Talking Points: Modern Capitalism: Growth and Equality: Friday Focus for October 10, 2014
J. Bradford DeLong: Talking Points for IIF: Modern Capitalism: Growth and Inequality”: 4:00-4:50 pm, Friday October 10, 2014, Ronald Reagan Building
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I am going to talk mostly about the U.S. and somewhat less about the North Atlantic, and say only one thing about the world as a whole.
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The one thing about the world as a whole: After the Qingming Festival of 1976, the rulers of China recognized that they had lost whatever legitimacy they had ever possessed, that Hua Guofeng and his allies could not manage the situation, and that they needed to adopt the successful-mouse-catchers development strategy, the world has become a more equal place because China and secondarily India have done well. But a continuation is not guaranteed for the next two generations. It may not even be ore likely than not.
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The United States primarily and the rest of the North Atlantic to a lesser degree are losing the race between technology and education. We do not need to slow technology; we do need to accelerate education if we are to ever reduce the gap between those at the 20th and 80th income percentiles to a magnitude that does not shame us.
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We may not be able to do so with our current educational technologies: we know how to get 1/3 of our populations reaching adulthood a useful college education–but the same educational strategies may well be much less effective for those outside our luckiest 1/3.
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A good deal of the rise in inequality outside of the 80-20 education-and-technology factor is also due to our technologies’ creation of winner-take-all contests within our economy. It is not clear to me why the economy of 1900 and the economy of 2000 did this, while the economy of 1960 did not.
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The rest of the rise is due to a feedback loop by which the rich use their wealth to acquire more political influence to secure the rents that make them even richer so that they can use their wealth to an even greater extent to acquire still more political influence to secure even more rents. We do stand in great danger of building a latifundista society, which will in due course bring with it our Perons, our Pinochets…
Martin Wolf, J. Bradford DeLong, Muhamed El-Erian, Jason Furman.