LOSING CONTROL by Stephen D. King

Author:Stephen D. King
Language: eng
Format: epub
Publisher: Yale University Press

LIVING WITH INCOME INEQUALITY

Longer term, the education route appears to be attractive, but I cannot help feel there are immense limitations. We’re back to the population numbers game. As already noted, US evidence suggests that graduates are not getting their rewards for increases in productivity in recent years. In the UK, the picture is, so far, more encouraging.20 Yet, for all the additional investment that might be made in education in the US, the UK and elsewhere, the likelihood is that, in the international jobs market, increased competition will be coming from Chinese and Indian graduates who are willing to work for wages significantly lower than those now being paid to the educated elites in the developed world.

The rise of the emerging world is coinciding with the ageing of societies in the developed world. The implications of this will be discussed more fully in Chapter 8. For the purposes of this chapter, the important point is that, with the baby-boomer generation heading into retirement, vulnerability to sustained increases in food and energy prices will increase: living on unearned income in a world of secular price increases may not be much fun. Policymakers in developed countries already worry about the cost of ageing societies – through the provision of pensions and medical support – but they may also have to give consideration to the costs associated with a growing Malthusian constraint.

And then there’s the potential for a political backlash. There may be a rising global economic tide, but Jack Kennedy’s hopes are in danger of being washed away. Not everyone’s boats are being lifted and those who feel vulnerable are becoming easy prey for populist politicians who, in turn, will attempt to turn the debate towards protectionism, nationalism and blatant xenophobia. Even mainstream politicians find the temptation to pander to the worst instincts of society overwhelming, as the quote from Gordon Brown at the beginning of this chapter highlights. In May 2009, President Obama, newly installed in the White House, offered similar sentiments: ‘It’s a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York.’21

For those in the developed world who wish to carry on consuming regardless of the constraints on their incomes, there is another way. Harold Macmillan, Britain’s Conservative prime minister in the late 1950s and early 1960s, launched a now famous assault on Margaret Thatcher’s Conservatives in the 1980s, when he likened the privatization policies at that time to ‘selling the family silver’.

If the developed world is not ready for the income-redistribution implications of the rise of the emerging economies, an easy short-term solution is to sell Western assets to those who have the money to buy them. The money raised could be used to carry on consuming, at least for a while, even as the ownership and control of capital heads elsewhere. This is the subject of my next chapter. Many people in the West have forgotten about the importance of state capitalism as a source of their economic success.

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