Within the US, especially, the widening gulf between the incomes of rich and poor, and what (if anything) to do about it, dominate political debate. Capitalism needs to be reigned back, many believe: untamed market forces are driving this dangerous trend (see this earlier post). Globally, on the other hand, one should note that market forces seem to be doing just the opposite. As Martin Wolf explains in his column this week, In the grip of a great convergence, the incomes of hundreds of millions of poor people are rising much faster than the incomes of the rich. The scale of this change is stunning. Global inequality is undoubtedly falling faster than it ever has before.
[T]oday's divergent rates of growth between successful emerging economies and the high-income economies reflects the speed of the convergence of incomes between them. This divergence in growth is staggering. In an important speech in November, Ben Bernanke, chairman of the US Federal Reserve, noted that in the second quarter of 2010, the aggregate real output of emerging economies was 41 per cent higher than at the start of 2005. It was 70 per cent higher in China and about 55 per cent higher in India. But, in the advanced economies, real output was just 5 per cent higher. For emerging countries, the "great recession" was a blip...
Desirable as this unprecedented growth out of poverty may be, it severely tests economic policy in today's rich countries, a topic that Martin covers more thoroughly than any other economic commentator. Another economist whose work on this has long been compulsory reading, John Williamson of the Peterson Institute, has just published a new paper, Getting Surplus Countries to Adjust. This brings together the leading recent proposals for improving international economic governance and better managing global imbalances. It's technical, but if you want to get to grips with the subject there is nothing else as good or up to date.
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