Why Is Economic Inequality Higher in English Speaking Industrialized Democracies?

Thatcherism and Reaganism had a lot in common, ideologically, and led to similar results.

Universitas chicagoensis delenda est.

I’m not convinced that Thatcherism is a sensible analogy even for Reaganism (see: % of GBP derived from state), and suggesting that might be relevant for Aus and NZ is just bloody ignorant.

My conjecture for main reason: educated labour is completely mobile between the Anglosophere across that time, both legally and actually. The reason why dependence between London and New York is greater than dependence between either and Frankfurt is that, while half the important people in Frankfurt speak perfect English, half of them don’t (probably fewer, because if you work for DB and speak perfect English and are ambitious, you’re in London).

Also, Jules is bloody mad: one of the clearest and most obvious points about globalisation is that goods are easier to offshore than services.

So far, Antonio is the plausible-est beyond “well, yes, that’s what basic economics and William of Occam would suggest”.

Uh, the MBA?

It could just be an apple and oranges problem. The GINI data input, used to measure inequality, varies by country. For example, France includes government benefits, such as its equivalent to food stamps as income, while the US does not. France shows a lower GINI number because it includes in the income of the poor the value of government benefits.

The underlying trends in all the countries may be the same, but it is masked in some countries because they include offsetting government transfers, while other countries do not.

Much of the US anti-poverty strategy for the last several decades has relied on government transfer programs, such as subsidized housing, food stamps, earned income tax credit, Medicaid, etc. These transfer dollars are not included in inequality computations.

Additionally, household, family and worker income almost always does not include the value of employer-paid employee benefits. For example, for those US citizens who get their health care and other benefits paid for in whole or part by their employers, the value of that transfer from the employers to the workers is not included in US income data.

It makes more sense to take the lower percentile income groupings and compare them across countries. One would then see that the income inequality numbers do not reflect the plight of the poor in the different countries and that the poor are much better off in the US than in almost any other country.

English, obviously, is the language of natural aristocrats, plutocrats, and oligarchs.

One would then see that the income inequality numbers do not reflect the plight of the poor in the different countries and that the poor are much better off in the US than in almost any other country.

This is a joke, right?

Can common language be the only critical factor

Yes. The American disease found it easy to leap across the Atlantic and Pacific because of the low (language) barrier to entry, which means that any idiot can transmit it. Non-Anglophone countries have more capability to resist the American capitalist hegemony.

The common language is a bit misleading – it’s not so much just that there is a common language among the English-speaking countries, but there’s a common academia. Things which become dominant at the very top level of British – American academia will extremely quickly propagate and become quite dominant throughout the whole. But the trends will greatly abate or even cease when the trend hits an academic barrier – what rules at the two Cambridges and Oxford rules all of English-speaking academia (simplifying the picture somewhat) BUT that’s not similarly the case within non-English speaking academic status hierarchies.

Some major examples are: analytic philosophy and Chicago School economics (but there are multiple other examples). One piece of data that can be added is that, as Israeli academia moved closer to American / English academia over the 1970s (as opposed to it’s 1930s origination in Central European models staffed by refugees from Central Europe) and afterwards, the Chicago school was rapidly exported to Israel and there too income inequality skyrocketed.

‘An addition to that: the Anglophone academic world also widely shares a great deal of common assumptions that are strongly challenged when you meet language barrier’.

Anecdata alert but hey…wtf.

IMHO, the vogue for cognitivism in Anglo-American psychology is another thing that can really only be explained by cultural presuppositions (specifically a desire (cf neo-classical economics) to model psychology as much as possibly on Newtonian physics, and a love of ‘numbers’ and ‘equations’ and quasi (or pseudo) mathematical models)…something which makes it highly appealing to those in Anglo-American academia but not nearly so appealing to those outside it.

The alleged ‘horror’s of Freudianism are often discussed by psychologists, along with a desire never to let ‘such a terrible thing’ happen again. But as a colleague of mine frequently points out it is by definition true that it could ‘never happen again’ as it is almost inconceivable nowadays that a non English speaking psychologist could be the Main Man in Anglo-American psychology. Since WW2 psychologists in the Anglosphere have, generally speaking, paid no attention whatsoever to any non-English speaking psychologist, or sociologist for that matter.

It would be an interesting task for a sociologist to look at the precise prerequisites for a Theory (of any sort, really) to be taken seriously in Anglo-American academia. But there is something about neo-classical economics that seems uniquely ‘Anglo-Saxon’, at least subjectively. *

*FWIW I am very aware that in literary studies more or less the opposite was the case, at least in the 1960s and 1970s and 1980s, in that it was very difficult for anyone who wasn’t French to get taken seriously. But those days are now very much over, I think.

I’m not convinced that Thatcherism is a sensible analogy even for Reaganism (see: % of GBP derived from state), and suggesting that might be relevant for Aus and NZ is just bloody ignorant.

i dunno, rogernomics and ruthanasia seemed pretty thatcherite to me, plus vaguely similar economic policies were being implemented in australia at pretty much the same time.

There’s a nice check on this provided by the Quebec income inequality over time. Basically francophone income inequality in Canada has increased a lot less than in the anglophone population, which has roughly kept pace with the US (despite no real Reagan analogue (Mulroney, cmon?) or sharp tax cut). All shown in this paper: http://elsa.berkeley.edu/~saez/saez-veallAER05canada.pdf

“IMHO, the vogue for cognitivism in Anglo-American psychology is another thing that can really only be explained by cultural presuppositions (specifically a desire (cf neo-classical economics) to model psychology as much as possibly on Newtonian physics, and a love of ‘numbers’ and ‘equations’ and quasi (or pseudo) mathematical models)…something which makes it highly appealing to those in Anglo-American academia but not nearly so appealing to those outside it.”

Precisely. The Anglosphere shares the same understanding of what knowledge is. Things that look like (or pretend to look like) that preconception of knowledge are (often) rapidly adopted, and can only be dislodged with difficulty. Other language spheres also share their respective understandings of what knowledge looks like, and are similarly difficult to dislodge within their respective “zones”.

The point, however, is not the languages, but rather the ideas: the idea zones do cross linguistic lines. It’s possible (if highly unlikely in practice) that an Anglophone country could fall outside the Anglo-idea zone while still obviously retaining the same language. To some extent this was true of American academia in the nineteenth century and very early twentieth century, since the American academics of that era had a much higher likelihood of being trained in continental Europe than they do now (with the resulting academic status hierarchy in nineteenth century America leading to it not necessarily following, and sometimes explicitly rejecting, the lead of Oxbridge). To some extent this was also true of Israeli academia, since it was technically conducted in Hebrew and English but was actually staffed by immigrants from Central and Eastern Europe (now that this generation has now died out, Israeli academia has generally reverted back to imitating Anglophone models).

Mightn’t the differential acceptance of Marxism explain some of this?

‘Can common language be the only critical factor or are there more fundamental reasons?’

As a patriotic British citizen it does occur to me that the fact that Ireland, Australia, NZ, Canada, US and UK all (mostly!) speak the same language (and have mostly similar legal systems) isn’t purely a coincidence.

I’m not convinced that Thatcherism is a sensible analogy even for Reaganism (see: % of GBP derived from state),

this shows what a bad measure of anything the state % of GDP is rather than anything else (mainly because it’s a ratio of two big numbers and thus very difficult to change). Thatcher and Reagan regularly gave speeches saying how much they ideologically had in common, and so did their Australian and New Zealand equivalents.

if you work for DB and speak perfect English and are ambitious, you’re in London

not even nearly true, not even if “London” is synecdoche for “somewhere other than Frankfurt”.

Gawd – am I surprised the richest of the rich has increased their share of the pie since the mid 1980s (try even earlier). They have been given tax cut after tax cut after concession after subsidy. They have been living high on the hog of all other ranking groups (middle and poor). It doesnt take Da Vinci’s genius to work that one out. It all comes from lobbying and so called trickle down theory over decades (where is the blocked pipe – way back with the deciders of the high income tax cuts??).
Doh.

Well, Brandolini isn’t actually asking “Why Is Economic Inequality Higher in English Speaking Industrialized Democracies?” He’s asking “why did it suddenly rise more or less simultaneously across all English-speaking industrialised democracies in the 1980s?”

Because the first statement isn’t actually true, apart from anything else. Australia and Ireland are both more equal than the EU average, and therefore more equal than a lot of non-anglophone industrial nations, including Italy, Spain and France. Canada is more equal than France. All the English-speaking nations except the US are more equal than Japan and Israel. Sorry to hark back to the “quantitative methods” discussion, but I’m sceptical that there would be a significant link between “speaks English” and “high inequality” even if you limit it to OECD members.

So, starting from that, you can rule out anything to do with Calvinism or similar legal systems or international markets in labour. The mid-80s didn’t mark a sudden opening up of the high-end labour markets (CEOs etc), as far as I know – there was no sudden flood of American directors into Britain.
I would guess that there are a lot more continental executives working in the UK now than ten or 20 years ago (thanks to closer European union) – has this had an effect on equality?

‘Australia and Ireland are both more equal than the EU average.’

Really? I could believe it about Australia, but Ireland? Even after the crunch?

I think 4 is on the right track – where the dominant right-wing political party has been Christian Democratic, or has sought / needed to emulate CD, income inequality is less marked.

The mid-80s didn’t mark a sudden opening up of the high-end labour markets (CEOs etc), as far as I know – there was no sudden flood of American directors into Britain.

wouldn’t be so sure of this. Remember that exchange controls were only lifted in the UK in 1979. The Thatcher government started with a very significant move in the direction of internationalisation of British capital markets (and given the relative sizes of markets, “internationalisation” effectively meant “Americanisation”).

Financial deregulation in general does seem to match up pretty well in time and place, although of course the direction of the causal arrow is not clear.

Also, that only works for the UK. Did Canada deregulate in the mid-80s? Did New Zealand and Australia?

I think we would have heard about something happening in Japan if the gini had gone from 24.9 in 93 to 38.1 in 02. That is rather a large move.

And it’s not like there was any kind of a decade-long economic slump in Japan in the 1990s, after all.

Simple – the same gang of thugs who’ve managed to pervert the political process to their economic ends in the US and UK all speak English, but no other language.

In interesting data point from the 2008 Growing Unequal summary (http://www.oecd.org/dataoecd/45/42/41527936.pdf; it seems the full report is not available for free):

Income inequality has risen significantly since 2000 in Canada, Germany, Norway, the United States, Italy, and Finland, and declined in the United Kingdom, Mexico, Greece and Australia.

The increase has been particularly marked in Germany, despite (?) a nominally social democratic government in that period.

The official story in Australia & NZ (and probably the USA and Canada) is that the persistent high inflation of the 1970s was blamed on wage-increase demands: supposedly, people’s inflation expectations had become entrenched at very high levels, and it was necessary to lower expectations.

Accordingly, there was a concerted effort to demonize and de-fang unions; union membership in NZ fell from 44% to about 17% of the labour force in (from memory) seven years. In NZ, there was an overt effort to reduce labour’s share of income with the cutting of many transfer payments (“the mother of all Budgets”) and legislation that had the avowed purpose of cutting wages, especially at the low end.

(The opportunity was also taken to corporatize many publicly owned enterprises, with a view to donating them to private ownership, but the privatization process was arrested part-way through. Interestingly, the corporations remaining in public hands have done rather better than those that were privatized –the Post Office is usually profitable — demonstrating that ownership is irrelevant to how well an organization meets its goals. A fat lot of good facts will do in the argument, though.)

There is still debate about the cause of the high inflation – obviously the oil price shocks triggered it, but it is thought that persistent attempts to maintain unemployment at too low a level were the reason it became entrenched.

Outside the Anglospere: I don’t know about France, or Italy, but I understand that in Germany there is a tradition of cooperation between labour and management, and a pattern of interlocking holdings and directorships that reflects a view of society as an organic whole rather than as a collision of competing interests.

As I understand it, the official view of Japan since the mid-1980s is that extreme labour-market inflexibility has lead to a situation where one-third (and rising) of Japanese workers are now casual and mostly employed in low-productivity jobs; hence the once-low but now sharply rising Gini index.

My take from this history is that the elites of most English-speaking countries liked the descriptions of teeming slums in their history books, and set out to re-create them. (The Aussies have a discourse about “the little Aussie battler on Struggle Street” that shapes their policies and moderated the Randist assault; maybe the Canadians had something similar.) Alternatively, most Anglophone countries are young and therefore not yet inclined to learn from other’s experiences or their own history.

The Japanese, on the other hand, seem to be unable to let go of a core cultural value about mutual lifetime loyalty between employer and employee.

Anglo-american bankers and politicians since at least Bretton Woods make no secret of their cabalistic plans for world domination, via the IMF, University of Chicago and various organs of state/corporate power. They call it the “Anglo-American free-market system.” (â„¢) Usually preceded with military force and followed by rapacious carpetbagging.

Bufoons like Thatcher and Reagan merely took orders, as Obama does today. Current plans call for the pauperisation of host country populations and disaster capitalism style “austerity” programs, once practised on Latin Americans, Africans and Asians; now here.

Any questions?

From NYT March 28, 2009 http://www.nytimes.com/2009/03/29/weekinreview/29burns.html

(Prime Minister Gordon Brown’s) goal at the G-20 meeting is to make a start on reforming, and eventually saving in more regulated form, the model of the Anglo-American free-market system. It is a plan that Mr. Brown hopes will give Canary Wharf a place in history somewhat like Bretton Woods, the New Hampshire resort where, in July 1944, the United States and Britain led other nations in creating the International Monetary Fund, the first of a group of international organizations that became the pillars of the postwar international system.

Nur-al-Cubicle: you might want to google on [sir] James Goldsmith’s activities.

there was no sudden flood of American directors into Britain.

What matters is whether there is a plausible threat of international movements for the Boards of Directors to use as a rationale for raising their remuneration packages. This has been the case in New Zealand, at least, as companies explain that they have increased the CEO’s pay by another 50% to keep pace with movements elsewhere in the Anglosphere. We hear a lot about the international labour market for the higher echelons, with warnings that if they did not receive such large amounts of money then they would immediately change citizenship and decamp for executive positions in the US or the UK.

It doesn’t matter whether there is in fact any large-scale brain-drain. That would require our executives to show international levels of skill as well as income.

Point one: In the English speaking world, industrialization was financed mostly by private interests in financial markets and privately owned banks. In most of the non-English speaking world, industrialization was financed mostly by state owned or controlled national financial institutions. As a result, the English speaking world, even today, has a private financial sector that is a much more important part of its economy than in the non-English speaking world where the size of the financial markets relative to GDP is much smaller and publicly affiliated banks are much more important even now in financing economic growth.

Point two: The boom from the 1980s on in the English speaking world was dominated by the financial sector. Financial company profits and financial company executive compensation rose much faster than that of companies and executives in the “real economy.” Something on the order of 40% of all of the economic growth in the U.S. was captured by Wall Street financial companies and their executives. In contrast, in the non-English speaking world, a lot of that growth was not diverted to the financial professionals who helped to facilitate it.

60: which would predict that inequality would also be high in (neutral and unbombed) Sweden.

“(though you can also point to places like Switzerland, who are outside of the Anglosphere with extremely large private finance sectors)”

Switzerland is an anomaly in terms of the importance of wealth management for international clients, but internally the banking sector is more in line with continental Europe. The biggest financial institution in terms of the number of clients (of course not in terms of the amount of deposits) is federally owned Postfinance, and most states operate their own banks (Kantonalbanken). Then there is a very active cooperative sector (Raiffeisen, Migros Bank). From the perspective of domestic private and business customers, the financial landscape looks very different from that in the US.

though you can also point to places like Switzerland, who are outside of the Anglosphere with extremely large private finance sectors

And how high is inequality in Switzerland? Do the heads of the famous Swiss banks make as much as US hedge-fund managers? If not, then the role of finance isn’t a very convincing explanation, at least standing alone.

There seems to be an implicit undercurrent in this thread that income equals income from salaries and wages. For the top 1%, or more exactly the fraction of the top 1% that drives the increasing disparity (the top 0.1% or even the top 0.01%) this is most certainly not true. Even the increase in CEO compensation is mostly equity-driven.