The Financial Times, the day before Christmas, released a fairly stunning analysis of globalization by John Gapper. As Glenn Reynolds at Instapundit says, read the whole thing. In summary, the piece notes that the winners of Globalization are the top 10% of income earners in the West, and the poor in China and India. The loser are the White Western middle and working class, and the sub-Saharan poor.
Gapper’s attitude seems to be, “well this is all good because rising inequality among the West is balanced out by helping Chinese and Indian peasants.” Common cause with Gideon Rachman’s view that “of course” Western leaders should favor the global (non-White) poor over their own citizens, and Tyler Cowen’s desire to build favelas for everyone outside the top 10% earners and make them eat cheap beans. Because there is not enough money for the middle and working class anymore, and besides, if people are worth anything they would be economists writing books.
What threatens the global elite party is nationalism. Which is building on the massive failure of elites to deliver even a flat level of living standards for their people in the West. One might ask the Romanovs how well elites work when they deliver declining standards and destruction. Or the Communist Party Oligarchs, conversely, on how much people will forgive when their daily lives improve.
First, the fairly stunning admission of the global transfer of wealth to elites in the West and elsewhere, and to a lesser extent Chinese and Indian peasants at the expense of the White middle and working class.
The pressures of inequality have been building in industrialised societies for two or more decades but the combination of the 2008-09 financial crisis and the inflated fortunes of the elite have reinforced them. The economic democracy of the mid-20th century is giving way to a distribution of wealth more like Edwardian or Victorian times.
“Straightforwardly, it’s about capital and labour,” says Tony Atkinson, centenary professor at the London School of Economics. “We are seeing all sorts of change that have benefited capital. That tends to equalise global wages, which means reducing them in rich countries.”
The tensions are exacerbated by inequality between generations. Postwar baby boomers enjoyed greater prosperity than their parents – steadily rising incomes, strong welfare states and defined benefit pensions.
Those born in the 1970s and 1980s have fewer benefits, face stagnating incomes in mid-career and must borrow more to buy expensive houses.
Yet the rise of China and India – two poor but populous countries – has made global inequality (measured by the disparity in individual incomes, regardless of where people live) less pronounced. The world’s Gini index of inequality fell between 2002 and 2008 – perhaps for the first time since the Industrial Revolution – and the growth of Indonesia and Brazil is pushing in the same direction.
The two groups that did worst were the very poor – those in the bottom 5 per cent, in sub-Saharan Africa and elsewhere, and the western middle classes, both in the US and western Europe and former Eastern Bloc countries. Their income rises did not match the luckier groups and, at the 75th percentile – including the US middle class – stagnated and even fell.
The forces producing the dispersion of income and wealth in western countries are hard to reverse. They are also the forces that have helped the emerging middle class of China, India or Brazil.
The accompanying graphic shows how the winners (global elites who are at least semi-hereditary) and losers (the White middle and working class) fared since before WWII.
This makes extraordinary reading. And it pretty well makes a compelling argument for economic protectionism and strong nationalism. That all production of anything that is high-margin should be done inside the nation, at prevailing wages, by people of the nation, not outside it. That fundamentally the elites have failed to look out for anyone but themselves and so are owed nothing. And that nationalism is the only cure for what ails the West.
Already, a fairly clear economic and political policy suggests itself. High tariffs and trade barriers to protect and promote domestic industry. If Apple wants to sell Iphones, it must make them here. Like the Dominican Republic, revoke birthright citizenship, retroactively, to 1929. Deport those not citizens, even including birthright citizens. Increase military production on an emergency basis to jump-start wages and consumer wealth. Stop QE aka the “make working people poor by increasing the prices of food and clothing and gasoline” program. And most of all, remove the elites by seizing their money and preventing them from accumulating any more. This latter would impact no more than a dozen people — we are talking Murdoch and Ellison and Gates level wealth in practical terms.
Yes, this implies a populist revolt. But it is better to have one now, with limits, and a clear sense of destination: net income rising at 4% a year for working people, and a secure and high trust nation. If the great mass of people are screwed over for too long, the danger becomes any flim-flam artist can create a mass cult following. The Taiping Rebellion comes to mind.
The idea that the global mass of White middle and working class Westerners will resign themselves to favelas for the sake of Bill Gates and Mark Zuckerberg’s ability to make more billions, and the poor in China and India, is in and of itself a revolutionary provocation. One that begs for Nationalism and one that will get it. Sooner or later. Pray it is sooner.