Opinion

Chrystia Freeland

Trickle-down consumption

Chrystia Freeland
Mar 22, 2012 23:29 UTC

We know now that trickle-down economics doesn’t really work – the past decade in the United States has seen incomes at the very top soar, while the earnings of the middle class stagnated or declined. But a growing body of academic research is suggesting that this benign force’s wicked stepsister, a phenomenon two economists have dubbed ‘‘trickle-down consumption,’’ is having a powerful impact on the economy and politics of the United States.

The idea is that income inequality has a significant impact on the 99 percent: It drives the rest of us to consume more, whether we can afford to or not.

Robert H. Frank, an economist at Cornell University, is a pioneering student of this behavior who has been writing about the subject for nearly two decades, long before it became fashionable. Frank, who is the co-author of two economics textbooks with the Federal Reserve chairman, Ben Bernanke, believes that rising income inequality affects the rest of us through what he calls ‘‘expenditure cascades.’’

Rising income inequality, he notes, isn’t just about the gap between the 99 percent and the 1 percent; it is also about growing differences across the income distribution, including at the very top. The result is that all of us see people we think of as our peers earning – and spending – a lot more. As a consequence, we find ourselves spending more, too.

‘‘The main idea is that frames of reference are very local,’’ Frank said. ‘‘Bertrand Russell said beggars don’t envy millionaires, they envy other beggars who have a few more coins than they do. Expenditure cascades aren’t because the poor want to emulate the rich.’’

George Soros: I’m a “traitor to my class”

Chrystia Freeland
Jan 25, 2012 21:21 UTC

Watch as the billionaire investor tells Chrystia why the hedge fund community has abandoned President Obama and why there’s not a huge gap between the views of the president and Republican front-runner Mitt Romney.

Welfare bums vs crony capitalists

Chrystia Freeland
Nov 4, 2011 15:12 UTC

 

Paul Martin and Ernesto Zedillo are members in good standing of the global elite. Martin is a former Canadian prime minister, finance minister, deficit hawk and, in his life before politics, multimillionaire businessman. Zedillo is a former president of Mexico, holds a doctorate in economics, directs Yale University’s Center for the Study of Globalization, and serves on the boards of the blue chips Procter & Gamble and Alcoa.

Yet when I interviewed the two of them in a wide-ranging public conversation last week, hosted by the Center for International Governance Innovation, an independent, nonpartisan Canadian research organization, they sounded an awful lot like the people camped out in Zuccotti Park in New York.

Neither Zedillo nor Martin had sympathy for the complaint that Occupy Wall Street lacked a clear agenda. As Zedillo put it: “These criticisms — ‘Oh, they don’t have an agenda, they only pose problems and provide no solutions’ — well, they are citizens and they have earned the right to express a very serious, real problem.”

Wall Street protesters challenge Reagan Revolution

Chrystia Freeland
Oct 14, 2011 13:59 UTC

On a drizzly evening in Zuccotti Park this week, where the Occupy Wall Street protesters are camped out with the modern revolutionary’s gear of iPhone, blue tarp and cappuccino, I spotted one young man wearing a T-shirt with an image of Ronald Reagan and the words “Bad Religion.”

It was the right outfit for the occasion. That’s because the greatest significance of the wave of leftist demonstrations that started in Lower Manhattan and rippled across the United States over the past few weeks is the potential challenge it poses to the Reagan Revolution.

During the 2008 campaign, Barack Obama drew shrieks from the Democratic base, particularly its Clinton wing, by naming Ron rather than Bill as a president who had “changed the trajectory of America.”

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