Up to 70% of people in developed countries 'have seen incomes stagnate'
theguardian.com
theguardian.com
http://www.voxeu.org/article/greatest-reshuffle-individual-i...
His book published in April: https://www.amazon.com/dp/067473713X/
If I understand his thesis correctly our 1% raked in the profits of letting us compete against emerging market workers. To put it in startup lingo: we are the cab drivers, they are the uber drivers.
It's not 'perfect' for us. But I have a hard time seeing only immorality at work here, while emerging markets getting a shot at having a middle class at all.
https://www.theguardian.com/business/2015/apr/26/recession-r...
“In Sweden, for example, where the government intervened to preserve jobs, market incomes fell or were flat for only 20%, while disposable income advanced for almost everyone. In the United States, government taxes and transfers turned a decline in market incomes for 81% of income segments into an increase in disposable income for nearly all households.”
So, protectionism works? At least it seems consequential to me, that for western workers came with globalization an increase in wage-competition from workers in emerging markets.
That most western workers can afford much more from their flattened or fallen income than they could 10 years ago is the other part of the story that neither this data-point tells nor the populist movements.
Afford much more of what?
It's probably easy to find evidence that computing power in a smartphone is more affordable.
But, can people now afford more quality in their children's education or their family's health care?
And what about food? Maybe the price per calorie has actually decreased in real terms, but what about the quality of those calories? Is a calorie of corn equivalent to a calorie of fresh fruits and vegetables?
And housing? Is a condominium equivalent to a house with a yard? etc.
It seems like a mixed picture. Some things are more affordable, but some other important things appear to be more expensive.
Junk you can buy in a store.
Education, health care and real estate are a totally different matter.
Yes, and totally inaccessible to the people that the folks in this thread are saying allegedly have a better quality of life because they can afford useless commodities.
Degrees however are a different story. Here, the same competition Western workers face from abroad due to globalization, the same competition now students face as emerging market's rich dads prefer to send their offspring to western universities.
To me it feels like quality of living per dollar has risen tremendously over the past generation, but income per household hasn't. So while quality of living overall has improved, it doesn't 'feel' like it with regards to individual wealth. That is to say, an upper-middle class person 15 years ago might feel lower-middle class today even with a better QoL overall.
I would definitely agree that this kind of stagnating income in the middle class is a large part of what is pushing these nationalist/populist movements.
It's definitely not a popular sentiment on HN at the moment(nationalism), but I can definitely see the allure; especially for the lower-middle class who have lived through the past ~15 years and aren't seeing the same increase in wages/authority that the previous generation did.
Personally I have yet to see a real cogent argument for why globalism would help here at all with regards to the growing income inequality in developing nations. From my perspective a single centralized government(e.g.: the EU) can only really benefit the multinational corporation and almost by definition be of detriment to the individual nation-states.
It's hard to really grok the reality of the situation from unemployment/income statistics because they don't really tell the whole tale and of course because I'm neither an economist nor a statistician.
Lastly, I don't think it can really be ignored that this is the fastest changing world our species has ever had to adapt to.
I love technology, of course, but I don't think it's impact has been _only_ good. Looking at pictures of previous generations you can't help but notice the upright postures and healthy bodies that are so often missing from today's populace. Not trying to be a luddite here, and you can of course so,
Edit: to clarify 'because things are cheaper', I'm speaking of disposable items and food, as was stated by another commenter "stuff you can buy in a store"
In fact, I think an important aspect of this discontent is the increasing cost of housing/healthcare relative to income.
From my perspective it's the other way around since it's much easier to regulatorily capture smaller governments than larger ones. A large French company can easily capture the French government, especially when the competition is German or Spanish, by leveraging local power and appealing to nationalist sentiment, whereas that wouldn't fly in Brussels.
The EU also has labor and human rights protections built into it, so factories that move from Germany to Romania see far less benefit than a factory moving from the US to Mexico.
Regulatory capture is a thing.
I don't disagree, but they were often leaner from hard physical labor and fewer calories, and lived shorter lives. None of which means they were less happy, or that we are happier, but just that there are tradeoffs involved.
Given how many more dollars it costs to rent or buy property compared to 20 years ago, it is quite evident to many of us that quality of living per dollar has decreased.
Why? Aside from many reasons, we westerners changed our perception of what is included in our "quality of life"-basket.
Some of those things that can enter this basket are especially scarce and inelastic. And since we've chosen that "life in a dense urban city part" should be in this basket we've chosen one of the most inelastic economic items.
Still, it doesn't mean that this life-quality-basket is set in stone. Its composition will change again. And it doesn't have to become more expensive.
Well, I don't. I consider living in a place I don't like or a property I don't like to contribute to poor quality of life, and I'm definitely not alone in thinking that.
Having >40% of my income eaten up to pay for a mediocre living situation is not good quality of life.
That's true for a lot of people, so redefining "quality of life" to exclude housing and then claiming that everyone's quality of life is going up seems dishonest.
When 35-50% of your income is taken up by rent, you don't care that much that home appliances cost less than they used to.
You're right that with increasing utbanization the costs of housing was rising dramatically (as currently people prefer the dense urban areas of a city to its cheaper suburbia).
But that would mean that 70% of western workers now live in the dense city parts, which can't be established I think.
1) It implies a lack of mobility from job-poor places to job-rich places
2) Suburbs outside of job-rich cities are similarly seeing land values rise: marginal land is expanding outward to exurbs
Ideally, we'd see people be able to chase well-paying jobs by moving to denser, job-rich areas if they wished to, but that's become an impossibility.
As far as solutions go, I think it basically boils down to:
1) People can live in exurbs and ex-exurbs, and work through VR
2) We can lower land costs with a land value tax.
I prefer the latter to the former.
I find HN is a bit focused on San Francisco and New York problems, which are important, but not universally.
The argument I've heard against it is that you might have to live farther from the city center and commute for 30 minutes or more, which is certainly a tradeoff, but perhaps a worthwhile one.
[1] http://money.cnn.com/calculator/pf/cost-of-living/index.html
I'm not denying globalization's role. However, as bufordsharkley said in a sibling comment, housing costs often do prevent people from moving for work opportunities. They deprive the companies of potential hires and are a significant opportunity cost for the individual. In aggregate this might have an effect. Plus, long-term stagnating income is painful per se, but it's only disastrous when core expenses rise at the same time.
> with increasing urbanization the costs of housing was rising dramatically (as currently people prefer the dense urban areas of a city to its cheaper suburbia)
I'm not american so the phenomenon must be different to me. I think most people end up paying too much for housing, relative to their income. Fortunate and less fortunate people alike spend 35-50%, it's just that some end up in a dump far away from anything (incl. their workplace) while others have a proper flat in the city.
Also, it might be interesting to look at the problem from an age perspective. Retirees (except the wealthiest ones) probably don't expect to see their incomes rise much, and as a group they're more likely to live in cheap places in the countryside. Younger, working-age people feel the housing pressure, need income to relieve it, and are facing dwindling opportunities for upward mobility.
In the US, at least, the high cost of health care has impacted wage growth for many since firms generally pay employees according to overall salaries and benefits. As more and more money has gone to health care costs, less money has gone to salaries.
I agree. I do think though that even without this artificial scarcity there are physical limits to efficient housing.
Hyperbole: it's impossible to house 7 billion people with a nice balcony facing NY's Central Park.
Economically it wasn't much a smart decision to shy away from suburbia.
And long-term, the cheaper workers overseas should move a bit higher into the middle class, which makes them more expensive and also increases their demand for services and manufacturing. At that point the original workers could get better jobs to fulfill the new demand. But that could take a long time!
They aren't talking about protectionism, Sweden "protected" Swedish jobs during this time period by aggressively cutting taxes for the middle/upper class.
Housing/rent, healthcare, tuition, food and many other things have risen dramatically. Some products have come down in price but that is typical with technology/entertainment products over time.
If you make products to sell to everyone, not just the wealthy, you have also probably noticed consumers having less money to spend. This is not good for the engine of the US that creates jobs, small to medium business. This is bad for both classes in the US: wealthy upper and lower plebs, the middle is just about gone.
If we want growth across the board, wages also have to grow, else stagnation for all from lower to upper, when did we forget this?
However, productivity has gone up and been helped by technology, wages have not followed.
It seems like it's pretty simple math: You're paying me X/day, tool which costs Y would save me Z days of time, over the course of the year. Is Y/Z >= X? Then get out the company Amex already.
So if the simple math checks out, don't ask the company, break out your own Amex, and pocket the difference.
you can use that time and energy to make money elsewhere or invest in learning, networking, understanding your bureucracy.
but i am sure there are companies where your bonus depends on your performance vs. your proposed budget. If you are not being rewarded for improved productivity and being treated as a commodity, why should you pass on your internal productivity gains.
sometimes you want more work (responsibility). that's how you get experience and a bigger budget. Even if you can only spend the budget for work things, you still gain autonomy and power.
So in this case, businesses are using their leverage in the job market (high unemployment) and the fact that they own the means of production to break the relationship between income and productivity.
Any chance at changing this in the 2016 election is dead. 4 or 8 more years of this and it's only going to get worse.
My only hope is that a strong progressive movement can take off before the right wing Nationalists make it into power.
This is obviously false. When a poor country becomes developed, the net productive capacity of humanity increases.
The whole world is lifting itself into wealth, despite the hand-wringing of pessimists. It's awesome!
As the article speaks of half a billion people experiencing stagnation, that would make ~5 billion people experiencing double-digit growth.
I've heard the general claim of reduced poverty pretty often, but I'd be (genuinely) curious to see sources of it. It seems strange in light of the current migratory movements from "developing" into "developed" countries: As in, if poverty has been reduced by such a tremendous amount, why are so many people ready to risk their life to get to europe instead of taking part in the booming economy at home?
I'm not saying it's an easy sell. The mood in the developed world is definitely protectionist.
It's not looking like a good deal to Joe and Jane.
At the time the US had a liberal business climate compared to other parts of the world. As a result a lot of industry was created and exported via culture.
What's happened since is that rest of the world caught up. Europe is no longer rebuilding. Soviet Union fell apart freeing a lot of nation states to purse western ideals. In Asian countries the regimes got softer and also liveried their economies. So there's a lot more competition. Globalization became possible and practical.
In the US life expectancy went up (medication and not smoking) so that made generous defined benefit programs a lot less practical. Women and African Americans can now do a lot of the jobs that were reserved for white middle class males.
All of these things contributed to white middle class American males losing out compare to what they had before. Baby boomers and before just happened to be in the right place / right time.
At the same time there are still more poor people than ever before in history, ~3 billion, so what is the net? 50 years ago there was only ~3 billion people on the planet.
Socialism != Democratic Socialism. Venezuela is not the model Bernie Sanders and his supporters wants to emulate. The Nordic countries, and to some extent Germany, are good examples of Democratic Socialism.
Stronger social safety nets, free / nearly free health care and higher education, high minimum wage. Paid for by taxing corporations and the wealthy.
We also see that increased incomes from the wealthy and corporations are not flowing back into the economy. The wealthy are saving their money, not spending it. Corporations are doing stock buybacks and paying out dividends, not expanding their workforce or increasing wages. This is the failure of neoliberalism. It worked great in the past, but now it isn't. It's time for a change.
Also, German health care might be expensive but it's always affordable since it scales with your income. It's also still cheaper than the US.
Source: I live in Germany and pay the maximum for my health care, which is around $900 US a month. This covers my entire family, and there are practically 0 co-pays, deductibles, or arguing with the insurance company. Before that, while I was boot strapping my startup and making 0 money, my health insurance was super super cheap.
-PM Rasmussen, in response to American socialists incorrectly claiming that they were trying to emulate the Nordic model.
I'd also like to note that (probably as a result of their relatively high tax rate) the Nordic countries are not economic powerhouses. Places like Hong Kong or Switzerland, with relatively free markets and low taxes, are.
https://en.wikipedia.org/wiki/Social_democracy <-- The Nordic model. This what I would argue for, and when people say they want to emulate the Nordic model, this is what they mean. It's 100% a market economy, no one is advocating for a socialist planned economy.
Regarding economic powerhouses, do we really need to make that the goal? Quality of life and sustainability should be the primary goal, not corporate growth and profits.
What people fail to understand is that the Swedish model of social democratic capitalism isn't antagonistic to large corporations; it's a model where state and corporations form a symbiotic relationship. This at the expense of SMBs and the civil society.
I don't think anyone who seriously follows US politics or economics fails to understand that. Bernie Sanders is not pushing to get rid of the free market.
I would love to know more about what you mean when you say it comes "at the expense of SMBs and the civil society"?
From my perspective, here in Germany, having a small business is a bit easier because you do not have to cover health insurance for yourself (your health insurance scales with your income so it will always be affordable) or any of your employees. Of course, the stronger rights of the worker can bite you since it is very difficult to actually fire someone. I know a lot of people who are self employed contractors (filling some small niche), not even making that much money, but still having excellent health care and a high quality of life. That type of thing is much harder in the US since there is no safety net to fall back on and you will be crushed by health care costs.
"No True Scotsman".
Both have actual definitions, but are never used appropriately.
http://www.imf.org/external/pubs/ft/fandd/2016/06/pdf/ostry....
If you think neoliberalism means something different, please let me know. I would love to hear it. I agree that it has buzzword potential, but I believe it corresponds to a pretty specific set of government and economic policies, basically what the UK and US have right now. Germany and the Nordic countries are less neoliberal since they have stronger social safety nets, stronger workers rights, and less "free market" (imo, the good aspects of the free market while removing some of the bad).
This question investigates a counterfactual claim. Could poverty be eliminated in a world without neoliberal politics determining the structure of the global economy?
But that's not the whole story. Rapid income inequality is also happening and needs to be explained and judged in terms of whether it's a good or bad thing--most feeling it's the latter.
You see, trade is a net positive sum or it cannot occur.
At the least, this is what free trade advertises. I believe in most cases it is true with some caveats.
When I hear you talk though, as we know others have, then I hear something else, which is the implication of a zero sum game occurring in one place to allow a positive sum game to happen elsewhere. Crudely, some must lose for others to win.
Would you care to elaborate?
Why would that be necessary?
'Zero for bottom 50' is usually code for 'positive for 40-50', 'neutral for 20-40', 'negative for 0-20'.
Household consumption costs are dominated by housing, first of all, and transport, secondarily; in many coastal cities, strangling supply has led to higher prices that consume way more income, making people feel artificially poorer than they would in a freer market.
Surely this is a side effect of something else.
This effect cannot be caused by population increases because most of the 20th century had large increases without this zoning pattern emerging.
Additionally many European countries have declining populations and high rent/house prices.
So what is it? Low interest rates?
But then low interest rates are supposed to spur business development and new enterprise. More people should have more savings to spend on things, like houses.
Why isn't this happening?
And finally we're back to Peter Thiel's position = ex-computation technological progress has stalled and many people in the intelligentsia haven't noticed it due to their cocoon.
Do you agree with this train of thought?
I recommend the writings of Prof. William Fischel (author of Zoning Rules![0]) to answer this question-- he uses a Coasian approach to identify that restrictive/exclusionary zoning policy is a rational response by homeowners when they are given undue entitlements.
One entitlement that's especially relevant is low property taxes (Prop 13 in California/Measure 5 in Oregon)-- this drives up housing prices and incentivizes homeowners to hold on to housing stock and resist the increase of housing stock elsewhere in their community.
[0] https://www.amazon.com/Zoning-Rules-Economics-Land-Regulatio...
Very interesting, thank you.
> It's important to remember that the rise of the automobile happened over this same period, which raised the level of marginal land (and delayed conflict over overpopulation, for at least a few generations).
A good point. I expect self driving to extend such an effect.
> This effect cannot be caused by population increases because most of the 20th century had large increases without this zoning pattern emerging.
It's important to remember that the rise of the automobile happened over this same period, which raised the level of marginal land (and delayed conflict over overpopulation, for at least a few generations).
1. the deep slump and the weak recovery after the 2008 financial crisis
2. a decline in the number of people available for work
3. more part-time and temporary working
4. a decline in the influence of trade unions
I don't buy. What their research found is that one country has fared better than the other 5. Everything else are assumptions of causality.
Most likely, our environment is going to become uninhabitable within 50-100 years, causing our population and societies to collapse, and while a few of us may persist in some domed cities for a bit, instead of building more technology to move offworld, we'll have a big religious war and then go extinct. Hopefully, some other species will eventually evolve to become intelligent and do much better than we did.
Checkmate.