(THIS ARTICLE IS MACHINE TRANSLATED by Google from Norwegian)
We live in the age of globalization. Professor at the Collège de France in Paris, and former chief economist and Vice President of the World Bank, François Bourguignon, are trying to give us some answers to what this means for inequality. His book was published in French already in 2012, but is now also available in English translation. It is a necessary supplement to what was previously written about inequality and economics, by Joseph Stiglitz, Thomas Piketty and Anthony Atkinson. While the three gurus in the international economy are most concerned about inequality in the United States, or within the borders of the nation-state, Bourguignon is concerned with the whole picture. Will globalization lead to institutionalized injustice, both nationally and internationally?
Inequality is defined as one of the great and growing challenges of our time. But what is inequality? What do we measure? At home, think tanks Agenda and Civita disagree on the facts. Bourguignon has a longer theoretical chapter on what inequality can mean and how it can be measured. All kinds of existing global statistics tools are discussed. It is partly difficult for a non-economist, but at the same time interesting if one is concerned with development issues.
The development. 20 years ago, the average standard of living in Germany and France was 20 times higher than in China. Today, this difference is halved. It is revolutionary. In recent years, we have become so caught up in national inequalities that we have forgotten to take into account the leveling that has happened internationally. This is what the current leader of the UN environmental program Erik Solheim has been talking about for so long. We are approaching the situation from before the age of imperialism. The European, Indian and Chinese farmers then had essentially the same, low purchasing power. They were equally poor, or rich.
The author points out that some of the benefits of globalization have been that millions of former farmers have now become workers. This has created dynamism and growth in poor developing economies. At the same time, cheap imports for the masses in the north have made everyday life easier in the form of more clothes and more technological dupits at an affordable price. In the south, technology development has accelerated, and a growing south-south trade has developed.
The downside for the north has been the closure of factories, the phasing out of jobs and the painful transition to other production. The author otherwise writes little about environmental problems and lack of labor rights in the new mass production in the south.
No linear evolution. Bourguignon is aware that although there is less difference between poor and rich countries today than before, inequality is increasing internally, both in the north and in the south. A large number of developing countries, especially China, India, Indonesia and Bangladesh, have experienced an increase in inequality from the mid-1980s onwards. The same is true for some of the African countries that have experienced the strongest growth, such as Ghana, Kenya, Nigeria and Ivory Coast. The author believes that from this it should be obvious that growth in itself is no guarantee against a society with much inequality. Over the past two decades, a large majority of high-income OECD countries, including the Scandinavian countries, have also experienced increasing income disparities. But in some countries, levels of wages and living standards have been leveled since 1990, such as in Belgium, Spain and Italy, according to the author. It was new to this reader
Bourguignon therefore argues that globalization plays a role in increasing inequality in most countries. In developed countries, this development has contributed to a greater product specialization where production requires more capital. It is also the capital that has been most favored in emerging countries exporting labor-intensive industrial products. And it is still so for many poor countries that they mainly export raw materials, either in the form of agricultural products or minerals. Here, it is often those with capital and large landowners (sometimes the state) who have made the most of rising demand and rising prices.
New technology. Bourguignon points to the tremendous development of communication and information science and technology. This has enabled a few people to now manage a large portfolio, often worth a few billion dollars, and ergo generating even greater profits. Financiers gravitate towards London and push up the prices of their own services, as do directors of listed companies. This has made many brokers, financiers and directors megarike, and helps to influence the inequality statistics. The same goes for sports icons like Zlatan Ibrahimovic and a few writers, or movie stars, such as JK Rowlings.
Authorities have created increased inequality by cutting the progressive income tax, which they felt would lead to more investment appetite and entrepreneurship. In the very first year of Thatcher's reign, the highest marginal tax rate was reduced from 83 to 60 percent, while value-added tax increased from 6 to 15 percent, which should lead to more efficiency, in other words, the life of those with little to no trouble with before became more expensive, and vice versa.
Global redistribution. Economic policy in Bourguignon's analysis revolves precisely on these very different principles: efficiency or equality. The principle of economic efficiency has led to a number of reforms aimed at improving the competitiveness of national economies. This is precisely what we see today leading to increased differences, which is probably part of the backdrop Donald Trump won the US election against.
In the last chapters, Bourguignon discusses how aid and international cooperation can help prevent some of the growing inequality we see. He is positive about the UN's previous Millennium Development Goals and the new sustainability goals, and sees aid as a necessary redistribution opportunity. Not least, he believes this is necessary for sub-Saharan Africa. By 2050, this part of the world will make up 20 percent of the world's total population. If jobs are not created, millions of Africans will migrate. These countries have also understood China, and they have now emerged as an important aid player.
Bourguignon appears to me to be a good social democrat: he argues for increased tax rates, more investment in education, harmonization of international tax regimes, inheritance tax and, as I read it, continued commitment to strong unions with collective rights.
The book is strong on facts about differences in countries and between countries, and at the same time it is also clear on the good sides of globalization. In the meantime, the great unknown lies ahead of us. What happens if the Eurozone breaks down, if populists come to power in several countries, or if the climate crisis accelerates? Do we risk that inequalities will increase even more, both nationally and internationally?
