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Nothing should be done, that isn't already being done. Income equality is a reality, because people aren't all equal in intelligence, drive, ingenuity, and just plain old luck. I strongly support reward for efforts, education, and industriousness, and I strongly dislike paying people for doing nothing.
What role does China play in this?
For instance.... part of the reason for the stagnation of the middle class in America is that, in the past, the middle class were defined by manufacturing jobs. Today, in the interest of higher profits and lower costs, many American corporations look to China to produce the goods they sell in to the United States.
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What role does China play in this?
For instance.... part of the reason for the stagnation of the middle class in America is that, in the past, the middle class were defined by manufacturing jobs. Today, in the interest of higher profits and lower costs, many American corporations look to China to produce the goods they sell in to the United States.
While this strategy is good for their corporate bottom lines, and while it certainly benefits the investor class who have seen their stock portfolios blossom, it does in fact harm the job and earnings prospects of the middle class.
One could argue that if Americans were more competitive, jobs would not need to be moved to China. To that, I would respond that while I do agree we need to be doing more to increase our competitiveness (which, by the way, is a form of "intervention"), I would also point out the role played by currency valuation and would submit that by pegging their Yuan to the US Dollar at an artificially low level, Chinese goods receive an unfair price advantage in the US market compared to domestically produced goods.
Thus, another form of intervention I would suggest would be to work with the IMF and the world bank to put pressure on China to stop manipulating their currency.
China has a huge role, but we are the actual cause. People in this country want cheap Chinese crap, which has put many of our manufacturing jobs out on the curb. If Americans were willing to pay what it costs, for Americans to make our stuff, we'd have a much more true and accurate picture of economic viability.
Not very patriotic, then, to shop at WalMart....huh?
It's indisputable fact that income inequality in the United States has grown substantially in the past few decades.
Median nominal incomes, adjusted for inflation, have not gone up in the USA since the 50's. (Median is the halfway point, so we are talking about the middle-earner). In contrast, the per capita GDP has risen quite dramatically, due to the increased purchasing power of the upper echelon.
I pose three questions to you:
1.) What has caused this phenomenon
2.) What are the long term implications if the trend is allowed to continue
3.) What, if anything, should be done to adjust our course
Thanks
Globalization and international trade is not a contributing factor, IMO. What is lost in manufacturing wages is made up by the low prices, so it evens out in terms of cost of living. Comparative advantage allows for a diversification of what is produced, thus more wealth overall is produced.
International trade is a factor when factors such as taxes, business regulations, environmental regulations, taxes, government subsistence, etc... are taken into account...
I think the most important thing policy makers need to do is identify government policies that have created inequality, and then change or abolish them so that they no longer cause it. Others would say we need to go down the Marxist path of mass redistribution of wealth, but that would not only be incredibly destructive (economically and ethically), it would also ignore real things we should do to eliminate special advantages which have been establishment by government force.
I also think it is important to recognize that income inequality as a concept is not a problem. It's the stagnation of a group of people economically that is the problem. If everyone's standard of living increases amid inequality, then there is no problem unless you give the concept of absolute equality moral credence (I don't).
Not sure what you are getting at. I'm saying international trade is not causing income inequality. In fact, it is dramatically raising the living standards of less wealthy nations as we speak. It is bridging the gap.
We live and work in a global economy. People without unique, limited or desired skills are going to be paid whatever their particular market will afford them. Without full employment, there will always be someone willing to work for less in jobs that require little skill and minimal intelligence. Simple fact of life. If you want to be paid well either start your own business and be damn good at it or get a good education in a field that needs more employees than candidates qualified and available.
Globalization and international trade is not a contributing factor, IMO. What is lost in manufacturing wages is made up by the low prices, so it evens out in terms of cost of living. Comparative advantage allows for a diversification of what is produced, thus more wealth overall is produced.
Another thing to consider is the bubbles such a system creates. On the one hand, you have the corporate/investor class who are constantly pressing for higher and higher returns.
In practice, this means they are actively trying to get the American Consumer to buy more and more stuff.
On the other hand, the American Consumer is stagnant in his earnings.
The answer to this enigma has been, wrongly, to extend more and more credit to the stagnant middle class.... such that they're living in massive amounts of debts.
We saw this crash in 2008 with the housing bubble - the lower and middle earners bought more house than they could afford, and when it became apparent they couldn't pay their mortgages, the housing bubble popped.
Today, we're seeing a consumer credit bubble growing - an increase in home equity loans, an increase in credit card spending. The debt to earnings ratio in the US is not healthy.... hence we're creating another bubble.
On the one hand, the American Public needs to learn to live within their means. On the other hand, banks need to put more realistic limits on people's credit. Finally, we need to do more to grow the actual income of the consumer class, and not have it continue to stagnate.
It isn't Walmart. Go find me some AMerican made products to buy ANYWHERE. It's not easy to do. The finest clothing stores are selling Chinese crap.
Except that lower/middle class Americans are buying their Chinese goods at Walmart with their Visa cards, not with their savings.
Also, prices have not really dropped as much as you think.
That's the sad truth.
When all players are competing under different rules, there will be a class of individuals who will be left out, thus enhancing inequalities, especially when the government tries to make up for this with direct payments...
Well, the U.S. would have more industry if it attempted to compete with nations like China, but nobody seems to be on board with that.
I would abolish the corporate income tax tomorrow, for example. Not only is not very complicated (another cause of inequality), it puts us at a world disadvantage overall. People believe takes money from the rich-not really, it essentially is a hidden tax on sales that hurts consumers as well as our competitiveness.
I believe a lot of this (if not most) ties into monetary policy. Our monetary policy exacerbates the boom and bust cycle. Everyone gets wiped out during recessions, but then the investor class gets bailed out. This creates a huge gap. Low interest rates cut into the savings of people and promote debt, so there is no way people will growing their wealth exponentially. The money not being pumped into consumer credit is propping up the financial industry, creating massively inflated asset prices not in conjunction with realistic evaluations. And finally, inflation erodes at the wages and wealth of most people over time, whereas the investor class has ways to avoid losing wealth to inflation.
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