Troubled about income inequality? Globalization fuels it
Income inequality has been talked about and written about for decades but, while universally decried as “a bad thing” and steadily getting worse, its causes and consequences were widely misunderstood or lost in a miasma of economic jargon. The most glaringly absent piece of this puzzle was the powerful connection between income inequality and globalization.
Globalization, itself a complex phenomenon, has been commonly represented as “a good thing” that, through the efficiencies of technology and the virtues of multilateral cooperation, would over time greatly benefit workers and consumers alike. The reality, however — exposed by economic calamities from the financial crisis of 2008 to the pandemic of 2020 — has been starkly different.
Far from being the sunny face of an inevitable and always forward-marching progress, globalization has been revealed as a façade concealing the greatest transfer of wealth and income in human history, with but marginal benefit to consumers and, for workers — except the 1 percent and their enablers — untold economic devastation and personal misery.
Not all have been blind to the rising perils caused by globalization. Prominent among credible voices, once dismissed as alarmists but now seen as mainstream, is Dr. Dani Rodrik, currently Ford Foundation Professor of International Political Economy at the Harvard Kennedy School. Through more than two decades of research at Harvard, and earlier at Columbia and the Institute for Advanced Study in Princeton, N.J., Rodrik conclusively demonstrated that globalization essentially allowed multinational corporations to create a worldwide system for the express purpose of escaping the constraints of taxation, regulation, unions, environmental laws — and most especially, accountability to democratically elected governments.
In books such as “Has Globalization Gone Too Far” (1997) and “The Globalization Paradox” (2011), he details how globalization not only destroyed millions of jobs held by a once prosperous Western working class but also did even greater damage to poor countries in Latin America and sub-Saharan Africa, in some of which economic output collapsed entirely.
Sometimes reality can be obscured when viewed through a too wide global lens, but gains great clarity when seen in the microcosm of a single country. Such is the case of a remarkable book by French sociologist Christophe Guilluy: “Twilight of the Elites: Prosperity, the Periphery, and the Future of France” (2019). The book won acclaim throughout the English-speaking world: “Disturbing and affecting … something profound that extends well beyond the border of France” (New York Times); “How the gulf between France’s metropolitan elites and its working classes are tearing the country apart” (The Guardian); “This book will make you fret and question your moral integrity” (Financial Times, London).
Guilluy persuasively asserts that the old dichotomy of liberal v. conservative is no longer relevant. Instead, he sees a new chasm in society dividing those who are winners in globalization’s “New Economic Order” and those who are losers. The elites are not just the traditional upper classes but also the professional classes that support them, without whom this social and economic transformation could not have occurred. The elites “capture most of the benefits of offshore production and free trade” while the working classes are excluded and “condemned to live out their lives as second-class citizens,” Guilluy contends.
His data surprisingly demonstrates that the dispossessed working class is actually a majority of the country’s population (60 percent), and younger, owing to a higher birth rate than the elites who increasingly are having fewer children — facts suggesting considerable political ramifications for France’s future. Accordingly, among some in the political class, as well as some cultural leaders, intellectuals and journalists, there is a palpable sense of alarm that “a new form of class conflict long assumed not to exist is now plain for all to see.”
The stunning growth of income inequality, and the historically unprecedented transfer of wealth it entailed can be seen most graphically by examining income distribution data for the United States from 1970 to 2007, the same period in which globalization was fastening a grip on the world economy. In 1970, the income share of the top 1 percent of households was 9 percent; in 2007, it was 24 percent. In a similar vein, the average income of the top 1 percent in 1978 was 10 times that of the remaining 99 percent; in 2007, it was 30 times greater.
Not for nothing is economics known as “the dismal science.” Yet, however difficult to convey or comprehend, these statistics make abundantly clear that profound and ominous changes have overtaken our country — and the world — and they do not bode well for the future.
William Moloney, Ph.D., is a Fellow in Conservative Thought at Colorado Christian University’s Centennial Institute who studied at Oxford and the University of London. He is a former Colorado Commissioner of Education.
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