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from Counterparties:

Unequal inequality

At the Upshot over the weekend, Tyler Cowen writes that Americans’ view of income inequality is too narrowly nationalistic. Instead, he says, we should “preface all discussions of inequality with a reminder that global inequality has been falling and that, in this regard, the world is headed in a fundamentally better direction.” Basically, rising incomes in growing economies like China and India should outweigh the inequality concerns of countries (like the U.S.) where increasing exports are causing incomes at the top to rise. “While Chinese growth has added to income inequality in the United States, it has also increased prosperity and income equality globally,” he says.

A global reduction in income inequality is great, says Ryan Avent, but Cowen’s piece misrepresents the heart of the American argument against income inequality. It isn’t about globalization; instead, it’s about lax financial regulation, subsidies to big banks, low tax rates for the rich, and the appearance that political persuasion can be bought. Further, he says, even if American inequality is benefiting the poor in other parts of the world, “few voters are content to have their economies run as charities.”

There are two distinct issues here, says Dan Little. First, there’s “income distribution within an integrated national economy,” then there is “extreme inequalities of per capita GDP across national economies.” The are two fundamentally different things. Branko Milanovic and Christoph Lakner put out a paper in May that took a look at the latter type of inequality. This curve shows global growth over the last two decades along the income spectrum.

global-growth

The takeaway here is that life has gotten a lot better for the global middle class — this is particularly true in Asia — as well as the top one percent. But life hasn’t gotten that much better for the 75th to 99th percentiles of the global income distribution. “The ‘losers’ were predominantly the people [from the ‘rich world’] who in their countries belong to the lower halves of national income distributions,” say the authors. The trough of that chart? That’s middle America. — Shane Ferro

from Counterparties:

MORNING BID – Spending concerns and car sales

Coming data on same-store sales will help illuminate whether the modest upward tick in prices is something that is being replicated throughout the economy and signalling a stronger overall economy or perhaps one that remains more weighted to the most wealthy in the United States. According to Thomson Reuters data, Costco is poised to post the strongest same-store sales figures among the retail chains, though its 4.6 percent estimated increase would fall short of the 5 percent rise a year ago. The figures have a bit less utility than in the past given the likes of Wal-Mart stopped supplying this data years ago, but you work with what you have. Either way, it's notable that the discounters have been weak this year - a sign of lackluster spending outlooks for lower income Americans.

The lower-income sector has seen its share of economic growth diminish over recent years, a trend that has been accelerated in part by the weakness in housing prices in most parts of the economy, poor overall demand and lack of spending among all but the upper tier of consumers, and no real growth in wages -- though this morning's data on productivity and labor costs does show finally some wage growth.

from Breakingviews:

Review: Brazil’s toughest tests lie off the pitch

By Dominic Elliott 

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Michael Reid’s astute new book has a stark warning: the country of samba, sex and soccer is teetering on a knife-edge. “Brazil: The Troubled Rise of a Global Power” explains why protests against this year’s World Cup are turning increasingly violent. Reid, a journalist for The Economist, persuasively urges a return to the broad liberal consensus that served Brazil so well between 1994 and 2006.

from The Great Debate:

Why India has less inequality than U.S.

Voters line up to cast their votes outside a polling station at Wadipora in Kupwara district

The outcome of India’s general election may have dramatic consequences for the nation’s economic health.

India now has more equal wealth distribution than the United States. Steven Rattner, a Wall Street financier and former Obama administration economic adviser, recently announced this on MSNBC’s Morning Joe, while discussing Thomas Piketty’s new book, Capital in the 21st Century.

from Edward Hadas:

Shhh – don’t talk about higher taxes

By Edward Hadas

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Many people assume that tax increases are the only realistic response to excessive income inequality. They are wrong. There is a better way.

from Edward Hadas:

Wealth buys less lifestyle, more power

Many serious people think economic inequality in the United States and other developed economies should be a hot political topic. But the general public hardly cares. There is a bad reason behind lack of public interest.

President Barack Obama said last December that a “dangerous and growing inequality” is “the defining issue of our time,” but the most recent Gallup poll suggests that view is not widely shared. Only 3 percent of Americans chose the “gap between rich and poor” as the country’s “most important problem” and 4 percent went for poverty. Unemployment scored 19 percent.

from Counterparties:

What we know about income inequality: Unions on the decline

There are a lot of things that “explain” inequality. Technology, finance, societal, and cultural changes have all played their part. In this series, Counterparties takes a look at the various things that correlate with rising income inequality in order to ascertain how we got to this economy and where we might go from here. For story tips/comments/complaints email us at Counterparties.Reuters@gmail.com.

In February, the United Auto Workers lost a fight to unionize workers at a Volkswagen plant in Tennessee. The vote was taken as a symbol for all organized labor in the South — particularly because Volkswagen was tacitly supportive of the unionization movement.

from Data Dive:

What we know about income inequaliy: America’s disappearing ‘middle-skill’ jobs and falling wages

There are a lot of things that “explain” inequality. Technology, finance, societal, and cultural changes have all played their part. In this series, Counterparties takes a look at the various things that correlate with rising income inequality in order to ascertain how we got to this economy and where we might go from here. For story tips/comments/complaints email us atCounterparties.Reuters@gmail.com.

America is losing middle class jobs -- and middle class pay. Not only are "middle-skill" jobs disappearing as routine tasks become computerized (think everything people do in the television show "The Office"), but that job loss has contributed to stagnating wages, according to a recent paper by Michael Boehm of the University of Bonn.

from Equals:

What we know about income inequality: Better marriages may mean more inequality

There are a lot of things that “explain” inequality. Technology, finance, societal, and cultural changes have all played their part. In a new series, Counterparties takes a look at the various things that correlate with rising income inequality in order to ascertain how we got to this economy and where we might go from here. For story tips/comments/complaints email us at Counterparties.Reuters@gmail.com.

Matt O’Brien wrote a good post last week on how the classic 1989 romcom When Harry Met Sally explains inequality. I’ll let him explain:

from The Great Debate:

The other inequality is structural

For the second year in a row, the issue of economic inequality was featured in President Barack Obama’s State of the Union Address. Even some Republican lawmakers have now dared to speak the “i-word.”

Though Obama predictably avoided comparisons between the earnings held by the top 1 percent and the 99 percent of Occupy Wall Street fame, the message was familiar: The widening income gap between the very rich and everyone else is a stain on the social compact and a serious problem for future economic growth.

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