An Uneven Planet Globalization, Capital, & Inequality in the 21st Century
Today’s Discussion • Brief Review • Globalization • The Problem of
Inequality • Picketty & the
Politics of Redistribution
Brief Review
Hayak Keynes
Keynes and Hayak led the 20th century’s revision and renewed
embrace, respectively, of free market liberalism.
Classical Economics Revisited
What Is Globalization? The Making of Globalization
Globalization & St. Jobs
iPod Employment In 2006, the iPod employed nearly twice as many people outside the United States as it did in the country where it was invented — 13,920 in the United States, and 27,250 abroad.
iPod Employment In 2006, about half of the foreign iPod jobs — 12,270 — were in China. Other jobs were found in countries like the Philippines.
4,750 iPodJobs
12,270 iPodJobs
Foreign iPod Worker Salaries The 13,920 U.S. workers earned nearly $750 million, while the 27,250 non-American employees earned less than $320 million.
U.S. iPod Worker Salaries More than half the U.S. jobs — 7,789 — went to retail and other nonprofessional workers, like office support staff and freight and distribution workers, who collectively earned $220 million.
U.S. iPod Worker Salaries More than half the U.S. jobs — 7,789 — went to retail and other nonprofessional workers, like office support staff and freight and distribution workers, who collectively earned $220 million.
U.S. iPod Worker Salaries The big winners from Apple’s innovation were the 6,101 engineers and other professional workers in the United States, who made more than $525 million in 2006.
iPod CEO Compensation Despite a $1 annual salary, Steve Jobs still topped Forbes' list of highest paid CEOs for 2006, with $646+ million in stock-based compensation (more than twice the next most paid CEO).
Neoliberal Economics The Making of Globalization
Globalization > Technology
+
Keynes and the Post-War Era Dow Jones Industrial Average, 1800-2003
Mt. Washington Hotel, Bretton Woods, NH
Dollar pegged at $35 per ounce
July 1944
Keynes and the Post-War Era Dow Jones Industrial Average, 1800-2003
The Course of Bretton Woods
The End of Bretton Woods 4.9 U.S. Exports and Imports, 1960-1972
Billions of dollars
The End of Bretton Woods 4.11 U.S. Fiscal Deficits, 1965-1972
Billions of dollars
Hayek Revival • During post-war era,
Keynesianism was the dominant economic approach, while Hayek’s views were marginalized
• As state-led growth stagnated in the 1970s, Hayek’s views gained currency and more states adopted market-based approaches
After Von Hayek received the Nobel Prize Economics in 1976, his views grew in popularity and application in the United Kingdom and the United States.
Tough Medicine from U.S. • In 1981 Paul Volcker
raised Fed interest rates, tightening money supply
• Inflation dropped, but the U.S. economy fell into recession
• Developing world experienced debt crisis
Reagan Reaganomics
sucks
U.S. Fiscal Irresponsibility • 1982 Volcker brings
back the punch bowl (lowers interest rates)
• Stronger dollar allows more consumption
• Massive fiscal deficits • Explosion of U.S.
foreign debt
Reagan
Deregulation reduced barriers to entry for new competitors and introduced competitive pricing systems, thereby helping to break up monopolies and reduce prices for consumers.
• Transportation: Rail, air, trucking, & shipping markets were gradually deregulated
• Communications: Telephone and cable deregulation
• Energy: Oil and natural gas deregulation partly responded to OPEC
Market Deregulation
• Ronald Reagan and Margaret Thatcher
• 1981 U.S. legalizes international banking
• 1984 ¥/$ agreement liberalizes Japanese investment
• 1986 London Stock Exchange accepts foreign securities deals
Unleashing International Capital
Foreign Direct Investment (FDI) Shift
Implications • Rise of institutional capital investment • Greater capital mobility for efficient production • Greater currency speculation & market volatility • Weaker role of government foreign reserves
The Wealth of Nations in the Global Era
Chicago Boy: Milton Friedman
The Wealth of the Rich in the Global Era
Chicago Boy: Milton Friedman
Extreme'Wealth'Concentra0ons'
Global'Distribu0on'of'Wealth'
U.S.'Incomes'and'Shares'of'Income'
The'Future'Looks'Even'Brighter'
Does'Inequality'Hurt'Markets?'
Inequality and Redistribution Piketty and Capital in the 21st Century
A'New'American'Gilded'Age'
U.S.'vs.'European'Income'Inequali0es'
Public'vs.'Private'Capital'
The'New'Billionaires'
Why'so'much'inequality?''
Educational inequality
Productivity vs. Income
Productivity vs. Income
Executive compensation
USD 2011 Tax Return
USD 2013 Tax Return
What'is'to'be'done?'
Final Thoughts
The'Future'of'Capital:'Asia'
Concluding Thoughts • Office Hours
– M 2-4, T 4-5, Th 10-12 • Concluding Quote:
– “A man can’t ride your back unless it is bent.”
—Martin Luther King, Jr., 1960