Thursday, September 15, 2016
Is it ultimately about race and cultural anxiety?
In an interview with Christiane Amanpour, Paul Krugman has just said in the CNN, mostly inspired by politics in the US but refering also to Europe, that the increasing success of national-populism, contrary to conventional wisdom, may not be so much due to worsening economic conditions of workers in developed countries due to globalization, but due to race and identity. White people would feel threatened by multiculturalism and population movements. This coincides with work that has questioned that the graph called "Milanovic's elephant" justifies the interpretation that inequality is caused by globalization. A study has analyzed in-depth the data behind the elephant and, although the most important features of the graph survive (China's middle class being the big winners in global income distribution between 1988 and 2008 although not becoming richer than us yet, and the very rich doing much better than the working and middle class in developed countries, although this seems to have slowed down in the crisis), in turns out that in individual countries we see very different evolutions of the poorest deciles of the income distribution depending on government policies. The nuances of using the available data from countries to construct the final graph were already discussed in the background academic article by Milanovic and a co-author. Then it would be that the main determinant of inequalities would not be so much globalization but national economic policies. In any case, globalization poses huge challenges and constraints to national policies. In addition, if the main reason of political backlash is ethnic or cultural, this begs the question of what are the political and economic mechanisms that make a strategy of appealing to race and identity successful as opposed to a strategy based on class and redistribution. Branko Milanovic and John E. Roemer would be well placed to undertake such political economy study at a global scale, since both have done past work that speaks to this issue. Milanovic did work in the past about the determinants of ethnic voting, and Roemer explained why the poor do not expropriate the rich in democracies (answer: because the rich are able to make other dimensions more salient). One hopes that their recent and promising paper about national and global income distribution is just to whet our appetite. The elephant graph is still great and I have used it in my first class in a couple of courses to motivate the interest of the students in the controversies surrounding globalization, markets and inequality. I should also say to my students that to study the really important problems with real data is very challenging and a single graph can never close a debate.