If I can be given the leeway to take this part out of context, I can agree with both
Brett Bellmore @3, 11.08.14 at 12:36 pm
and
ZM @117, 11.13.14 at 4:29 am:

There are poor countries with good natural resources. We got wealthy because our culture and legal system permitted them to be exploited effectively, and built upon. It didn’t discourage productivity…

…but not this part:

…and encourage theft. (Legal or otherwise.)

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