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Everything you think you know about inequality is wrong.
May 19, 2008 5:18 PM   Subscribe

Everything you think you know about inequality is wrong. This guy disagrees. But it's not that bad, honest. And free trade with China is a good thing for poor Americans. But are these guys the next Yugo?
posted by Cool Papa Bell (68 comments total) 5 users marked this as a favorite

 
That's not a nice thing you said about Yugo.

I dunno about Geely. The cars are, by most descriptions, crap. Under-powered, severely unsafe, over-polluting, chintzy interior. They are what Hyundai was at its introduction, without the concern for protecting an established brand. You can tell just from the web site that Geely doesn't understand marketing, since they've already changed the names of every single one of their models, from one set of incomprehensible two-letter designations to another set of two-letter designations.

Oh, and I love that the car based on Daewoo designs is a "model for China's self-development."
posted by 1adam12 at 5:29 PM on May 19, 2008


I don't the comparisons between Geely and Yugo -- Geely so far seems to have some really decent concepts. There's a tenuous connection between a car company formed in China versus one from Serbia -- I suppose you could say they're independent (although to be fair, Yugos were built from an existing car platform, although its donor car escapes me).
posted by spiderskull at 5:30 PM on May 19, 2008


Why did the prices of the things poor people buy fall relative to the stuff rich people buy? Lefties aren’t going to like the answers one bit: globalization and Wal-Mart!

Is this guy as naive as he sounds? Better go back to graduate school, guy.
posted by ...possums at 5:30 PM on May 19, 2008 [1 favorite]


This swelling head also disagrees.
posted by Citizen Premier at 5:37 PM on May 19, 2008 [1 favorite]


Yeah, the freakonomics blog post was idiotic. Expensive luxury items get more expensive, therefore the rise in inequality is an illusion? That's fucking idiotic. Luxury items get more expensive because they're luxury items. If rich people weren't getting richer, then those items wouldn't get made. Similarly, I bet the overall quality of the items has gone up as well.

If I could afford a BMW in '03, and now I can only afford a Toyota Yaris, according to "Christian Broda and John Romalis" I still have the same amount of wealth, because in both cases I can afford "A car."

Well, the prices for health care, the prices for a reasonably sized home, the prices for a fuel efficient, non-flashy car, the prices for those things are the same regardless of how rich you are.

They are looking at the symptoms of inequality, and declaring that it doesn't exist. Utterly absurd.
posted by delmoi at 5:38 PM on May 19, 2008 [4 favorites]


Can't be the next Yugo, Yugo's were cute. But not as cute as Adobe car.
posted by DenOfSizer at 5:39 PM on May 19, 2008


What Broda and Romalis quite convincingly demonstrate, however, is that the prices of goods that poor people tend to consume have fallen sharply relative to the prices of goods that rich people consume.
Fuck me, what a moron.
posted by Abiezer at 5:40 PM on May 19, 2008


China is able to produce clothes, electronics, and trinkets incredibly cheaply.

So as long as poor people in other countries get even poorer & more fucked, at least it means that poor Americans can buy more cheap, shoddily-produced crap?

Their argument could hardly be simpler more simplistic.

Fixed that.

I'm not convinced by any of this that everything I know about inequality is wrong.
posted by jammy at 5:44 PM on May 19, 2008


Dear China,

Can you please start making real estate here in Los Angeles?

Thanks.

-Jabberjaw
posted by jabberjaw at 5:56 PM on May 19, 2008 [2 favorites]


I wonder if this is also true of intelligence. I mean, in that case, the writer of the article behind the first link is just as smart as the rest of us, we just think bigger thoughts.
posted by maxwelton at 6:02 PM on May 19, 2008


Cage match: Broda & Romalis vs. Elizabeth Warren.

She has some good numbers on the specific point that savings from the kinds of "goods" that have gotten cheaper thanks to Walmart & globalization are completely dwarfed by dramatic increases in basic necessities like housing, healthcare, etc.
posted by kanuck at 6:21 PM on May 19, 2008


If Economics is the Dismal Science (and a dismally unscientific science), then Freakonomics is nothing more than Economics' comedy relief. It's all about coming up with an "Everything you know about X is wrong" topic on a periodical basis and generating economic activity by selling books.

As for that last link...
Reported Attack Site!
This web site at www.geely-global.com has been reported as an attack site and has been blocked based on your security preferences.

What happened when Google visited this site?

Of the 3 pages we tested on the site over the past 90 days, 2 page(s) resulted in malicious software being downloaded and installed without user consent. The last time Google visited this site was on 05/10/2008, and the last time suspicious content was found on this site was on 05/10/2008.

Malicious software includes 2 scripting exploit(s). Successful infection resulted in an average of 16 new processes on the target machine.

Malicious software is hosted on 3 domain(s), including wodegezi.cn, seobw.cn, mylls.cn.

3 domain(s) appear to be functioning as intermediaries for distributing malware to visitors of this site, including vccd.cn, 158baidu.cn, dmfwq.cn.
I could make a snarky comment about "our friends the Chinese" but - wait - I already did!
posted by wendell at 6:22 PM on May 19, 2008


Beijing Auto Show is Geely’s Strategic Point of Blow-up
----The Audience claims 5 out-of-expectations.

But are these guys the next Yugo?


Um ... yes.
posted by ZenMasterThis at 6:23 PM on May 19, 2008


It's actually CHEAPER for poor people to get brain tumors removed than it is for rich people because poor people can now hire inexpensive un-suable monkey surgeons! And after you pay the monkey surgeon, you still afford that Ikea house made out of a shipping container!

What a fucking idiot this guy is.
posted by tkchrist at 6:25 PM on May 19, 2008 [3 favorites]


When people talk about inequality, they tend to focus exclusively on the income part of the equation.

Funny, that! Maybe it's because poor people have to spend up to their entire income just to live, even if they can find stuff real real cheap, while the rich can take some of their income and use some of it to buy more expensive stuff while using more of that excess to save and invest, thus growing even richer, and able to buy even more expensive stuff!

The "income part of the equation" is kind of important like that.
posted by Miko at 6:38 PM on May 19, 2008


Luxury goods are getting relatively more expensive because there is more demand for them.

There is more demand for luxury goods because, you know, rich people now have Scrooge McDuck-like piles of money that they can throw away on overpriced luxury goods

This does not actually demonstrate that income inequality is declining.
posted by AsYouKnow Bob at 6:40 PM on May 19, 2008


Wow, is it really so hard to believe that China has held down prices for the poor consumer more so than for the rich one? I think the freakonomics write up wasn't that good, and the paper does leave questions, but I don't see what is so obviously implausible about the idea.
posted by thrako at 6:44 PM on May 19, 2008


So as long as poor people in other countries get even poorer & more fucked, at least it means that poor Americans can buy more cheap, shoddily-produced crap?

The real wage in China has been rising
posted by thrako at 6:48 PM on May 19, 2008


There is more demand for luxury goods because, you know, rich people now have Scrooge McDuck-like piles of money that they can throw away on overpriced luxury goods

This does not actually demonstrate that income inequality is declining.


Thats kind of the point of the paper. Prices for luxury goods have risen faster, so measuring inequality with a common deflator overstates the rise in real inequality.
posted by thrako at 6:57 PM on May 19, 2008


Ok, if we take his boneheaded logic to a certain place, I would reckon that we could do a simple side-by-side of benefits and vacation and things would go all unequal by his own estimation right quick.
posted by DenOfSizer at 6:59 PM on May 19, 2008


Wow, is it really so hard to believe that China has held down prices for the poor consumer more so than for the rich one? I think the freakonomics write up wasn't that good, and the paper does leave questions, but I don't see what is so obviously implausible about the idea.

It challenges biases, which might be a good thing if people could be arsed to read the paper.
posted by Kwantsar at 7:01 PM on May 19, 2008


But the real gain is for rich people who like to shop at WalMart, and throw giant junk food parties.

Wow, is it really so hard to believe that China has held down prices for the poor consumer more so than for the rich one?

That's not hard to believe, what is hard to believe is that product value, durability and quality do not fluctuate over time. What is even harder to believe is that "economists" can make that kind of facile analysis in the lay press without backing that shit up by citing peer reviewed papers. If I can buy three dozen brands of toasters in 1950 which have an average 50 year product life, and I can buy 14 dozen brands of toasters in 2008 which have an average 5 year product life for 85% lower price (in real dollars), have I gained anything as a consumer?
posted by BrotherCaine at 7:05 PM on May 19, 2008


Oops, missed the part where the paper was cited, *blushes*, my bad. I'll be back after I read it.
posted by BrotherCaine at 7:06 PM on May 19, 2008


overstates the rise in real inequality.

Only if you decline "real inequality" in terms of "how much cheap junk can one dollar buy?" That is not the only measure of equality. Other measures that mean something:

degree of education you can purchase
quality of education you can purchase
age at which you can retire (if you can retire)
amount of traveling you can do
ability to own a home
ability to make improvements and conduct maintenance on property you do own
ability to avoid debt due to emergency and covering gaps
whether your job offers benefits or you just skip the dentist/eye doctor/ GYN for a few years,(or always)
choice of types of work
degree of security in/control over employment
ability to retrain for work if your skills become obsolete
likelihood of advancement/being promoted
safety of neighborhood you live in
amount of personal space each member of family has
quality of nutrition you can purchase
control over schedule
amount of time available to enjoy personal relationships with friends and family
quality of entertainment available
how much excess income goes to caregiving and providing for the elderly/disabled/young

if people could be arsed to read the paper.

It's an academic paper; you can read the introduction, scan, read the conclusion. It isn't successful in challenging biases because it's so tightly qualified and restricted to looking at only one type of data: consumer pricing.

As the NYer piece mutters at the end:
Now, there’s a lot that’s left out of this equation, such as the fact that free trade may help richer Americans by increasing corporate profits. And cheap DVD players may not, on balance, make up for lost jobs. But the reality is that if we toughen our trade relations with China the benefits will be enjoyed by a few, since only a small percentage of Americans now work for companies that compete directly with Chinese manufacturers, while average Americans will feel the pain—in the form of higher prices—far more quickly and more directly than rich Americans will.
Quality, equality, and inequality are about more than stuff. People are more than consumers. The idea that low-priced manufactured goods are a true boon to the poor is an updated "let them eat cake." I'd trade low-priced goods for decent universal healthcare, equalized access to education, safe neighborhoods, and more employment at a living wage, with benefits, within our borders.
posted by Miko at 7:15 PM on May 19, 2008 [6 favorites]


I'd trade low-priced goods for decent universal healthcare, equalized access to education, safe neighborhoods, and more employment at a living wage, with benefits, within our borders.

Within our borders? Why don't you care about Chinese people?
posted by mr_roboto at 7:26 PM on May 19, 2008


Miko - yes, I meant real as in deflated. I agree that trying to add up what appears on a balance sheet misses some very important things.
posted by thrako at 7:26 PM on May 19, 2008


Why don't you care about Chinese people?

Non-joking answer: because I'm not represented in their government.
posted by Miko at 7:28 PM on May 19, 2008 [1 favorite]


Only if you accept the truly unequal idea of two entirely seperate classes of people, the rich and the poor, does this challenge any understanding of inequality. Consumption patterns at different income levels are a secondary point unrelated to this larger question, and this is a shameless debasing of the meaning of the word.
posted by Abiezer at 7:31 PM on May 19, 2008 [2 favorites]


I'd trade low-priced goods for decent universal healthcare, equalized access to education, safe neighborhoods, and more employment at a living wage, with benefits, within our borders.

BLASPHEMY!
posted by blue_beetle at 7:33 PM on May 19, 2008


Quote for me -- that lovely Changlish I crave

Coming soon!! Please wait for moment.
posted by RubberHen at 8:13 PM on May 19, 2008


Every time my relatives are talking among themselves about cheap clothes they've scored at Target, I feel almost obligated to point out that the reason it's so cheap is because they've effectively sold a part of their children's future to pay for it.

But then I remember I'm a technology junkie. I look at my mouse and keyboard made in China, my processor made in Malaysia and my monitor made in Korea and I'm not really that much better.

I really do fear for my future children (if I do end up having any) and what we're getting into. It feels like we're maxing out the country's credit card and they're going to have to pay for it.
posted by Talez at 8:17 PM on May 19, 2008


I'd trade low-priced goods for decent universal healthcare, equalized access to education, safe neighborhoods, and more employment at a living wage, with benefits, within our borders.

How do trade barriers (of various kinds) lead to universal health care, education and safe neighborhoods? Seriously, how do you "get there from here" in your vision. For example, how does a more expensive, American-made toaster result in a safer neighborhood? Because more people get employed? We're essentially at a full employment level now (although I'd agree that the types of work could be improved). And dude, crime in this country has gone down, not up.

I look at that sentence of yours and think, "Society can walk and chew gum at the same time. I can have lower trade barriers and universal health care..."

In fact, Wal-Mart would like it that way, too. They could stop pretending to offer their employees a health care benefit.
posted by Cool Papa Bell at 8:20 PM on May 19, 2008 [1 favorite]


It feels like we're maxing out the country's credit card and they're going to have to pay for it.

Similar question as above -- how do you think the availability of a cheap toaster "maxes out the country's credit card?"

We're talking about trade barriers, not national debt. It's a muddled interrelationship twixt the two, from an economic standpoint. And one could argue that lowered trade barriers frees up capital which can be taxed which addresses the national debt ... if only government spending could be reined in (which does indeed "max out the country's credit card").

But that's Clinton economics, and that'd never spur growth. oh wait, it kinda did.
posted by Cool Papa Bell at 8:27 PM on May 19, 2008


How do trade barriers (of various kinds) lead to universal health care, education and safe neighborhoods? Seriously, how do you "get there from here" in your vision.

Obviously it's all more complicated than that. But I'd say that to get from here to there, you begin by confronting the lie that "the good life" is somehow to be had in the aisles of a discount store, turn our attention to long-range planning for a society that is more practically sustaining for its citizens. When prices rise to the point of pain we'll be looking to the government for some solutions to real problems; at that time, I think it will be clear that we've made a tradeoff which has enriched owners and shareholders at the expense of the interests of middle- and low-income workers. It all comes back to policy. When we can no longer exploit the relative poverty of foreign markets - either because we demand changed trade policies, or more likely, because our standard of living eventually becomes so much closer to China's that there's not much more exploiting to be done - , we'll need to meet the demands of our own. It's not crazy; it's not even radical.

The real worth of cheap consumer goods is a lot less than what we've traded for them.
posted by Miko at 8:36 PM on May 19, 2008


how do you think the availability of a cheap toaster "maxes out the country's credit card?"

Let's say when I buy a toaster it sends $20 over to that country. That country then has $20 that they will then spend at a future time.

We effectively "owe" the other country $20 worth of assets which we don't have to give them right now but someone eventually will.
posted by Talez at 8:41 PM on May 19, 2008


the availability of a cheap toaster "maxes out the country's credit card?"

When Black & Decker made toasters in America, they had to meet American labor standards for factory safety and legal wages, environmental practices, workers' rights and taxation. When an Asian supplier popped up without needing to place those restrictions on manufacturing, they were able to easily underprice the American model - even with shipping, which after all is cheaper than overland transport.

The American factories downsized and/or closed, and comparable jobs have not materialized. The service jobs that have replaced manufacturing jobs - service jobs such as stocking Asian-made toasters on the shelves at Wal-Mart - are lower-skill, lower-wage, lower-security, and lower-benefit. They are subject to many fewer protections than the toaster jobs. Those lower-skill workers with fewer benefits then make more demands on the country's social services such as the 911/ER/clinic medical model of emergent care as opposed to preventative health; they use more unemployment; they rely on Medicare/Medicaid because they have no manufacturing pension. The local economy is impoverished because local wages decline; the tax rolls yield less money for municipal needs, schools, roads, and infrastructure. Meanwhile, profits are exported from the physical home of the retail outlet to the location of the home office of the discounter, situated in an affluent area with ancillary professional industries (law, design, accounting) to support the handling of the brand and its income, further isolating wealthy from poor neighborhoods, which intensifies demand on social service in a localized, rather than evenly spread, way. Which in turn furthers the inequality between different types of community and destroys common cause and economic diversity, making a fair democratic society more difficult to maintain. I think all that makes the credit card pretty close to bursting into flame - and that's without taking into account the cost of added pollution worldwide and the less quantifiable damage to American community life. The toaster just doesn't look very cheap any more.

Plenty more economic studies here, here, and here.
posted by Miko at 8:54 PM on May 19, 2008 [7 favorites]


The real worth of cheap consumer goods is a lot less than what we've traded for them.

Fair point, Miko. You're looking at it from a wide perspective, I get ya' now, although I don't go as far as agreeing with it.

Let's say when I buy a toaster it sends $20 over to that country. That country then has $20 that they will then spend at a future time. We effectively "owe" the other country $20 worth of assets which we don't have to give them right now but someone eventually will.

On the other hand, Talez, I have to say that's a screwy view of simple economic concepts. It's just wrong on every level. Sorry.

* Let's say when I buy a toaster it sends $20 over to that country.
Well, after Wal-Mart takes a cut ... and after we take a cut from various taxes ...

* That country then has $20 that they will then spend at a future time.
Well, actually, they're out the materials, time and effort that went into making the toaster. So what they have is whatever profit they earned from the sale of the toaster. So, what will they spend their profit on? Anything they'd like, and that includes American products and services, and that would be easier if there were -- wait for it -- lower trade barriers.

* We effectively "owe" the other country $20 worth of assets.
Huh? I have to pay for something twice? Unh-huh. Nobody owes anybody anything. The seller puts materials, time and effort into making a toaster, and the buyer buys it for the price of those materials, time and effort, plus a little extra, and the method of transaction was money, any while "money" is a bit of an abstract concept, the seller and buyer agree on relative worth. At this point, the transaction is done. Finito. Over. You have a toaster, which you valued as being worth more than (or equal to) the money you paid for it. The other guy has (hopefully) a profit, which he valued as being worth more than the materials, time and effort put out in making the toaster.
posted by Cool Papa Bell at 9:05 PM on May 19, 2008 [1 favorite]


I think all that makes the credit card pretty close to bursting into flame

I think you're using the term "credit card" in a different way than Talez intended.

Like I said, Mike, I think you're looking at free trade through a wider societal lens that ultimately ends up muddying the issue. I don't agree, but I do see your points.
posted by Cool Papa Bell at 9:09 PM on May 19, 2008


You're looking at it from a wide perspective,

Definitely. Because the discussion about trade policy tends to be about what will make things cheap rather than what will make the best quality of life for a country's citizens. All discussions from a purely economic standpoint will fail at the bigger questions about what a government is for, I think.

Huh? I have to pay for something twice? Unh-huh. Nobody owes anybody anything.

What he means is that we just gave away $20 for the toaster. Now we have a toaster (which will be a doorstop in a few years). The other guy now has the $20 and, at some point, he's going to want to spend it on something. If we have nothing to sell, because we haven't maintained any industry or developed any service that he needs, he's going to go spend that $20 to enrich yet another country. Or his own. Whoever has something to offer. In other words, we're trading liquid assets for solid ones with limited lifespans - and we've got short attention spans anyway. We're going to be over toast pretty soon and be wanting, I don't know, a blender. But with nothing to sell to get the cash for the blender, we're looking at a mortar and pestle.
posted by Miko at 9:11 PM on May 19, 2008 [1 favorite]


If we have nothing to sell

That's a pretty big if. Monstrously big. Sorry, just can't go there with you. That part of the sky just ain't falling. Not when China is still being run by an oligarchy of gangsters under cover of a dead echo of communism and, despite what Fareed Zakaria says, most of the world's talented people are still coming to the United States in droves.
posted by Cool Papa Bell at 9:16 PM on May 19, 2008


after Wal-Mart takes a cut ...

Stores that sold American-made toasters in America took a cut, too.

Well, actually, they're out the materials, time and effort that went into making the toaster.

Raw materials are cheap. What costs a lot is labor. But labor is always going to be cheaper where the standard of living is lower and people are more desperate. The cash is worth a lot more to them than the labor, so they're not "out" as much, in relative terms, as we are. The overall standard of living here will continue to drop.



That's a pretty big if. Monstrously big. Sorry, just can't go there with you....most of the world's talented people are still coming to the United States in droves.


I'm not sure which talented people you're talking about here. What industries do you see the US commanding the world market on in 20 years? What will we be selling on the world market that will draw a degree of demand that will provide fair employment and begin to close the income gap for working- and middle-class Americans? We often hear that innovation and the creative industries (fashion, movies) will save us. But having a few powerful sectors that do well at the expense of the broader citizenry who perform their services and stock their stores is, again, not a society of equality - it's an aristocracy.
posted by Miko at 9:24 PM on May 19, 2008


Free trade with China is good for poor Americans who love happy meal toys, that's for sure.
posted by Raynyn at 10:50 PM on May 19, 2008 [1 favorite]


Miko, I don't know where to begin.

First, I seriously doubt that you've ever worked in a factory. I have, and it sucked. Driving Screw A into Slot B is no more edifying than stocking shelves at a retailer. Toaster manufacture is even lower-skilled than most retail work. Furthermore, manufacturing in the United States is not dead. You can see what it is that is made in American factories (pdf): Chemicals, trains, electronics, metals, et cetera. It's true that this output is being produced with fewer workers, but from a quality-of-work standpoint, the American economy has high-graded, replacing laborers and box-tapers with engineers, technicians, and metallurgists. I tour manufacturing facilities all the time, and the vast majority are squeaky clean and incredibly safe-- in sharp contrast to the local GM factory, littered with beer cans and cigarette butts, that I visited in my youth. The high cost of US labor, rightly or wrongly, has prompted the substitution of capital (machines, mostly, often designed and manufactured by Americans, and almost always maintained by Americans) for labor.

So we're making more stuff with fewer people, the developing world is now manufacturing toasters rather than starving, and you lament the poor candlemaker. Trade is not without side effects, and it has losers. But the toasters are not the problem here. The problem is that in a relatively free global economy, the lifestyle of an unskilled worker in a developed country will converge with the lifestyle of an unskilled worker in a developing country. That doesn't bother me, because I don't think an American necessarily deserves to live better than a Chinese person by virtue of his birthplace. From your earlier comments ("because I'm not represented in their government"), I suspect that you might feel otherwise. And even if you do, I don't know how killing trade is the answer. Tax the winners, if you must, but don't confiscate the Whirlpool to save the washboard.

The corollary to all this, of course, the formation of an "aristocracy", is pretty well explained by increasing returns to education. And more people-- Americans-- are going to college. We could, of course, eventually produce a more level society by closing the colleges and outlawing emigration.

And the vast majority of foreign manufacturers of low-value-added goods are not earning returns above their capital costs. Li & Fung might be generating returns, for example, but they're not integrating further upstream because they can't get a satisfactory return on their capital. The profit is in coordination and design, because it's hardest to compete away.

And your assertion about the new, inferior model of medical care isn't necessarily a failure of trade policy, it could just as well be a failure of the state. You're picking and choosing things that are wrong with the world and laying them at the feet of trade and the profit motive-- which happen to be two of the bigger reasons that the vast majority of Americans have adequate shelter and full bellies.

As to the number of industries in which the US will "command the world market," well, gosh, I hope its zero, as overspecialization and path dependency can together produce sclerotic outcomes. I hope that Siemens and Alstom and GE and Emerson and Mitsubishi Heavy and Hitachi beat each others' brains in, increase efficiency, and lower prices. And I hope that Bharat and L&T continue up their curves so as to maximize the human potential of the tens or hundreds of thousands of woefully underemployed Indians, and that 20 years from now someone else will complain about the shrewd, ruthless Indians who will then be taking America's skilled manufacturing jobs while the US finds yet another industry in which to compete.
posted by Kwantsar at 10:53 PM on May 19, 2008 [3 favorites]


Heh. That's some awesome sentence construction, right there.
posted by Kwantsar at 10:53 PM on May 19, 2008


That doesn't bother me, because I don't think an American necessarily deserves to live better than a Chinese person by virtue of his birthplace

I think most people would define this as a basic function of government: making sure our people have it better than their people, from the smallest of us on up. Globalization will indeed lead to what you say - American lower classes having it as rough as lower classes elsewhere. But if you told that simple truth to the American working class, you'd have a riot on your hands.
posted by BinGregory at 11:18 PM on May 19, 2008


Driving Screw A into Slot B is no more edifying than stocking shelves at a retailer. Toaster manufacture is even lower-skilled than most retail work.

This may be all true. But it's often paid better and has better benefits.

Manufacturing jobs generally pay more than service work - for a lot of reasons. More likely to be male, more likely to be unionised, take your pick.

Unionisation matters - one of my grandfathers had 2 years of university and worked as a laboratory technician developing new dyes. My other grandfather has about 2 years of highschool (I think, or less), and worked in a plant. And in the 60s, he made more money, because he was unionised.
posted by jb at 12:38 AM on May 20, 2008 [1 favorite]


I'm not actually pro-protectionism for developed economies (for developing economies trying to diversify, that's a different story). I don't think the US should be protectionist, though I think that it should have the right to demand that imports are produced under the same regulations as they would be here (for moral reasons - because undercutting on efficiency is one thing, but undercutting on safety and worker conditions is just not something I would support morally).

But I also think that ignoring the real crisis and growing disparity in the US, as in most if not all developed countries, this is just sticking your head in the sand.

Our societies were all very unequal, until we made political and social decisions to change that. In Britain, for example, it was not the economic growth of the 19th century - as impressive as that was - that brought a good standard of living to most people. Working class Londoners in 1910 had poorer nutrition than people in almshouses in 1710. It was collective bargaining that raised the ratio between wages and profits, and political decisions that set working conditions, and created a solid social safety net including health and education.

But we have in the last 30 years decided that this was not what we wanted as a society, and funny enough, once we lost the political will, inequality has grown again.

Our economies have changed - we are no longer as competitive in manufacturing. But we also allow our society to increase pay for the top people while incomes at the bottom stagnate. That is a political/social choice, not simply the effect of mindless economics.

I would also like to point people back to the Elizabeth Warren lecture linked above - it is a excellent exploration of actual consumption. She wipes the floor with this nonsense.
posted by jb at 12:48 AM on May 20, 2008 [3 favorites]


Poll shows wide dislike of wealth gap
...

Income inequality has emerged as a highly contentious political issue in many countries as the latest wave of globalisation has created a “superclass” of rich people.

A United National Development Programme report in 2005 estimated that the world’s richest 50 people were earning more than the 416m poorest.

According to the latest FT/Harris poll, strong majorities in five European countries – ranging from 76 per cent in Spain to 87 per cent in Germany – consider that income inequality is too great.

But 78 per cent of respondents in the US, traditionally seen as more tolerant of income inequality, also think the gap is too wide.

...
posted by Abiezer at 3:11 AM on May 20, 2008


I think most people would define this as a basic function of government: making sure our people have it better than their people, from the smallest of us on up.

Gotta be better than the Joneses, right? Or the Lees.

As long as people have it good, does it necessarily have to be better than the next guy? Win-win, people, not win-lose.
posted by WalterMitty at 5:18 AM on May 20, 2008


When free trade is presented as a solution to the social ills of a nation, it's being sold under false pretenses, as you say, Knwantsar. IT's not going to do that. Meanwhile, I'm one of those who believes that governments exist by the people and for the people: to create favorable conditions for all their citizens, skilled and unskilled. Totally unrestricted trade is never going to do that. If your goal is to see the world's workers "converge," and not concern yourself with the people who end up on the bottom of the heap, then in the long run, free trade will satisfy you. But those who suggest that there aren't social problems created by free trade - problems which then fall on the shoulders of government - are ignoring the patently obvious.

I don't feel that Americans "deserve" to live better than Chinese by dint of their place of birth. What I feel is that we, as Americans, are only able to influence the conditions of wealth through the policies of our own countries.

I seriously doubt that you've ever worked in a factory. I have, and it sucked. Driving Screw A into Slot B is no more edifying than stocking shelves at a retailer.

I haven't, but if this is to question my working-class cred, that I've got in spades. I'm sure it's as boring as unloading pallets while inhaling French fry aroma. The thing is, it's not about how interesting the work is. It's not about the toasters themselves - which someone brought up as a concrete object to avoid abstractions - and it's not even about manufacturing jobs. It's about regulation and working conditions, benefits and worker support. The manufacturing sector, as jb described, was generally pressured into providing those things by conditions of policy. When manufacturing declined and service, particularly retail, raised its head, a combination of deregulation, anti-union policy, and tax structure freed the newly minted big conglomerates from responsibility to their workforce. That's the problem for American workers. I agree that it's associated with free trade but not necessarily caused by free trade; however, they work in concert. The issue I take with free trade advocates is that they sit comfortably looking at the world with a God's eye view, calmly expounding about how the world economy will meet its own level and the standard of living will equalize. But I don't think that's good enough. In a world in which natural resources are still abundant, and poverty is caused by drastically unbalanced distribution of wealth, it's not all right with me to anoint the "winners" and allow them to make more money, relatively free of regulation and taxation, while shrugging off the poor and unskilled as the "losers" of society. Any economic system that is going to work long-term needs to address how it plans for the poor and unskilled. Free-trade advocates free themselves from being concerned with that at all. "Tax the winners, if you must?" You advocate a welfare state, I suppose. Maybe that's how we'll solve it. I don't think that will assist in narrowing income disparity and increasing common cause.

It may be that more people are going to college; at the same time, we see t the value of a college education dropping. It may be that this isn't the form of education we need going forward.

Some find a bright picture in the idea of unrestricted global economy. But unless we talk about those "losers," the picture is brightest for those already benefitting from it. I think the reality is that free trade has never existed and never will exist - it just can't happen. There are too many economic variables advantaging different populations at different times. It's also not as though we could only function with total protectionism or totally dropping all barriers to trade. Nations will always be in a middle ground of managing trade income, resources, labor, and competition through the use of public policy. All I'm advocating is that we focus public policy on fair wages and fair support for all workers, and bring down the ceiling on the wealthiest of the wealthy through policies that influence the movement of profit through our system differently. The goal is a healthy nation.
posted by Miko at 5:52 AM on May 20, 2008 [5 favorites]


What Broda and Romalis quite convincingly demonstrate, however, is that the prices of goods that poor people tend to consume have fallen sharply relative to the prices of goods that rich people consume.
Fuck me, what a moron.


Um, why is that a moronic statement? I am not an economist, but it seems plausible to me that the statement is true and relevant to a discussion of inequality. People seem to be reacting as if the linked articles were saying "Ha ha, poor people get to buy cheap crap at WalMart, so nothing's wrong with America! Rock on!" It seems to me it's saying rather that the media are presenting too simplistic a view of inequality, and that the picture is more complicated if you look at what each class buys with its income. Yes, we want better health care and all that other stuff Miko writes so passionately about, but that's not really what the post and the linked articles are about.
posted by languagehat at 5:54 AM on May 20, 2008 [1 favorite]


Gotta be better than the Joneses, right? Or the Lees.

That's not really what I meant. I'm saying that your government's job is to protect your interests, not the interests of citizens of other governments. That's pretty fundamental. Now, could your best interests and the best interests of your trading partner or whatever line up? Yeah, of course. But frankly, I'm way suspicious of American free trade advocates whose heart bleeds for Chinese peasants but talk in abstractions about the American working class getting steadily enserfed.
posted by BinGregory at 6:11 AM on May 20, 2008 [1 favorite]


The people who write published apologia for free market globalized capitalism are, in general, being paid well enough that it's worth their while. What I find dumb are the people who defend these views without getting paid to do so.

The idea being proposed that "more cheap goods for the poor = less inequality" is ridiculous on the face of it. It's literally spitting on your face and telling you that it's raining. What these apologists are pointing out is simply that sometimes inequality manifests itself in quality of goods instead of quantity — hardly a surprising fact, and not at all a factor of "depth" in the reality of growing income inequalities that they are trying to sweep under the rug.
posted by graymouser at 6:41 AM on May 20, 2008


that's not really what the post and the linked articles are about.

What I've been reacting to is something implied rather explicitly in the articles: that inequality is not as serious a concern in the debate about trade as official reports would indicate, because the poor are able to buy more than ever. For instance, the linked paper says:
These new facts have important implications for the measurement of inequality and the debate on trade and inequality....We present several facts that are crucial in our re-examination of the impact of Chinese trade on U.S. income inequality...The debate on trade and wages in the U.S. has entirely focused on the impact that trade with developing countries has on the wages of the unskilled in America. This debate has overlooked the impact that trade has had on the prices of the goods consumed by different income groups. In particular, since developing countries typically produce low quality goods that are disproportionately consumed by the poor in America, this implies that inequality measures that do not correct for differences in the basket of goods consumed by rich and poor neglect this "price" effect of trade.

To produce in their report an "offset" of a third of the official inequality measures that appear in government reports, the writers had to "relax" the assumption that "the rich and the poor purchase a common basket of goods."

I'm saying that's not a fair assumption to relax. As others have said, it's obvious that the rich and the poor don't purchase the same "basket of goods." The poor disproportionately purchase cheap goods. The rich are able to disproportionately purchase luxury goods. But unless we're looking at purchasing power and available choices across the board, throwing everyone into the same pool of spending ability, what have we learned? That we're not as unequal as we thought? I think the very fact that poor people aren't purchasing the same basket of goods is pure indication of inequality - not evidence against it.

BY using too narrow a definition of "equality" by looking only at the pricing of consumer goods, the report directs attention away from perhaps more vital questions about what equality is.
posted by Miko at 7:04 AM on May 20, 2008


languagehat - moronic in the reduction in the meaning of inequality it attempts. Yes, poor people can still buy quantities of shoddy goods as free trade with cheap labour and poor safety have reduced prices. As I noted above, this is only relevant to a discussion of inequality in your are prepared to commit violence to the actual meaning of the word. Calling it moronic was charitable, because the alternative would be that it's a cynical diversion.
posted by Abiezer at 7:07 AM on May 20, 2008


There's a more superficial reason for why "poor people can buy things cheaply at Walmart, so it's okay" is flawed:

The stuff at Walmart looks like crap and falls apart after a year, so you have to get it new next year. Whereas if you'd gotten the higher-priced, better-quality thing, it would have lasted ten years. So at the end of the decade, you've actually spent more money on the same item and had less satisfaction from it.


No thanks.
posted by EmpressCallipygos at 8:11 AM on May 20, 2008


because the poor are able to buy more than ever

Actually, Warren's research shows that the middle class have lower proportion of their income to spend flexible costs like food, clothes, and other stuff you buy at Walmart. They are paying less not out of desire, but out of necessity, because their inflexible costs (housing, health care, childcare and gas, etc) have all increased dramatically.

This article is trying to obscure a real and serious trend in our society. It's more than moronic - it is perfidious. Since income inequality is defined as income inequality, one cannot possibly argue about it by talking about consumption. But even when you do talk about consumption, as this article does stupidly and Warren does intelligently, you see that there is also a very serious crisis - not in the price of flexible costs (which this article writes about), but in the price of inflexible costs which mean that even middling income households are in a very precarious position - one illness, a brief period out of work, and their whole balancing act falls down.

The western economies are seriously bent if not broken - perhaps the US most of all (because of the morgage crisis and foreclosures - though the UK is poised to fall down the same hole). Frankly, I don't know if it is such that our lifestyles have been just so imbalanced compared to the rest of the world that it was inherently unstable and uneconomic for us to live a good life.

But I do know that not all are falling - and even as the poor get poorer and the middle class not so much poor but more precarious, the upper classes are getting richer. Share dividends are up as a proportion of profits, and wages are down. And bottom wages are not tracking with top wages. It's not a rising tide that floats all boats, but a rising tide that is swamping most while floating a few large ones.
posted by jb at 8:27 AM on May 20, 2008



There's a more superficial reason for why "poor people can buy things cheaply at Walmart, so it's okay" is flawed:

The stuff at Walmart looks like crap and falls apart after a year, so you have to get it new next year. Whereas if you'd gotten the higher-priced, better-quality thing, it would have lasted ten years. So at the end of the decade, you've actually spent more money on the same item and had less satisfaction from it.


No thanks.
posted by EmpressCallipygos at 12:11 AM on May 21 [+] [!]



They were talking about non-durables in that paper. Important distinction.
posted by saysthis at 9:02 AM on May 20, 2008


Important distinction.

It is, but it's important to know that if they were using the conventional description of "durable goods" - items that are supposed to last more than 3 years. "Non-durable goods" are supposed to be things you're expected to use up or wear out, like shoes, laundry detergent, and food. Wikipedia:
Examples of durable goods include cars, appliances, business equipment, electronic equipment, home furnishings and fixtures, houseware and accessories, photographic equipment, recreational goods, sporting goods, toys and games.

Durable goods are typically characterized by long interpurchase times--the time between two successive purchases.

Nondurable goods or soft goods are the opposite of durable goods. They may be defined either as goods that are used up when used once, or that have a lifespan of less than 3 years.

Examples of nondurable goods include cosmetics, food, cleaning products, fuel, office supplies, packaging and containers, paper and paper products, personal products, rubber, plastics, textiles, clothing and footwear.
But this paper's definition of "non-durable" includes things that one might expect to be classed "durable" if they were better made. They used data from a Nielsen database called "HomeScan," in which families get a scanner and scan everything they purchase as it arrives in their home. The report says:
The majority of these goods are non-durable products sold in groceries, drugs, and mass merchandise stores...Examples of the type of non-food modules included in this database include "cosmetics," "toys and sporting goods," "house ware appliances," "cookware," and "wrapping materials and bags."
That's the only place they're specific about types of goods they're looking at. Their data does, though, include things like irons, vacuums, the famous toaster, lots of consumer electronics, cookware, and so on - things you don't have to replace in under 3 years if they are decently made. Of the list they give, only "cosmetics" and "wrapping materials and bags" would traditionally be considered non-durable.
posted by Miko at 9:49 AM on May 20, 2008 [2 favorites]


* We effectively "owe" the other country $20 worth of assets.
Huh? I have to pay for something twice? Unh-huh. Nobody owes anybody anything. The seller puts materials, time and effort into making a toaster, and the buyer buys it for the price of those materials, time and effort, plus a little extra, and the method of transaction was money, any while "money" is a bit of an abstract concept, the seller and buyer agree on relative worth. At this point, the transaction is done. Finito. Over. You have a toaster, which you valued as being worth more than (or equal to) the money you paid for it. The other guy has (hopefully) a profit, which he valued as being worth more than the materials, time and effort put out in making the toaster.


Alas, that "abstract concept" bit makes the rest of your point a problem.

$20 is what, exactly? What is this profit, if it is reported in US Dollars? It's an asset OWED. We promise to make good on that representation of some real good or service at a future point, in exchange for little bits of green paper. Yes, we have to agree on what the $20 is going to buy, but until it buys something, it is a promise that we will have to handle later. That's a debt.
posted by dwivian at 9:54 AM on May 20, 2008


I've been holding onto Geely stock for over two years now, so I hope they do become the next Jugo. They trade in the pink sheets for around 10-19 cents/share, and if they start selling the numbers of cars projected in India and China in the next 5 years, they could very well be on their way to becoming a player like Toyota or Nissan.

I'm in for the long haul. I'll let you guys know how it's going by the time the world ends in 2012.
posted by daHIFI at 10:04 AM on May 20, 2008


. . . The toaster just doesn't look very cheap any more.
So very well said.
posted by Critical_Beatdown at 11:19 AM on May 20, 2008


it is a promise that we will have to handle later. That's a debt.

Sorry, you're just not understanding the difference between credit money, fiat money and public debt. The fact that you're holding a $20 bill doesn't mean the government "owes" you anything. This goes back to 1971.

It's a good thing when someone overseas holds a $20 bill. It means that person believes it has value, as backed by the faith of the U.S. government and its ability to tax the largest economy on the planet. This is why the U.S. dollar is by far the most traded currency.
posted by Cool Papa Bell at 10:04 PM on May 20, 2008


Yes, we want better health care and all that other stuff Miko writes so passionately about, but that's not really what the post and the linked articles are about.

Exactly.
posted by Cool Papa Bell at 10:06 PM on May 20, 2008


Chief executives see earnings soar
posted by Abiezer at 2:41 AM on May 25, 2008


that's not really what the post and the linked articles are about.


I completely disagree; they're inextricably linked, but of course you have to be looking at the macro level, not the narrow level. If you think that what low wages can purchase and the job conditions that come with low wages are not linked with our current systems of health care and "all that other stuff," you're not correct. If you are crafting arguments that attempt to reach the conclusion "inequality is not as bad as we thought" and take only the direct cost of consumer goods as the stuff of your argument, then you are not really crafting an argument about true inequality. As others have said very eloquently upthread. Therefore, this study is not useful in any meaningful national discussion of equality. When employed in such discussions, it ought to be shot down immediately.
posted by Miko at 10:20 AM on May 25, 2008


I mean, to put it in the very simplest terms, the article is saying:

1. We're often told that inequality in America is at a historic high.
2. But that's because we've only been emphasizing income inequality.
3. When we invent our own definition of "equality" based on how many consumer goods you can buy, inequality on that score appears to be less.

Which wilfully ignores the ideas that:

4. The cheapness of the consumer goods newly available to the poor is a direct result of conditions of policy which are making them poorer.

and

5. Things that are true benchmarks of poverty vs. wealth - regular health care, home ownership, income stability, good education, safe and stable job conditions - are not available cheaply at mass market retailers.
posted by Miko at 10:28 AM on May 25, 2008 [1 favorite]


I wonder also how the price of healthy food has changed over time?

I did some reading several years ago on poverty in early 20th century London, and also have heard a paper recently on poverty in the early 18th century - and it struck me that people in c1900 London had more consumer goods than c1700 labourers, but in about 1700, people in workhouses were eating better than working class families in c1900 London.

But I don't know how food prices have changed recently. I would hypothesise (based on bad anecdotal evidence and personal experience) that food prices are down, but that is not true for all kinds of foods, and that the foods which we are being recommended to eat (fresh vegetables, lean protiens) are not down in price.
posted by jb at 5:22 PM on May 25, 2008


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