Friday, April 20, 2012

Galbraith on inequality

Here an interview with Jamie Galbraith on his new book. An important point about inequality is that it peaked around 2000 and in the first decade of this century it has improved. That is often missed by economists. According to Galbraith:

"Worldwide, inequality rose sharply from 1980 to 2000. This is a pattern you find in my data, which measure pay inequalities within countries, and also in measures of inequality between countries and in measures of the profit share in the rich countries. It's well-confirmed at this point. The pattern closely tracks the evolution of the global debt crisis: first in Latin America and Africa, then in Central and Eastern Europe, finally in Asia.
Worldwide, as in the U.S., the peak appears to have come in 2000. Since then, with lower interest rates and rising commodity prices, conditions have improved, especially in South America where inequality has declined quite a bit. Even in China we observe a peaking of inter-regional inequality in the mid-2000s, although inequality between sectors (for example, inequalities related to the rising power of the banks) continued to increase."
Prices of commodities and higher growth in the periphery are a crucial element of the reduction in inequality in certain parts of the world. The burst of the bubble too reduces inequality in developed countries, but of course it remains (both in the center and in the periphery) at very high levels.

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