Global Inequality: Legitimation Crisis?
posted by Frank Pasquale
Fractal inequality continues apace: the Wall St. Journal reports that the global wealth gap is getting bigger:
According to a study to be released tomorrow by Boston Consulting Group, the world’s wealth grew by 7.5% in 2006, reaching $97.9 trillion. The study also showed that the wealth gap between the haves and the have-nots continued to widen over the past five years, with much of the global wealth gains going to the wealthy.
Pope Benedict XVI offers wisdom on the topic:
Capitalism should not be considered the only valid model of economic organization. . . . The emergencies of famine and the environment demonstrate with growing clarity that the logic of profit, if predominant, increases the disproportion between the rich and the poor and leads to a ruinous exploitation of the planet. . . . When the logic of sharing and solidarity prevails, it is possible to correct our route and point it toward fair and sustainable development.
Of course, people like Gary Becker might view such sentiments as merely the product of “simple jealousy and envy,” and intellectuals’ “remove[] from the real world.” Views like Becker’s are enormously powerful, but perhaps someday he will recognize that the legitimacy of globalization depends on its fulfilling basic human needs–and not some abstract measure of wealth maximization:
While the supporters of an exclusively private-sector driven globalization may resent the idea of vesting tax-raising authority for the first time in history into a global agency, they cannot fail to notice that the very process they support undercuts, in an ironic twist, their own position. It does so by rendering the gap in wealth more obvious, and the fairness of the existing global distribution, more questionable. They will ultimately realize that their self-interest lies in supporting some form of global action to deal with both poverty…and inequality.
(From Branko Milanovic, Global Income Inequality: What it Is and Why it Matters.)
October 9, 2007 at 9:08 pm
Posted in: Law and Inequality
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Responses (10)
Nate Oman - October 10, 2007 at 10:26 am
“…with much of the global wealth gains going to the wealthy…”
Doesn’t this statement necessarily imply that some of the wealth is also going to those who are not wealthy. I am not as concerned about income inequality per se if the real purchasing power and standard of living of the poor is rising. To put it in starker terms: I think that poverty is a much, much greater evil than inequality.
Of course, I think that inequality can have negative effects. It may, as you suggest, cause people — rightly or wrongly — to lose faith in the system making them prey to various forms of destructive populist nonsense. It also — and I think that this is a bigger problem — creates the potential for big public choice problems. When wealth is heavily concentrated in the hands of a few it is easier for them to manipulate government for their private benefit. I think that there are even problems of social fragmentation and loss of solidarity created by huge income inequalities, although I place these concerns far down the list from concerns about poverty.
I think it is very important, however, in these discussions to realize that there is no logical connection between poverty and inequality and in fact massive inequality is also quite consisent with massive decreases in the levels of poverty. For me the question is whether over the long term global free trade is going to do a better job of alleviating poverty than the alternatives. If the answer is yes (and looking at the issue historically the answer does seem to be yest), then I am willing to accept quite a bit of inequality.
Nate Oman - October 10, 2007 at 10:30 am
“…with much of the global wealth gains going to the wealthy…”
Doesn’t this statement necessarily imply that some of the wealth is also going to those who are not wealthy. I am not as concerned about income inequality per se if the real purchasing power and standard of living of the poor is rising. To put it in starker terms: I think that poverty is a much, much greater evil than inequality.
Of course, I think that inequality can have negative effects. It may, as you suggest, cause people — rightly or wrongly — to lose faith in the system making them prey to various forms of destructive populist nonsense. It also — and I think that this is a bigger problem — creates the potential for big public choice problems. When wealth is heavily concentrated in the hands of a few it is easier for them to manipulate government for their private benefit. I think that there are even problems of social fragmentation and loss of solidarity created by huge income inequalities, although I place these concerns far down the list from concerns about poverty.
I think it is very important, however, in these discussions to realize that there is no logical connection between poverty and inequality and in fact massive inequality is also quite consisent with massive decreases in the levels of poverty. For me the question is whether over the long term global free trade is going to do a better job of alleviating poverty than the alternatives. If the answer is yes (and looking at the issue historically the answer does seem to be yest), then I am willing to accept quite a bit of inequality.
Maryland Conservatarian - October 10, 2007 at 11:17 am
Professor Oman writes: “To put it in starker terms: I think that poverty is a much, much greater evil than inequality.”
I’ll be even starker: inequality isn’t an evil. It is unarguable that talents and intelligence are doled out in unequal portions and that efforts are expended in unequal measures. To follow-up (approvingly) on Mr. Oman’s comments – unless there is a suggestion that wealth is a zero-sum game and that the increase in wealth that the wealthy supposedly enjoyed only came about because they stole it from the poor, this tired alarm about rising inequality just seems directed to foment a class-warfare sentiment.
But I have an open mind – I’ll gladly sign on when someone shows me how Bill Gates and Warren Buffet losing half of their fortunes would somehow make me better off.
Frank - October 10, 2007 at 12:19 pm
Some responses (one conciliatory, others challenging):
1) The great generosity of people like Buffett and Gates does suggest a good side to inequality: when wealth is very concentrated, people at the top may become less interested in buying another 50,000 square foot home, and more interested in doing good with their wealth. Geoff Rapp has an interesting article making a parallel point in the antitrust context.
2) But one key question here is: how representative are Buffett and Gates? “Research shows that less than 10 percent of the money Americans give to charity addresses basic human needs, like sheltering the homeless, feeding the hungry and caring for the indigent sick, and that the wealthiest typically devote an even smaller portion of their giving to such causes than everyone else.”
from:
http://www.nytimes.com/2007/09/06/business/06giving.html?_r=1&oref=slogin
3) Another question arises with respect to the differences in buying power that inequality can generate. For example, I believe that Kevin Outterson has said that at least 80% of world spending on pharmaceuticals comes from less than 20% of the globabl population (the wealthiest nations). Should pharma R&D focus to diseases that mainly affect those rich countries to that extent?
Of course, in the case of pharma, the benefits may well diffuse to all once the patent expires (but again, Outterson’s work on antibiotics questions that conventional wisdom in at least one drug class). But there are other examples of unequal buying power leading to results that I think anyone would agree are troubling. Here is Laurie Garrett:
“Data from international migration-tracking organizations show that health professionals from poor countries worldwide are increasingly abandoning their homes and their professions to take menial jobs in wealthy countries. Morale is low all over the developing world, where doctors and nurses have the knowledge to save lives but lack the tools. Where AIDS and drug-resistant TB now burn through populations like forest fires, health-care workers say that the absence of medicines and other supplies leaves them feeling more like hospice and mortuary workers than healers.”
***
“[T]he world is now short well over four million health-care workers, moreover, is all too often ignored. As the populations of the developed countries are aging and coming to require ever more medical attention, they are sucking away local health talent from developing countries. Already, one out of five practicing physicians in the United States is foreign-trained, and a study recently published in JAMA: The Journal of the American Medical Association estimated that if current trends continue, by 2020 the United States could face a shortage of up to 800,000 nurses and 200,000 doctors. Unless it and other wealthy nations radically increase salaries and domestic training programs for physicians and nurses, it is likely that within 15 years the majority of workers staffing their hospitals will have been born and trained in poor and middle-income countries. As such workers flood to the West, the developing world will grow even more desperate.”
from:
https://www.foreignaffairs.org/20070101faessay86103/laurie-garrett/the-challenge-of-global-health.html?mode=print
Patrick S. O'Donnell - October 10, 2007 at 1:03 pm
On poverty and inequality see, for example:
Bardhan, Pranab, Samuel Bowles and Michael Wallerstein, eds., Globalization and Egalitarian Redistribution. Princeton, NJ: Princeton University Press/New York: Russell Sage Foundation, 2006.
Hurrell, Andrew and Ngaire Woods, eds., Inequality, Globalization and World Politics. New York: Oxford University Press, 1999.
Grusky, David B. and Ravi Kanbur, eds., Poverty and Inequality. Stanford, CA: Stanford University Press, 2006.
In the last work above, see in particular Sen’s essay, “Conceptualizing and Measuring Poverty,” pp. 30-46, for why we should not separate poverty from inequality, indeed, why poverty is in many respects a relative term.
Those interested in pursuing issues raised by Frank’s post, specifically as they relate to questions of *distributive justice*, can e-mail me (patrickseamus “at” hotmail.com) for a fairly decent reading list: “The Ethics, Economics & Politics of Global Distributive Justice: A Transdisciplinary Bibliography.”
There are also several excellent entries at the Stanford Encyclopedia of Philosophy (http://plato.stanford.edu/contents.html#e) that one should be familiar with: on Equality; on Equality of Opportunity; and On Distributive Justice. Finally, in early 2008 Thom Brooks’ book, Global Justice: A Reader, should be appear (Blackwell).
Patrick S. O'Donnell - October 10, 2007 at 1:03 pm
On poverty and inequality see, for example:
Bardhan, Pranab, Samuel Bowles and Michael Wallerstein, eds., Globalization and Egalitarian Redistribution. Princeton, NJ: Princeton University Press/New York: Russell Sage Foundation, 2006.
Hurrell, Andrew and Ngaire Woods, eds., Inequality, Globalization and World Politics. New York: Oxford University Press, 1999.
Grusky, David B. and Ravi Kanbur, eds., Poverty and Inequality. Stanford, CA: Stanford University Press, 2006.
In the last work above, see in particular Sen’s essay, “Conceptualizing and Measuring Poverty,” pp. 30-46, for why we should not separate poverty from inequality, indeed, why poverty is in many respects a relative term.
Those interested in pursuing issues raised by Frank’s post, specifically as they relate to questions of *distributive justice*, can e-mail me (patrickseamus “at” hotmail.com) for a fairly decent reading list: “The Ethics, Economics & Politics of Global Distributive Justice: A Transdisciplinary Bibliography.”
There are also several excellent entries at the Stanford Encyclopedia of Philosophy (http://plato.stanford.edu/contents.html#e) that one should be familiar with: on Equality; on Equality of Opportunity; and On Distributive Justice. Finally, in early 2008 Thom Brooks’ book, Global Justice: A Reader, should be appear (Blackwell).
Daniel Goldberg - October 10, 2007 at 2:55 pm
While Nate and MC’s position on the relative evils of poverty vs. inequality are understandable, there is strong evidence that inequality has a much, much greater impact on population health than poverty. If this is so, it follows that our public health policies should most assuredly focus much more in inequality and much less on poverty if we really want to improve health.
AYY - October 11, 2007 at 3:32 am
Frank, the problem with this post is that you take 3 separate ideas, and mention them too briefly to do justice to any of them.
As to the Pope’s comments, I would suggest that it is collectivism rather than capitalism that leads to the problems he mentions. After all, the great famines in recent history have occurred under leftist rule.
As for your point about Becker, why bring him into this?
As for Milanovic, it’s hard to understand why he would say something like you quoted. He, of all people, probably knows as well as anyone how many hundreds of billions of dollars the richer countries have put into the poorer ones. So why he thinks a global taxing agency that is going to pour (at most) another few billion dollars into governments that often are plagued by corruption and inefficiency, is going to do any good is beyond me. Besides, who is going to get taxed, who is going to set the tax rates, and how is it to be decided who is going to get the money?
Frank - October 11, 2007 at 9:29 am
AYY:
As for Becker,
1) there are things on blogs called “links;” they are usually indicated in blue
2) if you click on the blue “Gary Becker” above, you will be led to his blog post on the topic of “intellectuals and capitalism”
3) Pope Benedict XVI is an intellectual; some would say among the most intellectual of contemporary religious leaders; and he questions capitalism in the quote above.
4) Becker says the following about intellectuals who question capitalism in the linked to piece:
“Since their basic hostility to capitalism is largely unabated, but they are embarrassed to openly advocate socialism and very large governments, given the history of the 20th century, intellectuals have shifted their attacks to criticisms of the way they believe private enterprise systems treat women and minorities, the environment, and various other issues. They also promote political correctness in what one can say about causes of differences in performance among different groups, health care systems, and other issues. I believe considerations in addition to simple jealousy and envy are behind the opposition of intellectuals to capitalism.”
I thought you’d know about links, but sorry to have assumed such a high degree of technical sophistication.
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