Economist Branko Milanovic ( https://twitter.com/BrankoMilan ) wrote about this in a World Bank working paper in 2012. Here is a recent article which refers to his now famous "Elephant Curve."
Not to diminish the suffering of the western middleclass (as I'm part of it) but what about the people in emerging markets?
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.
Maybe it's a hint the this model of capitalism is only good for increasing the wealth of societies within a certain range of development. What happens when emerging markets become developed middleclass markets - do they too stagnate, or does the whole economy decline except for the top 0.1% at that point? Is that an acceptable system?
Ideally globalization gives everyone a shot at a middle class, if everyone plays towards a larger market. Realistically, there's jockeying for trade and racing to the bottom via whatever measures can be taken (lower taxes, fewer regulations, or dumping product). Winners/losers is ok within a liquid self-balancing economy, not for the illiquid concept of countries.
Well, the next 20 years are going to be really interesting. I predict automatic is going to make it so that manufacturing may well move back to the consuming countries (Foxconn that assembles iPhones recently replaced 60,000 employees with robots) and in fact some of that is already happening.
I think if we want to understand the recent surge of populist movements in western countries, this study gives one good reason for it. Regardless of wether statements/positions of those groups are correct or outrageous.
“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.
> ... most western workers can afford much more from their flattened or fallen income than they could 10 years ago ...
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.
> 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.
I hate to sound aggressive or confronting, but will say this: you do have heard of a thing called "the internet"? ;-) we have lots of knowledge for free now.
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.
That they can afford more, I would assume, is because things are cheaper. clarified below
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 a single centralized government(e.g.: the EU) can only really benefit the multinational corporation
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.
One thing the EU does is prevent a "race to the bottom" with regards to foreign trade agreements and tariffs. For example, if Poland wants to trade with China, they cannot negotiate directly. They must go through the EU. This prevents China from playing EU countries against each other to get better and better trade deals.
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.
Both views may be valid because the "bad actors" are sentient human beings with working brains, not a force of nature. They have a goal, they'll pick whatever methods works depending on conditions.
> 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.
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.
> quality of living per dollar has risen tremendously over the past generation
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.
I think housing costs and quality of living per Dollar are two different things.
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.
> I think housing costs and quality of living per Dollar are two different things.
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.
Thats your decision to put this costly housing in your basket. And your not alone making this decision, but a) its a trend and b) the aforementioned 70% of western workers aren't necessarily repeating your choice.
> Thats your decision to put this costly housing in your basket.
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.
Or maybe they _could_ afford much more if basic necessities such as housing did not swallow up any gain otherwise expected. (Not to mention children, education, healthcare depending on countries).
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.
Do you think the income stagnation is due to housing costs rather than globalization?
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.
I hear similar thinks in the UK, that housing is affordable in such and such a small town. Thats great, but there are never any "good" jobs in these places.
According to this cost of living calculator from CNN [1] housing in San Francisco is 256% higher than in Austin. Both have good jobs in tech.
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.
> Do you think the income stagnation is due to housing costs rather than globalization?
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.
The high cost of housing in urban centers such as NYC, SF, Boston, LA is caused by market inefficiencies caused by zoning density restrictions and overuse of historic landmark status. This actions result in a "politically induced" scarcity which works against wealth creation. In microeconomics, this is called, "rent-seeking." Harvard Economist Edward Glaeser has written extensively about this, see NY Daily News: "Build Big Bill" for a solution to the high cost of housing in NYC. Financial Times columnist (and with a masters in Economics) Tim Harford has written about this. See his book, "The Undercover Economist." Economics Nobelist Paul Krugmann has mentioned this in his NYTimes columns as well.
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.
You could negate the gains of land wealth. There are small fixes for this (applying capital gains to home sales), but the big fix would be an application of a land value tax,[0] something generally agreed to be very economically efficient.
Protectionism kinda works, yeah. Globalization increases the profits of the companies that can take advantage of it, but it also has major downsides for all the local people who can't compete. On average, the "economy" might go up even when lots of individual people are being put out of work or taking much lower-paying jobs. You can either tax the increased profits and distribute them to the under-employed workers so they maintain a decent income, or limit globalization so they can keep their old jobs.
This is an overly simplistic (to the point of being absolutely incorrect) explanation. There are four parties involved; {consumers, producers} in {country A, country B}.
Well of course it only works for the specific people you're "protecting" and kinda screws over everyone else. My point was, if you're only looking at the median OF the richest countries, of course it's going to move down. Maybe a lot. Even as the mean of that country goes up and the real median (of everyone involved) should go up too.
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.
That's not surprising. Infinite growth is physically impossible and we are just seeing the end of it. We have to shift our economy and planning from a growth driven mindset to a sustainability driven one.
just like the sun burns up all its hydrogen stores eventually, the earth will eventually give up the last of its natural resources. Sooner, rather than later if we keep up at this pace. Unlike the suns nuclear process, though, our use of resources is unnaturally accelerated.
No, we won't, not the way we're going now. We don't have the technology to extract offworld resources, and we're not doing anything right now to change that, except for some hot air from a few places.
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.
The rate of production cannot be infinite since it's based on finite resources. As for your second point, I pretty much have all my basic needs met. I could take a 30% decrease in salary right now without any significant change in lifestyle.
Since there is a smaller consumer spending pool to pull from, prices have risen faster on key products to make up for the lack of growth in wages.
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?
assuming a Technology/Capital/Labor split (simplistic), if productivity has gone up due to technology, and the technology is primarily a function of capital (i.e. technology doesn't make me smarter, it makes my computer faster) then doesn't it follow that my wage doesn't go up, but the money spent on my computer does?
You know, that would make a lot of sense, but it seems to be awfully hard to get management to sign off on time-saving tools, equipment, and software sometimes.
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.
Unless the worker writes their own software with their own computer, in which case they can pocket the productivity gain. This is basically what has allowed programmer salaries to go up. IT frequently gives long estimates and then does the work in a tenth of the time, pocketing the surplus. Happens all the time at multiple levels. Until the end users learn to solve their own problems, they will keep losing to people who learn to automate themselves.
So if the simple math checks out, don't ask the company, break out your own Amex, and pocket the difference.
Where do you work? I've never worked at a company where I pocketed the extra money by coming in under schedule. On the other hand, I often pay out of my own pocket for licenses, books, etc that benefit the company. In return, I get more work and less time to do it.
i meant pocket the difference in time saved. Nice added benefit is irs doesn't tax time off, energy saved, or happiness.
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.
Yes, individual productivity has gone up in almost every field due to technology innovations. However, the increased profits generated from the productivity increases are only being captured by the business owners. The actual workers are seeing nothing, and many workers are actually being laid off so they are losing.
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.
The past few decades of globalization have resulted in the greatest destruction of poverty in history. For every person experiencing stagnation in the developed world, ten people in the developing world have experienced double digit growth. Poverty destruction has massive benefits, and not only for those in poverty. Even from a purely self-interested point of view, developing nations are already seeing exports to developing markets rise, and that will only continue.
When many millions of people go from being subsistence farmers to producing a massive amount of manufactured goods on the planet, how could you possibly come to the conclusion that it is a zero sum game?
Because many of the people in the developed world who used to be doing that manufacturing are now out of work. Unfortunately, at least here in the US, we've been pretty bad at retraining and helping those who get laid off because factories moved overseas.
In a completely undeveloped ecoonomy, there is no money to be made domestically. It is all coming from producing for advanced economies. One of the biggest fallacies in current times is that of a growing pie. People in the United States are starting to catch on as the middle class vanishes.
I think the "elephan curve" described above contradicts your point. We see 80% growth near the bottom of the world income distribution, and ~0% growth at the worst point for the American/ developed world middle class. If it was zero sum, there would have to be some negative growth somewhere.
The whole world is lifting itself into wealth, despite the hand-wringing of pessimists. It's awesome!
> every person experiencing stagnation in the developed world, ten people in the developing world have experienced double digit growth.
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?
Not that I disagree with you, but what would you say to "Joe Middle America" and all like Joe who are seeing their middle class lifestyle evaporate alongside this reduction in poverty? Welcome to being upper-lower class?
To see it as an investment, and also an act of self-interest. Getting basic health care to billions lowers the risk of new plagues. Improving their quality of life lowers discontent and the risk of more and larger wars. Establishing a basic standard of education does more than all the rest, adding billions of voices to the global conversation and inventions that benefit everyone. You can't sell tertiary services to people subsisting on $1/day. The situation had to be addressed, the pain is real, but we will all be better off.
The "investment" would be in plague prevention, foreign education, and potential war prevention? So that tertiary services can be sold by members of the upper class to citizens of the developing world? This seems like the sort of argument that strengthens Joe Middle America's nationalist sentiment, not alleviates it.
Plagues and wars don't respect national boundaries. Joe Middle America knows that it's his sons and daughters that would be on the front lines in a large war. Foreign education alleviates the environment of ignorance that allows fundamentalism and extremism to thrive, and also lowers population growth rates that threaten a wide variety of problems. Joe Middle America is almost certainly employed by an organization that provides tertiary services, or else high tech manufacturing that, again, requires wealthy, educated buyers.
I'm not saying it's an easy sell. The mood in the developed world is definitely protectionist.
None of those things immediately impact the number of dollars in his bank account, or his ability to move upward in the economy moving forward, so Joe doesn't care. "Joe, I know all of your anecdotal experience says quality of life has been declining for you and everyone you know since the 70's, but just go with it a little bit longer and it'll be ok. Check out this chart of global income levels. And this one of happiness in America. See, life is better. Just not for you."
Unfortunately Joe and Jane Middle-America don't care about the far-off billions they have never met. They care about their hometown, that is descending into a post-industrial ghost-town because the local manufacturing was undercut by the almost-free labor of those far-off billions, or their friends and family that are losing their financial independence, or spiraling into depression, suicide, or opioid abuse.
It's not looking like a good deal to Joe and Jane.
It seams to me as period of 50s to 90s contributed as a blip. Yeah, the American middle class doing artificially well. Europe was still rebuilding from WW2. The Soviet Union wasn't really a match (despite the pretenses). Rest of the wold with filled with poor counties with terrible with repressive regimes.
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.
>The past few decades of globalization have resulted in the greatest destruction of poverty in history.
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.
There's no doubt that population growth is one of the defining features of the world economy. But improving average wealth and education inevitably lowers population growth. Population growth must slow to allow further advances in poverty reduction, but I think everyone understands that population growth will slow one way or another. The question is whether it will happen through economic growth or through the four horsemen.
How, precisely, does increased economic friction in the form of more taxes encourage economic growth? I am strongly anti-nationalist, but I must say their economic track record is exemplary compared to the socialists. Venezuelan food riots, anyone?
> I must say their economic track record is exemplary compared to the socialists. Venezuelan food riots, anyone?
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.
That is why I said, "and to some extent, Germany".
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.
"I know that some people in the US associate the Nordic model with some sort of socialism. Therefore I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy."
-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.
My apologies, even I was confused at the terminology. Social Democracy vs Democratic Socialism.
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.
Sanders' policies would throw any of the Nordic economies into depression and would bankrupt the state if put into practice there.
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.
> 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.
New pet peeve: I wish people would identify which specific aspect of "neoliberalism" is responsible for whatever problems they blame on it. For instance, I've seen it used to refer to both free market policies and rent-seeking by dominant industries. Even though both policies conceivably benefit wealthy elites at the expense of others, they're not really ideologically consistent with each other. It'd be helpful to define our terms here. Otherwise, it's hard to distinguish from general angst about "the system" and "the man".
The 'free market' aspect is often purely ideological and used as an excuse for privatization and cutting spending/austerity, which leads to the rent-seeking and stagnation.
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).
It's not so much neoliberalism as economic reality. If you're going to trade with other countries you have to deal with labor arbitrage. "Challenging" that with a bigger state doesn't even address the problem, let alone solve it.
These 'zero growth for bottom X%' headlines, even when mathematically valid, are deceiving because growth isn't randomly distributed across the income space, it's concentrated at the top.
'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.
> we've systematically made housing dramatically more expensive through parochial zoning
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.
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.
> 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.
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).
This is the cost of lifting more than a billion people out of abject poverty and is an exaggeration of the negative impact (for example, ignores transfer payments & quality of life improvements). It is part of what is overall a very good thing.
Those are only half of the numbers. Yes, poverty has been reduced, but the global wealthy have seen their ownership over the collective wealth of humanity increase much more drastically. Where are the numbers that demonstrate that the only way to raise people out of poverty was to sell their countries' resources to the highest bidder and turn them into markets for international capital?
This question investigates a counterfactual claim. Could poverty be eliminated in a world without neoliberal politics determining the structure of the global economy?
> It is part of what is overall a very good thing.
Speak for yourself. I'd rather train and purchase from my neighbors. I guarantee people in China and India are not thinking about your welfare whatsoever.
I think you have a point in the sense that from the studies I've seen in the news, the average human being on earth is doing a lot better today than before in terms of income and health.
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.
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[ 3.5 ms ] story [ 210 ms ] threadhttp://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.
[0] https://en.wikipedia.org/wiki/Land_value_tax
https://en.m.wikipedia.org/wiki/Economic_surplus
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.
http://www.spectator.co.uk/2012/04/swedens-secret-recipe/
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
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.
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.
https://commons.wikimedia.org/wiki/File:US_productivity_and_...
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.
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.
https://en.wikipedia.org/wiki/Social_democracy
"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).
'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).
http://www.worldbank.org/en/topic/poverty/overview
This question investigates a counterfactual claim. Could poverty be eliminated in a world without neoliberal politics determining the structure of the global economy?
Speak for yourself. I'd rather train and purchase from my neighbors. I guarantee people in China and India are not thinking about your welfare whatsoever.
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?