globalisation and inequality
DESCRIPTION
Globalisation and inequality. Year 2, Lecture 1 Douglas McWilliams Mercers School Memorial Professor of Commerce Gresham College. C entre for economics and business research ltd Unit 1, 4 Bath Street, London EC1V 9DX - PowerPoint PPT PresentationTRANSCRIPT
Globalisation and inequality
Year 2, Lecture 1Douglas McWilliams
Mercers School Memorial Professor of Commerce Gresham College
Centre for economics and business research ltd
Unit 1, 4 Bath Street, London EC1V 9DXt: 020 7324 2850 f: 020 7324 2855 e: [email protected] w: www.cebr.com
© Centre for economics and business research ltd, 2013
To disentangle the relationship between globalisation and inequality;
To understand the forces driving changes in inequality
To consider the impact of globalisation on world poverty
Objective
© Centre for economics and business research ltd, 2013
The background to the debate
Inequality within countries
Inequality between countries
The process of economic development
Technology v globalisation
The role of industrial organisation
Football – the example of soccer salaries
What has happened to poverty
Conclusions
Overview
© Centre for economics and business research ltd, 2013
Implications of global shift
Intense international trade competition – the new economies are not just competitive but ‘supercompetitive’ because they have an entirely new cost basis
Rising real prices of natural resources – food, energy, fuel, materials
Slower growth in the Western world and faster growth in the emerging economies
Lower interest rates as a result of savings glut (see currencies and interest rate section later)
More volatile international economy
© Centre for economics and business research ltd, 2013
19131917
19211925
19291933
19371941
19451949
19531957
19611965
19691973
19771981
19851989
19931997
20012005
20090
2
4
6
8
10
12
14
16
Shares of total income received by wealthy groups % of total income USA
100 to 50 50 to 10 10 to 5 5 to 2 Top 0.1% Top 0.01%
© Centre for economics and business research ltd, 2013
19131917
19211925
19291933
19371941
19451949
19531957
19611965
19691973
19771981
19851989
19931997
20012005
20090
2
4
6
8
10
12
14
16
18
Shares of total income received by wealthy groups % of total income USA
100 to 50 50 to 10 10 to 5 5 to 2 Top 0.1% Top 0.01%
© Centre for economics and business research ltd, 2013
19131917
19211925
19291933
19371941
19451949
19531957
19611965
19691973
19771981
19851989
19931997
20012005
20090
2
4
6
8
10
12
14
16
18
Shares of total income received by wealthy groups % of total income USA
100 to 50 50 to 10 10 to 5 5 to 2 Top 0.1% Top 0.01%
© Centre for economics and business research ltd, 2013
19131917
19211925
19291933
19371941
19451949
19531957
19611965
19691973
19771981
19851989
19931997
20012005
20090
2
4
6
8
10
12
14
16
18
Shares of total income received by wealthy groups % of total income USA
100 to 50 50 to 10 10 to 5 5 to 2 Top 0.1% Top 0.01%
© Centre for economics and business research ltd, 2013
19131917
19211925
19291933
19371941
19451949
19531957
19611965
19691973
19771981
19851989
19931997
20012005
20090
2
4
6
8
10
12
14
16
18
Shares of total income received by wealthy groups % of total income USA
100 to 50 50 to 10 10 to 5 5 to 2 Top 0.1% Top 0.01%
© Centre for economics and business research ltd, 2013
19131917
19211925
19291933
19371941
19451949
19531957
19611965
19691973
19771981
19851989
19931997
20012005
20090
2
4
6
8
10
12
14
16
18
Shares of total income received by wealthy groups % of total income USA
100 to 50 50 to 10 10 to 5 5 to 2 Top 0.1% Top 0.01%
© Centre for economics and business research ltd, 2013
Possible causes of the recent trend towards increasing inequality
OECD Topics
Globalisation (but which aspect?)
Skill biased technical change (SBTC)
Labour market changes
Product market and regulatory changes
Household specific issues – eg increasing single parent households
Others
Changed relationship between owners and managers
Emergence of a ‘winner takes all’ star system
© Centre for economics and business research ltd, 2013
Definitions of different income groups for countries
© Centre for economics and business research ltd, 2013
Poor Lower middle incomes
Upper middle incomes
Rich0
1
2
3
4
5
6
7
Per capita income annual percentage real (PPP) growth 2000-10
Source: World Bank
What has happened to income inequality between countries?
© Centre for economics and business research ltd, 2013
Source: James H Chan-Lee and Helen Sutch Profits and Rates of Return OECD
© Centre for economics and business research ltd, 2013
Time series of profits share – UK 1920 to 1980
Source: James H Chan-Lee and Helen Sutch Profits and Rates of Return OECD
© Centre for economics and business research ltd, 2013
1929
1933
1937
1941
1945
1949
1953
1957
1961
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
2005
2009
0
5
10
15
20
25
30
35
40
US gross operating surplus share of GDP
Source: US Department of Commerce Bureau of Economic Analysis
the prospects service
How Manchester United’s revenues have changed
1968/69 1987/88 2012/130
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
310,000 7,577,000
320,000,000
Income in current £
the prospects service
How Manchester United’s revenues have changed in 2010 £
1968/69 1987/88 2012/130
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
4,200,00016,000,000
290,000,000
Income in 2010 £
the prospects service
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000Average weekly wages in 1st Division/Premier League
How Premier League footballers’ weekly salaries have changed
the prospects service
Average earnings Lower league Top league0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Annual pay in 1971
In 1971 a top footballer was paid just over 4 times what a player in the lower leagues earned (who earned less than average earnings!)
the prospects service
In 2012 an average Premier League footballer earns nearly 50 times what a player in the lower leagues gets
Average earnings Lower league Top league0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
Annual pay in 2012
the prospects service
According to Brookings, the millennium anti-poverty goal may already have been achieved
Source: ‘Poverty in Numbers: The Changing State of Global Poverty from 2005 to 2015’
Laurence Chandy and Geoffrey Gertz, The Brookings Institution, January 2011
the prospects service
According to Brookings, by 2015 the number of poor will have fallen from 1.4 billion people in 2005 to fewer than 600 million
Source: ‘Poverty in Numbers: The Changing State of Global Poverty from 2005 to 2015’
Laurence Chandy and Geoffrey Gertz, The Brookings Institution, January 2011
the prospects service
Conclusions
• In recent years, income inequality in most countries has risen
• But the effects of this have been offset by a fall in income inequality between countries
• Globalisation is one of the causes but others include information technology and the impact of shareholders trying to incentivise better performance from managers
• In the early 1970s, top footballers earned 4 times the earnings of lower league footballers while stars earned twice the top league average, today top footballers earn 50 times the earnings from lower leagues while stars earn 10 times the top league average. This has been driven by TV technology and globalisation
• But while all this has been going on at the top end, poverty has been reduced dramatically. The number of people in poverty by 2015 is set to be down by three quarters from the number in 1990.
• The main cause of the fall in poverty has been globalisation and economic growth, not aid