The Economics of the Anglo Disease | 48 comments (48 topical, editorial, 0 hidden)

Re: The Economics of the Anglo Disease (4.00 / 4)

It seems clear that globalisation has coincided with and probably caused increased inequality within the US, but has it decreased inequality within the global system - i.e. by enabling China/India and their workers to move up the food chain?

Secondly, if inequality is inefficient, has the increased inequality in the US reduced the ability of the US to compete within the global system? Would higher wages within the US enable it to compete more effectively within the global system, or is the problem excessive capital rents in the US?

Is globalisation reversible, or must any solutions we devise to the problems coming with globalisation also have to be resolved in a global context? I.e without an effective system of global financial governance is it possible to address the impact of globalisation in a national context?

It seems to me that the larger problem is that we have has economic globalisation without political globalisation (or indeed environmental global resource management) and it is the dis-juncture between global economics and the lack of global government which is the real problem.

And it is precisely the emergence of any global governance that the neo-cons and neo-libs have fought most bitterly - in the name of nationalism and patriotism - when in fact their real objective was to move their assets abroad without regulatory interference and into a much less regulated space.

If this is correct, then the real challenge is not to try to roll back economic globalisation, but to roll forward a much greater degree of global economic, political, and environmental governance and to expose political nationalisms as a cover for economic betrayal.

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Jan 10th, 2009 at 07:20:59 AM EST

Re: The Economics of the Anglo Disease (4.00 / 6)

I think globalization tends to be underemphasized in the US when we get into discussions of aggregate demand. The US is largely dependent on domestic consumption on the demand side (~70% of GDP, give or take a bit), and so falling domestic wages -- whether from outsourcing, union-busting, a non-indexed minimum wage, and any other cause easily attributable to rent-seeking -- can have an extremely harsh impact on the state of workers, and thus aggregate demand, here.

The goods are still there. The income needed to support consumption is not. The only way to bridge the gap, then, is borrowing. And here were are.

That's a pretty big simplification, of course, and I probably didn't express it clearly enough, but I think there's a good bit of merit to it.

The policy implications, then, are fairly clear.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sat Jan 10th, 2009 at 10:12:18 AM EST
[ Parent ]

Re: The Economics of the Anglo Disease (4.00 / 3)

It seems clear that globalisation has coincided with and probably caused increased inequality within the US, but has it decreased inequality within the global system - i.e. by enabling China/India and their workers to move up the food chain?

It isn't workers that benefit from this the most.

Remember that while the relative distance between China and India and the developing world is closing, inside of India and China, inequality between rich and poor is rapidly increasing. I know more about China than India. To give an example in 1980, China's gini coefficient was in the 20s, it was similar to the Scandinavian countries. Now it's in the upper 40s, and it approaching Latin American levels. India, I don't have stats for.

So what we are witnessing is the growth of inequality within nations, at the same time that inequality between them is shrinking. (And don't forget that Africa is falling ever further behind.)

So there is no birth of a global middle class. Instead there is the segregation of the world into rich and poor. The difference is that this class system is no longer quite so color coded......

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sat Jan 10th, 2009 at 04:38:13 PM EST
[ Parent ]

Re: The Economics of the Anglo Disease (none / 0)

Looking at the ranking of countries by Gini index there appears to be a correlation between high inequality and low economic performance which confirms your basic thesis. However rapid increases in average GDP/Capita also seems to correlate with increasing Gini within a nation. Whether this is a temporary phenomenon which occurs during a growth spurt and which stabilises as an economy stabilises (and the increased income is gradually re-distributed) is an interesting question, and one which I do not have the data to answer.

However the clearest correlation appears to be between a high degree of correlation between democratic political development and lower inequality as it takes strong governance answerable to the greatest number for income redistribution to be enforced through the state.

As capital is a lot more mobile than people it is natural for capital to gravitate to areas of lowest re-distribution - e.g. tax shelters and trading hubs such as Singapore - thus giving the appearance of a correlation between aggregate wealth and low regulation/re-distribution.

Only a system of global re-distribution/governance can prevent capital flows from systematically reinforcing inequality.

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Jan 11th, 2009 at 10:14:37 AM EST
[ Parent ]

Note that the conclusion over-reaches the argument (4.00 / 2)

... since reversion to a system of regulatory permission required for large cross-border capital transfers would also prevent capital flows from systematically reinforcing inequality.

That is, after all, what was in effect during the 1950's and 1960's, when persistent systematic declines in national income inequality was far more common than today.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Jan 11th, 2009 at 11:50:23 AM EST
[ Parent ]

will the global economy revert to the 1950's? (none / 0)

However a reversion to national regulation also assumes that the economy can be renationalised. However if the global economy is dominated by global corporations with opaque internal transfer pricing etc. it is doubtful whether that genie can be put back into the bottle. A standard global corporation profits tax payable wherever the profit is generated would remove the incentive to to cook the books or divert resources for purely tax avoidance reasons..

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Jan 11th, 2009 at 12:49:07 PM EST
[ Parent ]

Re: will the global economy revert to the 1950's? (4.00 / 3)

Don't forget that its the second age of globalisation, not the first ... we reverted to national controls on capital flows after the first age of globalisation drew to a close with the rise of the trading blocs in the early 1900's.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Jan 11th, 2009 at 02:44:44 PM EST
[ Parent ]

Re: will the global economy revert to the 1950's? (4.00 / 2)

Most of the transnats wouldn't survive two seconds of determined trust-busting. Most of them are monopolies and oligopolies on the style of the railroad robber barons.

And besides, any company with a turnover equivalent to the GDP of a moderately sized African republic needs to be either nationalised, broken into itty bitty pieces or taken out behind the woodshed and shot. To prevent it from buying politicians like they were toy cars, for no other reason.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jan 11th, 2009 at 05:34:29 PM EST
[ Parent ]

Re: will the global economy revert to the 1950's? (none / 1)

That should be "if for no other reason."

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jan 11th, 2009 at 05:35:57 PM EST
[ Parent ]

It could easily be a wash ... (4.00 / 4)

... if roughly 200m Chinese and a similar number of Indians are the primary beneficiaries of the globalisation in the medium term, then the question is whether they gained more than the losers in the Anglo Disease countries did.

Probably depends on whether you do the sums in purchasing power parity or current exchange rate terms.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sat Jan 10th, 2009 at 07:02:04 PM EST
[ Parent ]

Re: It could easily be a wash ... (none / 1)

Let me add a note that a difference between global inequality when measure in purchasing power parity term ... that is, including standard of living gains of the emerging Chinese and Indian middle classes ... and in terms of current exchange rates ... that is, the international financial value of income gains of the emerging middle classes ...

... would, under the Economics of the Anglo disease, not necessarily be an accident. Its the financial value that transnational corporations are pursuing, while political elites in China, for example, are quite clearly pursuing sufficient standard of living gains among the urban middle classes to avoid political turmoil as China negotiates the demographic shock waves of Mao's population explosion.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Jan 11th, 2009 at 11:46:54 AM EST
[ Parent ]

Re: It could easily be a wash ... (none / 0)

That sounds like a gap that would have to break down eventually? I mean, if the Chinese are equally or less productive than their American counterparts, then allocating more to the transnats and increasing the Chinese labour's standard of living at the same rate or faster as the US labour's drops would have to break down...

So who'll be left holding the bag? The Chinese, on account of pollution and other externalities they don't count at the moment? The transnats, on account of pursuing monetary wealth that ceases to be meaningful when the states that underwrite it start inflating their currencies? Third countries who accepted suddenly worthless dollars for feeding their resources into the Chinese industrial plant? The Americans, by finding most of their tangible assets in the hands of transnats? Some combination?

Or have I missed something fundamental?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun Jan 11th, 2009 at 05:52:08 PM EST
[ Parent ]

The Chinese not counting the tremendous natural .. (none / 1)

... cost would seem to be more along the same dynamic ...

... but note that while the transnational corporations require the impossible, in the sense of ever rising share of global income, when there is a maximum attainable share of global income, and further that the maximum sustainable share is likely less than the maximum attainable share, so they are quite likely to overshoot then crash.

By contrast, the Chinese do not have to keep up the pace indefinitely. They are navigating a demographic transition, and sometime in the current generation the number of new entries into the labor force will start dropping.

Obviously the American economy, and the military industrial complex in particular, are set up to be the biggest losers, precisely because of the focus on marshaling political support while taking the economic sustainability of their growth regime for granted.

If we go full cycle into a system of international political economy dominated by a relatively small number (three or four) of regional clusters, I imagine the successful transnationals will evolve into regional trading bloc champions.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Sun Jan 11th, 2009 at 10:16:06 PM EST
[ Parent ]

I'm not sure I get this right... (none / 1)

... in terms of the "stuff getting produced and moved around and used" economy. But I'm reading something along these lines:

The pie is getting smaller, because industry is being moved to places where it takes more resources to manufacture stuff than the places it comes from.
The developing countries take a part of the hit for the pie getting smaller, by ignoring pollution and other ecological costs that pile up due to the lower efficiency.
The Americans are taking the biggest hit, because their industrial plant is going the way of the dodo.
The transnats are laying increasing claim to the smaller pie, so right now they're winning.
This process cannot continue indefinitely, because when the Americans have lost (or lost claim to) too much of their industrial plant, the only way the transnats could increase their share is by laying claim to Chinese wealth, and the Chinese will oppose this more effectively than the Americans.

So when the music stops,

The Americans have lost big time.
The Chinese have gained, but due to the costs they're ignoring, they haven't gained nearly as much as they think right now.
The transnats who realise that the music will stop can position themselves to gain.
The transnats who fail to realise that the music will stop are going to be caught with their pants down, because their business model won't apply any longer
The transnats who plan ahead will attempt to capture tangible assets, rather than leave their fortunes in paper money, because when the music stops, the value of paper money will be a matter of political negotiation.

Does that sound about right?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jan 12th, 2009 at 06:59:33 AM EST
[ Parent ]

Re: I'm not sure I get this right... (4.00 / 2)

JakeS:

The transnats who plan ahead will attempt to capture tangible assets, rather than leave their fortunes in paper money, because when the music stops, the value of paper money will be a matter of political negotiation.

If the music really stops, then even the ownership of tangible assets will be a matter of political negotiations. As Chris likes to point out, property is a relationship, not an object. It ceases to be yours the moment force is no longer applied on your behalf to maintain exclusive rights. For this reason, if I where the Chinese lending money to the US, I would not be all too comfortable owning physical assets in the US either.

by someone (s0me1smail(a)gmail(d)com) on Mon Jan 12th, 2009 at 11:00:03 AM EST
[ Parent ]

Re: I'm not sure I get this right... (none / 1)

True. But if the music really stops in a way that makes the US seriously reassess property ownership by the transnats, the world is going to be a quite different place. That would take something not too far short of a revolution. Which means that all political relationships - alliances, geostrategy, distribution of wealth, political power, everything - would be up for grabs to some extent or another.

Trying to grasp what the world will look like on the other side of such a fundamental discontinuity is, I think, more in the realm of tea-leaf reading than political analysis.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jan 12th, 2009 at 03:00:40 PM EST
[ Parent ]

But consider Czarist Russia, the Soviet Union ... (none / 1)

... and modern Russia ... authoritarian strong man governments with local barons behind the scenes putting limits on the reach of the strong man's authority seems to persist through some of the biggest political disruptions imaginable.

Its reasonable to presume that the less dystopian scenarios will involve a rise of regional blocs, since that's what's tended to happen before. It is, after all, not the first time in the world-system that a wave of globalization under the cover of a capitalist hegemony has come to an end, and it seems to be more or less variations on a theme.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Jan 12th, 2009 at 04:07:44 PM EST
[ Parent ]

The structures survive... (none / 1)

... but not all the strongmen and barons do. And it seems hard to predict which strongmen and barons will come out ahead. Lots of randomness in revolutions, and it's a lot easier to cut a guy's head off than it is to reattach it...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jan 12th, 2009 at 04:12:45 PM EST
[ Parent ]

Precisely, the structure survive, even when ... (4.00 / 2)

... there is almost 100% turnover in the incumbents in the roles and even when the role themselves have dramatically different names and supporting folkviews.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Jan 12th, 2009 at 04:49:36 PM EST
[ Parent ]

Re: I'm not sure I get this right... (4.00 / 3)

What the Chinese are gaining is not having a political melt-down and chaos. And, of course, a massive industrial machine with a massive resource hunger and a massive destruction of the viability of their own sustainable biocapacity.

They are in a race, and whether they end up as winners in some sense depends on how effectively they manage the demographic transition. However, they are doing just about everything they can do, with all of the choices facing them involving hard trade-offs and genuine uncertainty how much bad to accept for how much good on either side of the choice ...

... and, sure, it could all come unraveled.

However, they might keep on juggling plates without too many crashing down and without falling off the high wire that they are driving their unicycle across. Its not a static question of where they have arrived, its a dynamic question of whether they can keep the plates on the air and the unicycle wheel on the wire.

There is, however, a possible viable future, with their current demographic track meaning a falling population level by the next generation, and their real economy at least gaining the ability to make things that countries with the resources they need may be interested in having.

For transnationals looking to maintain and buid on their present position of strength, it does depend on how effectively they acquire effective military force, doesn't it? Because when it comes down to it, when there is a dispute over property titles across large number of borders, the ability to move a squad of soldiers into the property and boot out the interlopers, from the perspective of that side of the negotiating table, is the strong hand when it comes to property rights.

This is, of course, another reason for those of us with a commitment to liberal democracy to invest in resilient local economies in sub-Saharan Africa. The big transitional World Wars tend to get started in a region of soft states on the periphery of the main actors ... Italy in the Napoleonic World War, the Balkans in WWI, eastern Europe and Southeast Asia in WWII (the long cycle people have more examples, those are the ones that come to mind). The EU already has multiple stakeholdings in Sub-Saharan Africa, the US is heavily dependent on Africa oil, and the Chinese, of course, are busily building up their influence, swapping manufactured goods on easy credit terms for access to raw materials.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Jan 12th, 2009 at 01:18:46 PM EST
[ Parent ]

Re: I'm not sure I get this right... (none / 0)

For transnationals looking to maintain and build on their present position of strength, it does depend on how effectively they acquire effective military force, doesn't it?

East India Company, meet Weyland-Yutani... You do have a talent for thinking up decidedly unpleasant scenarios...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jan 12th, 2009 at 03:09:04 PM EST
[ Parent ]

Reading a bit of history will do that ... (none / 1)

... but the East India Company ended up handing military power over to the Raj ... I'm not 100% sure how stable that kind of corporate feudalism really is, and in particular how it gains political legitimacy amongst the governed.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Mon Jan 12th, 2009 at 04:03:11 PM EST
[ Parent ]

Re: I'm not sure I get this right... (none / 0)

You do have a talent for thinking up decidedly unpleasant scenarios...
- Jake

Make that "an informed talent"

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Jan 13th, 2009 at 03:45:52 PM EST
[ Parent ]

The Economics of the Anglo Disease | 48 comments (48 topical, 0 editorial, 0 hidden)

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