Doug Saunders has “a blog post”:http://dougsaunders.net/2011/01/china-inequality-hu-jintao-barack-obama/ about Branko Milanovic’s new book “The Haves and the Have-nots“:http://amzn.to/fpjxlu . I haven’t read the book, but, according to Saunders, it denies that there is a convergence in living standards between Western workers and the Chinese. Here’s the reasoning:
bq. “If the U.S. GDP per capita grows by 1 per cent, India’s will need to grow by 17 per cent, an almost impossible rate, and China’s by 8.6 per cent, just to keep absolute income differences from rising,” he observes. “As the saying goes, you have to run very, very fast just to stay in the same place. It is therefore not surprising that despite China’s (and India’s) remarkable success, the absolute income differences between the rich and poor countries have widened.”
bq. And they have: Even as the Chinese worker has gone from $525 per year to $5,000 in two decades, the average American worker has gone from $25,000 to $43,200 – meaning that the income gap has widened from about $25,000 to $38,000, and, he notes, “of course so has the absolute gap in welfare between the average American and the average Chinese.”
Spot the non-sequitur. Even if the dollar income gap has widened in absolute terms there’s no reason to believe that the welfare gap has similarly widened, for the simple, and obvious reason of the declining marginal utility of income. On any plausible picture, the $525 to $5,000 transition is life-changing, whereas the $25,000 to $38,000 change is merely nice (especially if enough other people get the same increase and much of the increase goes on bidding up the price of inherently scarce goods).
Saunders continues:
bq. You may think of the United States as a place of extremes of wealth and poverty, and it is. Nevertheless, at the moment, the very poorest people in America, the 5 per cent with the lowest incomes, have better lives and more purchasing power than the top 5 per cent of income earners in India and the top 10 per cent in China.
Well I won’t quibble with the “more purchasing power” point, but “better lives” is really pretty dubious, since we know that by many objective measures “poor black men in the US do worse than even some poor people in India”:https://crookedtimber.org/2003/12/12/sens-development-as-freedom/.