tag:theconversation.com,2011:/africa/topics/thomas-piketty-10011/articlesThomas Piketty – The Conversation2022-12-07T19:05:25Ztag:theconversation.com,2011:article/1914222022-12-07T19:05:25Z2022-12-07T19:05:25ZWe live in a time of ‘late capitalism’. But what does that mean? And what’s so late about it?<figure><img src="https://images.theconversation.com/files/499138/original/file-20221206-26-tvcejf.jpg?ixlib=rb-1.1.0&rect=43%2C301%2C5708%2C3526&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A worker shovels charcoal at the at Al-Hattab production facility in the Gaza Strip.</span> <span class="attribution"><span class="source">Mohammed Saber/AP</span></span></figcaption></figure><p>The term “late capitalism” seems to be everywhere as a trending meme – often used as a kind of shorthand to illustrate the absurdities of certain free market economies.</p>
<p>On Twitter, you will find the hashtags #latecapitalism (English), #tardocapitalismo (Italian), #capitalismotardio (Spanish), and #spätkapitalismus (German), among others. Typically, they satirise notions such as the idea of endless growth.</p>
<p>The term also pops up in a wide range of academic articles and books.
There are, for instance, discussions around the populist rise in late capitalism, the increase in financial-related investments in late capitalism, migration conditions in late capitalism, and so on. </p>
<p>But what are the origins of this term? And what, exactly, does it mean?</p>
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<a href="https://images.theconversation.com/files/499136/original/file-20221206-16-efzsi4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A car factory in China" src="https://images.theconversation.com/files/499136/original/file-20221206-16-efzsi4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/499136/original/file-20221206-16-efzsi4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/499136/original/file-20221206-16-efzsi4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/499136/original/file-20221206-16-efzsi4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/499136/original/file-20221206-16-efzsi4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/499136/original/file-20221206-16-efzsi4.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/499136/original/file-20221206-16-efzsi4.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Workers assemble cars at the Dongfeng Honda Automobile Co., Ltd factory in Wuhan, 2020.</span>
<span class="attribution"><span class="source">Ng Han Guan/AP</span></span>
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<h2>The origins</h2>
<p>Karl Marx first analysed the last stage of capitalism in his three-volume magnum opus <a href="https://www.penguin.co.uk/books/35192/capital-by-karl-marx-intro-ernest-mandel-trans-ben-fowkes/9780140445688">Capital: A Critique of Political Economy</a> (published in 1867, 1885, and 1894), particularly in Volume 3.</p>
<p>For Marx, an acceleration in the turnover of capital, concentrating wealth in the hands of the few, would result in a continuous tendency to crises. This, he believed, would ultimately make the system collapse. </p>
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Read more:
<a href="https://theconversation.com/karl-marx-his-philosophy-explained-164068">Karl Marx: his philosophy explained</a>
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<p>However, Marx did not use the term “late capitalism”. It was coined by Werner Sombart, a controversial German historical economist, almost a century ago in his three-volume magnum opus <em>Der Moderne Kapitalismus</em> (published from 1902 through 1927). </p>
<p>Sombart’s main contribution was to define three periods of the capitalist economic system: early or proto capitalism, advanced capitalism and late capitalism. In Sombart’s analysis, late capitalism referred specifically to economic, political and social deprivations associated with the aftermath of the first world war. </p>
<h2>A new epoch</h2>
<p>The term wasn’t taken up widely until Belgian Marxist economist Ernest Mandel’s treatise <a href="https://www.versobooks.com/books/612-late-capitalism">Late Capitalism</a> was published in English in 1975.</p>
<p>Mandel used the idea to describe the economic expansion after the second world war. This was a time characterised by the emergence of multinational companies, a growth in the global circulation of capital and an increase in corporate profits and the wealth of certain individuals, chiefly in the West.</p>
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<p>As Mandel described it, the period of late capitalism did not represent a change in the essence of capitalism, only a new epoch marked by expansion and acceleration in production and exchange. Thus one of the main features of late capitalism is the increasing amounts of capital investments into non-traditional productive areas, such as the expansion of credit.</p>
<p>This period of exceptional economic growth, argued Mandel, would reach its limit by the mid 1970s. At this time, the world economy was experiencing an <a href="https://history.state.gov/milestones/1969-1976/oil-embargo">oil crisis</a> (<a href="https://energyhistory.yale.edu/units/oil-shocks-1970s">in 1973, and a second wave in 1979</a>). Britain was also experiencing a banking crisis derived from a fall in property prices and an increase in interest rates.</p>
<p>However, since the time of Mandel’s writing such crises have become recurrent. </p>
<p>For instance, the 1980s were known for the different regional financial crises, such as in Latin America, the US and Japan. In 1997, we saw the Asian <a href="https://www.britannica.com/list/5-of-the-worlds-most-devastating-financial-crises">financial crisis</a>. The 2008 US subprime crisis became the <a href="https://www.federalreservehistory.org/essays/great-recession-and-its-aftermath">Great Recession</a>.</p>
<h2>The cultural component</h2>
<p>The term “late capitalism” regained relevance in 1991 when Marxist literary critic Fredric Jameson published <a href="https://www.versobooks.com/books/1126-postmodernism">Postmodernism or the Cultural Logic of Late Capitalism</a>.</p>
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<p>Drawing on Mandel’s idea that capitalism has sped up and gone global, Jameson expanded his analysis to the cultural realm. His argument was that late capitalist societies have lost their connection with history and are defined by a fascination with the present. </p>
<p>In Jameson’s account, late capitalism is characterised by a globalised, post-industrial economy, where everything – not just material resources and products but also immaterial dimensions, such as the arts and lifestyle activities – becomes commodified and consumable. </p>
<p>In this capitalist stage, we see innovation for the sake of innovation, a superficial projected image of self via celebrities or “influencers” channelled through social media, and so on.</p>
<p>In this time, whatever societal changes that emerge are quickly transformed into products for exchange. Unlike those who celebrate <a href="https://www.britannica.com/topic/postmodernism-philosophy">postmodernism</a> as replete with irony and transgression, Jameson considers it to be a non-threatening feature of the capitalist system in contemporary societies.</p>
<p>More recently, Jonathan Crary, in his book <a href="https://www.versobooks.com/books/1570-24-7">Late Capitalism and the Ends of Sleep</a>, argues our current version of 24/7 capitalism, enabled by intrusive technologies and social media, is eroding basic human needs such as sufficient sleep. It is also eliminating “the useless time of reflection and contemplation”.</p>
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<span class="caption">Elon Musk, the world’s richest man, now owns Twitter.</span>
<span class="attribution"><span class="source">Patrick Pleul/AP</span></span>
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<h2>And then what?</h2>
<p>Since its conception, the idea of late capitalism has chiefly referred to the latest stage of capitalist development. This “last stage” condition has been bestowed on almost every period following a moment of economic crisis. </p>
<p>Global economic upheavals such as the 2008 subprime crisis and the financial upheaval caused by the COVID-19 pandemic have led to a simultaneous expansion and concentration of wealth. </p>
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<a href="https://images.theconversation.com/files/499135/original/file-20221206-15-hr2hfl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Men carrying bricks." src="https://images.theconversation.com/files/499135/original/file-20221206-15-hr2hfl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/499135/original/file-20221206-15-hr2hfl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=407&fit=crop&dpr=1 600w, https://images.theconversation.com/files/499135/original/file-20221206-15-hr2hfl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=407&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/499135/original/file-20221206-15-hr2hfl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=407&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/499135/original/file-20221206-15-hr2hfl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=512&fit=crop&dpr=1 754w, https://images.theconversation.com/files/499135/original/file-20221206-15-hr2hfl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=512&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/499135/original/file-20221206-15-hr2hfl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=512&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Migrant workers at a brick factory outside Kathmandu.</span>
<span class="attribution"><span class="source">Narendra Shrestha/EPA</span></span>
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<p>In other words, the rich get richer, and the poor get poorer, such is the ever-turning gyre of capitalism. Indeed, contemporary economists, such as <a href="https://news.harvard.edu/gazette/story/2020/03/pikettys-new-book-explores-how-economic-inequality-is-perpetuated/#:%7E:text=Q%26A-,Thomas%20Piketty,rooted%20in%20ideology%20and%20politics.">Thomas Piketty</a> and <a href="https://news.harvard.edu/gazette/story/2022/03/nobel-winning-economist-says-inequality-breeds-discontent/">Joseph Stiglitz</a> suggest increasing inequality could endanger our future.</p>
<p>What will come after late capitalism? In the face of the climate crisis, some are imagining everyday lives no longer guided by overconsumption and environmental degradation: a post-capitalist society. In the meantime, the hashtags continue.</p><img src="https://counter.theconversation.com/content/191422/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Elias Aviles Espinoza received funding for his PhD research from the Chilean Agency for Research and Development (ANID)</span></em></p>‘Late capitalism’ is referenced in books, articles and as a trending meme. But what are the origins of the term – and what does it describe?David Aviles Espinoza, PhD candidate in Political Economy, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1713082021-11-28T09:09:45Z2021-11-28T09:09:45ZHow African thinkers of the 1980s fed into today’s inequality debates<figure><img src="https://images.theconversation.com/files/431267/original/file-20211110-27-17rw2ib.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Inequality within countries is growing globally </span> <span class="attribution"><span class="source">Wikimedia Commons</span></span></figcaption></figure><p>Inequality is an issue that arises everywhere in the world today. </p>
<p>Recent studies by economists such as <a href="https://www.degruyter.com/document/doi/10.4159/9780674969797/html">Branko Milanovic</a> and <a href="https://www.hup.harvard.edu/catalog.php?isbn=9780674980822">Thomas Piketty</a> have looked at trends in economic inequality on a global scale. Social movements – such as <a href="https://www.theguardian.com/news/2015/nov/18/why-south-african-students-have-turned-on-their-parents-generation">Rhodes Must Fall</a>, <a href="https://blacklivesmatter.com/">Black Lives Matter</a> and <a href="https://metoomvmt.org/">Me Too</a> – as well as the COVID pandemic, have emphasised inequalities along lines of institutionalised racism, gender, wealth and health. All these highlight the unequal global power relations that continuously shape the world. </p>
<p>But how have the world’s intellectuals historically thought about inequality? By examining the ideas of earlier thinkers, we can gain perspective which might help us understand why today’s world remains unequal.</p>
<p>This is why a <a href="http://global-inequality.com/project">research project</a>, at Aarhus University in Denmark, is exploring the intellectual history of global inequality. As part of the research team, I have been studying how intellectuals in post-independence Ghana handled the idea of an unequal world. </p>
<p>For Ghanaian postcolonial intellectuals, terms such as development, neocolonialism, self-reliance and indigeneity were central to discussions of global inequalities. In a <a href="https://www.tandfonline.com/doi/full/10.1080/17496977.2021.1913390">recent paper</a>, I argue that at the end of the 20th century conceptions of global inequality were hinged on intellectual debates about African development. This was a time shaped by economic decline and crisis discourses. </p>
<h2>Decline and divide</h2>
<p>On the African continent, economic decline worsened after the oil shocks of the 1970s. The continued decline made the United Nations Economic Commission for Africa label the 1980s as ‘<a href="https://repository.uneca.org/handle/10855/15493">Africa’s lost decade’</a>.</p>
<p>The modernisation projects of the early independence years had not brought about the economic ‘takeoff’ that many African independence leaders had intended. What the first president of independent Ghana, Kwame Nkrumah, had <a href="https://www.africanbookscollective.com/books/selected-speeches-of-kwame-nkrumah.-volume-1">expressed</a> as the “raging hurricane of African nationalism blowing through the oppressed and down-trodden colonies” was losing air. </p>
<p>Intellectuals in Africa and elsewhere began to ‘diagnose’ the main causes of the economic, political and social problems on the continent and look for solutions. </p>
<p>Their thinking about development <a href="https://www.taylorfrancis.com/chapters/edit/10.4324/9781315761084-31/west-africa-gareth-austin-gerardo-serra">divided</a> opinion. Left-leaning and Marxist inspired scholarship focused on the sustained underdevelopment of poorer nations by foreign powers. On the other hand were neoliberal ideas, based on neoclassical economics, scepticism towards state intervention and confidence in the free market. </p>
<p>Accentuating this divide were two key official blueprints of the early 1980s. Through the Organisation of African Unity, African leaders issued the <a href="https://www.nepad.org/publication/lagos-plan-of-action">Lagos Plan of Action of the Economic Development of Africa 1980-2000</a> in 1980. This was arguably the <a href="https://www.worldcat.org/title/african-development-adebayo-adedejis-alternative-strategies/oclc/23765826">first African ‘home-grown’ development plan for the continent</a>. It stressed African collective self-reliance and resistance to free market economics. The following year, the World Bank published the strategy paper <a href="https://documents1.worldbank.org/curated/en/702471468768312009/pdf/multi-page.pdf">Accelerated Development in Sub-Saharan Africa: An Agenda for Action</a>. It underlined the managerial incompetence of African governments. This laid the foundation for the Structural Adjustment Programmes of the 1980s-1990s. </p>
<h2>Elites and indigeneity</h2>
<p>In my <a href="https://www.tandfonline.com/doi/full/10.1080/17496977.2021.1913390">article</a>, I show what two Ghanaian-born intellectuals made of the continent’s problems and how to fix them during the 1980s-1990s. They are the South African based social scientist Kwesi K. Prah and the US based economist George N.B. Ayittey. They both left Ghana in the 1970s under the <a href="https://www.jstor.org/stable/421836">Acheampong military regime</a>.</p>
<p>The solutions they offered were shaped by their different standpoints and intentions. </p>
<p>The two fell on different sides of the intellectual divide. Left-leaning Prah looked to language as a solution to development, ending neocolonial tendencies. Liberal Ayittey argued that postcolonial African elites had betrayed the African people through corruption and diasporic rule funded through foreign aid. </p>
<p><a href="https://www.jstor.org/stable/24352159?seq=1#metadata_info_tab_contents">Prah’s thinking</a> was shaped by language debates taking place in South Africa at the time. It was also shaped by theories of dependency between old colonial powers and their former colonies. He stressed how using indigenous languages had the potential to break the connections between African and foreign countries and their elites. In his view, the mother tongue was the foundation for personal and societal innovation.</p>
<p>Ayittey <a href="https://link.springer.com/book/9780312104009">depicted</a> precolonial Africa as democratic and capitalist. He emphasised that only through indigenous African institutions (such as chieftaincies) and free markets, free trade and entrepreneurship – which he argued were precolonial African values – could the grip of elites on the people be loosened. Provocatively, he called these elites black neocolonialists. </p>
<p>Thus, both Prah and Ayittey critiqued African postcolonial elites and upheld the importance of African indigeneity, but with very different purposes. </p>
<p>The divide among intellectuals – in this case Ghanaian – clearly shaped the debates of the 1980s-1990s. Both thinkers used concepts such as development, indigeneity and neocolonialism to portray different conceptions of the unequal condition of the world – and how to resolve this. </p>
<p>The 1980s also saw a ‘neoliberal turn’ as the World Bank and the IMF rolled out Structural Adjustment Programmes. A focus on ‘internal issues’, such as leadership mismanagement and the need to restructure ‘failed’ African states, shaped economic policies across the continent. This was in line with parts of Ayittey’s controversial criticism. And, in effect, it brought with it a reliance on foreign experts, funds and the free market – still, to some extent, effective today. A reliance on foreign models which both Prah and Ayittey criticised at the time from different angles. </p>
<h2>A lingering problem</h2>
<p>But the desired turnaround has not yet been fully reached. The most recent <a href="http://hdr.undp.org/en/content/latest-human-development-index-ranking?utm_source=EN&utm_medium=GSR&utm_content=US_UNDP_PaidSearch_Brand_English&utm_campaign=CENTRAL&c_src=CENTRAL&c_src2=GSR&gclid=CjwKCAiA1aiMBhAUEiwACw25McQXvNuL_TvPNRhuqbLAUnaCecsSbPow7676YV4JPUbdIWKxzork5xoCb7oQAvD_BwE">Human Development Index</a> reveals many bottom-ranking countries are in Africa. </p>
<p>Although <a href="https://theconversation.com/global-inequality-may-be-falling-but-the-gap-between-haves-and-have-nots-is-growing-159825">global income inequality</a> between countries has been decreasing recently, within-country inequality is on the rise. According to leading inequality economists <a href="https://wid.world/document/longrunpaper/">Thomas Piketty and Lucas Chancel</a> today’s levels of inequality are similar to those of the early 20th century. </p>
<p>Studying intellectuals like Prah and Ayittey reminds us of ideas which might give us the historical perspective to act on related current issues.</p><img src="https://counter.theconversation.com/content/171308/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mélanie Lindbjerg Guichon receives funding from Independent Research Fund Denmark under Grant 8047-00068B.</span></em></p>Ghanaian postcolonial intellectuals viewed terms such as development, neo-colonialism, self-reliance, and indigeneity as central to discussions of global inequalities.Mélanie Lindbjerg Guichon, PhD Candidate, Aarhus UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1412282020-06-30T14:06:52Z2020-06-30T14:06:52ZA post-pandemic world is unlikely to focus on meeting need over human greed<figure><img src="https://images.theconversation.com/files/344102/original/file-20200625-33557-140vli2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">VW Pics/Getty Images</span></span></figcaption></figure><p>How often has it been said that ‘the world will never be the <a href="https://theconversation.com/the-world-before-this-coronavirus-and-after-cannot-be-the-same-134905">same again</a> after the COVID-19 pandemic’? If so, the question is, how might it change? Might it not change much at all? The questions have given rise to speculative debate, with optimists and pessimists offering their predictions.</p>
<p>On what grounds do the optimists look to a future in which social justice, environmental sustainability, and reduced inequality are prioritised?</p>
<p>First, it is argued that the pandemic has exposed neoliberalism’s failure to provide an adequate response to the twin health and economic crises. During this pandemic governments pursuing neoliberal policies have departed from norms, making interventions in the economy and healthcare in order to limit the dire human and economic consequences of COVID-19. This, say the optimists, is a lesson for the future – the market shown to be an inadequate mechanism for tackling the most fundamental problems facing humankind.</p>
<p>Second, the pandemic has highlighted the need for greater international cooperation in addressing global crises. The optimists say that the pandemic has revealed the necessity for a global response, and that in the future such a response should extend to address other crises, particularly climate change and inequality.</p>
<p>Third, the pandemic has starkly exposed the failures of elected right-wing governments to tackle the pandemic – the US, UK and Brazil being the most obvious examples. Opinion polls have shown the approval ratings of these governments to be falling significantly. Surely, therefore, voters will punish them at the polls and opt for alternatives with social democratic inclinations?</p>
<p>The overall optimist view has been stated pithily by one analyst – there can be no return to normality after the pandemic, because normality has long been the problem. Before the pandemic Nobel laureate in economics <a href="https://www.theguardian.com/commentisfree/2019/nov/24/metrics-gdp-economic-performance-social-progress">Joseph Stiglitz</a> offered a sharp assessment of what is wrong, pointing to three major crises in the world: inequality, climate change, and the crisis of democracy. The latter crisis, he argued, is that democracies are not tackling the other two crises. The optimists hope the pandemic will force a more concerted attempt to address these global challenges.</p>
<p>The pessimists, on the other hand, hold out little hope for a more progressive, internationalist, post-pandemic future.</p>
<p>First, they see corporate power being little diminished. They recall how optimists believed that the 2008-2009 financial crisis would bring fundamental change in its wake, but in the event the neoliberal order survived. Surely, say the pessimists, the same will happen again?</p>
<p>The continuing power of the market is shown up in two recent, telling US economic indicators, which viewed together seem utterly <a href="https://theconversation.com/why-stocks-are-soaring-even-as-coronavirus-cases-surge-at-least-20-million-remain-unemployed-and-the-us-sinks-into-recession-140395">bizarre</a>. In April the US stock market recorded its biggest monthly gains since 1987. In the same month US unemployment rose by over 20 million – the largest monthly rise since the 1930s. It is estimated that during the months of the pandemic the wealth of US billionaires has grown by a staggering $565 billion, while the total number of unemployed in the country rose above 42 million during the same period – bearing out French economist <a href="https://www.theguardian.com/world/2020/may/12/will-coronavirus-lead-to-fairer-societies-thomas-piketty-explores-the-prospect">Thomas Piketty</a>’s view that the surest means of accumulating ever greater wealth is to possess wealth in the first place. If this trend can occur during the height of the pandemic is it not likely to continue in its aftermath? The free market is geared to profit-making, not to confronting human tragedy.</p>
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<a href="https://theconversation.com/coronavirus-what-are-the-chances-well-change-our-behaviour-in-the-aftermath-134991">Coronavirus: what are the chances we'll change our behaviour in the aftermath?</a>
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<p>Second, pessimists foresee the continuing rise of right-wing, populist nationalism in more parts of the world, as currently evident in countries such as the US, Brazil and India – a trend characterised by xenophobia, racism, and the scapegoating of those deemed responsible for the pandemic. </p>
<p>Third, with the rise of <a href="https://theconversation.com/white-nationalism-born-in-the-usa-is-now-a-global-terror-threat-113825">nationalism</a> will come anti-internationalism. Trump is showing the way with his scorn for international organisations like the World Health Organisation. Some observers fear what is being called ‘vaccine nationalism’ – the country that first develops an effective COVID-19 vaccine denying access to it for perceived enemies or rivals.</p>
<h2>Which is more likely?</h2>
<p>Which is the more likely: the optimistic or the pessimistic scenario? Any firm prediction is clearly impossible. There are variables to be considered, the chief one being the length of time it takes to bring COVID-19 under control. The longer it takes, the more far-reaching the economic devastation. </p>
<p>The overall death count will not itself be a major driver of change. An underlying, callous ageism may give rise to the view, not openly articulated of course, that the vast majority of those who have died have been the aged and infirm, doomed to die anyway in the near future. The loss of this cohort would have a minimal economic impact – in cold, materialistic terms such people are expendable. This kind of thinking is probably already guiding Trump’s cavalier approach to the pandemic.</p>
<p>A full-blown economic depression, however, would have far-reaching consequences, bringing massive unemployment and social discontent, bankruptcy, and heavy government indebtedness. In such a context the predictions of the optimists and the pessimists become possible – a government response along the lines of Roosevelt’s <a href="https://www.britannica.com/event/New-Deal">New Deal</a>, or a slide into fascism? Maybe one or the other in different parts of the world? Or perhaps neither? Will there be austerity programmes, with cutbacks in social security prioritised? Might there be a progressive approach, with heavy taxes on wealth and a clampdown on tax havens, as recommended by the likes of Stiglitz and Piketty? Will countries wholly prioritise their own recoveries, neglecting the plight of poor countries?</p>
<p>The likelihood is that there will be a drive on the part of political and economic power-holders to return to normality. While they largely succeeded following the 2008-2009 financial crisis, it will be more difficult to do so in the post-pandemic world. Welfare cutbacks are harder to implement in a context of widespread poverty. At the same time, corporations, backed by media allies, will surely resist tax increases for big business and wealthy individuals. While such increases may become unavoidable if the pandemic is not soon brought under control, one should expect austerity measures to take precedence, placing the greatest burden on the poor and working-class during the recovery period.</p>
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<a href="https://theconversation.com/what-will-the-world-be-like-after-coronavirus-four-possible-futures-134085">What will the world be like after coronavirus? Four possible futures</a>
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<p>The pandemic has given rise to a polarisation in public opinion in many parts of the world, especially in the US, where a vocal right-wing minority resents lockdown measures that restrict their ‘freedoms’ (including their freedom to infect others), while also showing themselves to be receptive to conspiracy theories, disinformation, and anti-scientific ideas. At the other pole are those who adopt a humanist perspective and bow to science.</p>
<p>This polarisation will likely continue in the post-pandemic world. Online media will persist in feeding nationalist, populist sentiment with ideas and disinformation directed against targeted scapegoats, including foreigners, immigrants, racial and religious ‘others’, and liberal elites. At the other pole, progressive opinion will continue to push for policies and practices that make for a more sustainable, egalitarian future.</p>
<p>Which pole is likely to prevail? Outcomes will likely vary in different parts of the world, but it is quite probable that for the most part neither will predominate. Expect the centre-right (as embodied in a figure like Joe Biden) to prevail. It is hard to envisage fascist regimes emerging as in the 1930s. Nor is there enough high-level support for a progressive agenda. Democratically elected governments tend to think short-term, afraid to bear the economic disruption accompanying a radical socio-economic and environmental transformation – costs that could endanger a ruling party’s electoral prospects.</p>
<p>The eventual outcome will depend on the extent to which the pandemic makes ‘business as usual’ an impossible eventuality. Be sure, though, that political and economic power-holders will strive for just such a return to pre-pandemic ‘normality’. The prospect of a political economy geared towards meeting human need, rather than feeding human greed, looks to be as remote as ever.</p><img src="https://counter.theconversation.com/content/141228/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Maylam does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Political and economic power-holders will strive for a return to pre-pandemic ‘normality’.Paul Maylam, Emeritus Professor, Rhodes UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/943332018-04-09T14:54:34Z2018-04-09T14:54:34ZIndia and China: lessons on how not to tackle inequality<figure><img src="https://images.theconversation.com/files/212972/original/file-20180403-189821-60qpmc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The poor continue to be drowned out by a global minority enjoying elite status.</span> <span class="attribution"><span class="source">EPA/ALEX HOFFORD</span></span></figcaption></figure><p>Wealth inequality continues to grow, according to the 2018 edition of the <a href="http://wir2018.wid.world/files/download/wir2018-full-report-english.pdf">World Inequality Report</a>. In the past three decades, 28% of the aggregate increase in real incomes in North America and Western Europe was captured by the top 1% of earners. The bottom half saw less than 10% of this increase. Inequality has also settled at alarmingly high levels in sub-Saharan Africa and the Middle East. </p>
<p>This crisis was never inevitable. Middle-class wealth reached its peak in the mid-1980s. But it’s <a href="https://www.huffingtonpost.com/2014/10/20/middle-class-wealth-shrinks-1940s_n_6014874.html">been ravaged</a> by stagnant incomes, unstable property and investment markets. Growing consumer debt is also a problem. Failed policy and weak political will are two culprits: more creativity and effort seems to have gone into election year soundbites and platitudes than into substantive solutions.</p>
<p>Many developing nations have targeted poverty alleviation and improved living standards as ultimate policy goals. While China has achieved poverty alleviation on an historic scale, <a href="http://www.xinhuanet.com/english/2018-03/30/c_137077898.htm">policy obstacles</a> remain. These include bureaucratic inefficiency and failed policy implementation. India has likewise <a href="https://www.economist.com/news/finance-and-economics/21739663-narendra-modi-needs-pass-further-reforms-if-india-fulfil-its">made progress</a> in alleviating poverty though it lags significantly behind China.</p>
<p>Inequality hampers growth by leaving <a href="https://www.economist.com/blogs/economist-explains/2015/06/economist-explains-11">human potential unrealised</a>. The middle class provides a crucial market for consumer goods and services, which in turn creates jobs. The cycle is interrupted when profits are excessively retained rather than reinvested into further capacity – such as strong health and education sectors. Market purists argue simplistically that there should be no constraint to profiteering within legal bounds. </p>
<p>Government policy is needed to balance private and social interests.</p>
<h2>China and India</h2>
<p>The ability of China, India, and other developing countries to end poverty lies with job creation. Industrial jobs replace agricultural jobs, lifting incomes as labour is shifted to higher value-added work. However, this continuing shift also exacerbates the growing inequality gap. The World Inequality Report points out that in China, this gap is geographic. Coastal urban regions are leaving the more rural interior far behind.</p>
<p>Between 1978 and 2015, the report shows, urban share of national income increased from 30% to 80%. Today urban households earn 3.5 times more than do rural households. Two Chinas are emerging. One is urban, educated, and mobile. The other is isolated, immobile and tethered to outdated livelihoods and social assistance.</p>
<p>India, meanwhile, is expected to be the world’s <a href="https://economictimes.indiatimes.com/news/economy/indicators/india-to-become-fastest-growing-large-economy-in-2018-report/articleshow/62589208.cms">fastest growing large economy</a> in 2018. It’s now home to more than <a href="https://economictimes.indiatimes.com/news/economy/indicators/india-home-to-245000-millionaires-household-wealth-at-5-trillion/articleshow/61644558.cms">200 000 millionaires</a>
and over <a href="https://www.livemint.com/Money/JpjPDowRGAvvKRm66aX5MM/India-now-has-100-billionaires.html">100 billionaires</a>. India’s population of 78 million who earn <a href="http://www.pewglobal.org/2015/07/08/a-global-middle-class-is-more-promise-than-reality/">USD$10 per day</a> are considered “middle class” by the National Council of Applied Economic Research. </p>
<p>By World Bank estimates, 270 million Indians – that’s nearly 20% of its population – were <a href="http://www.worldbank.org/en/news/infographic/2016/05/27/india-s-poverty-profile">considered poor</a> as of 2012. India also saw the <a href="http://wir2018.wid.world/executive-summary.html">fastest rise</a> in inequality of all major world regions between 1980 and 2016, and 55% of the country’s income share is in the hands of the wealthiest 10%.</p>
<p>There is little hope that these discouraging trends can be reversed. Across the developing world, blunt policies are not only proving ineffective at reducing poverty. They are also arguably widening the wealth gap.</p>
<h2>Policy failings</h2>
<p>Inequality is decried at campaign rallies and in the global commentariat. But little is being done at any policy level. Thomas Piketty’s <a href="https://www.ft.com/content/decdd76e-b50e-11e3-a746-00144feabdc0">proposed global tax</a> on individual net worth – targeting the super rich – lacks an obvious coordinating body. Worse, it would trigger crippling panic from the right about imaginary one-world-order-style socialism.</p>
<p>In the absence of such a broad initiative, most national level policies are either ham-fisted or intentionally ineffective. Even genuinely concerned governments plod forward as though bewildered by the challenge. They tinker at the margins with transfer payments and social programmes while failing to address structural causes such as gaps in educational achievement and public health.</p>
<p>There are numerous examples of policy ineptitude. Governments <a href="https://www.nytimes.com/2017/12/16/opinion/sunday/tax-bill-inequality-created.html">in the US</a> and <a href="http://www.livemint.com/Opinion/brOQkNWCFK93b5OOJm8eVP/Will-GST-exacerbate-Indias-income-divergence.html">India</a> are in thrall to <a href="https://krugman.blogs.nytimes.com/2017/08/20/the-political-failure-of-trickle-down-economics/?mtrref=www.google.com&gwh=F6BFDA2FD63CB451E380BF3ED9E6694C&gwt=pay&assetType=opinion">oft-discredited</a> claims about “trickle-down economics” and have passed sweeping tax reforms that substantially favour corporations.</p>
<p>In China, expectations of urban led economic growth are <a href="http://foreignpolicy.com/2018/01/08/chinas-war-on-poverty-could-hurt-the-poor-most/">driving programmes</a> to shift 100 million rural residents into urban environments. That includes <a href="http://foreignpolicy.com/2018/01/08/chinas-war-on-poverty-could-hurt-the-poor-most/">third tier cities</a> which lack the advanced education and health services typically supporting growth. This comes on top of neighbourhood redevelopment programmes that are <a href="https://www.theguardian.com/world/2017/nov/27/china-ruthless-campaign-evict-beijings-migrant-workers-condemned">displacing low-income residents</a>, particularly in Beijing.</p>
<p>In India, employment in agriculture is declining without a commensurate rise in <a href="https://thewire.in/91020/trends-manufacturing-sixth-economic-census-2/">urban manufacturing employment</a>. Narendra Modi’s government has promised about 10 million new jobs per year; <a href="https://www.indiatoday.in/magazine/up-front/story/20170605-jobs-in-india-low-modi-government-growing-economy-986475-2017-05-26">only about 230,000</a> materialised in 2016. </p>
<p>The <a href="http://www.livemint.com/Opinion/cF6yE71F4cCc5nFcz1Ft3H/Make-jobs-the-priority-in-2018.html">twin reforms</a> of demonetisation and a goods and services tax may have also <a href="https://thewire.in/195278/unprecedented-job-losses-wage-decline-unorganised-sector-post-demonetisation/">stunted job growth</a> by crippling the construction and informal sectors. It’s in these sectors that most migrant workers find jobs.</p>
<p>Failure to improve basic services is one of the most glaring gaps in inequality policy. China’s economic rise has generated tax revenues to invest in schooling. But <a href="http://blogs.worldbank.org/developmenttalk/it-harder-children-poor-families-rural-china-attain-education">education gaps</a> persist in the country’s rural areas. Private sector and philanthropic intervention, <a href="http://www.xinhuanet.com/english/2017-12/11/c_136817815.htm">while helpful</a>, is no substitute for equal access. </p>
<p>In India, the 2017 Economic Survey <a href="https://timesofindia.indiatimes.com/business/economic-survey/economic-survey-says-indias-public-spending-on-health-well-below-global-average/articleshow/56897993.cms">revealed</a> that the government spends only about 1% of GDP on health services, compared the world average of 6%. </p>
<h2>Addressing the gaps</h2>
<p>Inequality is not ignored for a lack of evidence; the challenge is made clear in research studies like the World Inequality Report and in daily press headlines. China’s inequality garnered global attention in a recent story about the “<a href="https://www.nytimes.com/2018/01/13/world/asia/frozen-boy-china-poverty.html">ice boy</a>”, an eight-year-old student in rural Yunnan province who walked three miles through freezing cold weather to reach school. </p>
<p>Perhaps the personalisation of inequality would more effectively influence public sentiment and policy pressure. At the moment political will is inexcusably weak. Mere statistics are failing to prod governments beyond election-year soundbites and platitudes. Both the economics and the ethics of inequality demand transformational thinking. But the voice of the poor continues to be drowned out by a global minority enjoying elite status – and, based on voting patterns, even by the many who aspire to such status.</p><img src="https://counter.theconversation.com/content/94333/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Inequality is decried at campaign rallies and in the global commentariat. But little is being done at any policy level.Asit K. Biswas, Distinguished Visiting Professor, Lee Kuan Yew School of Public Policy, National University of SingaporeKris Hartley, Lecturer in Public Policy, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/872152017-12-11T15:15:02Z2017-12-11T15:15:02ZSouth Africa needs a fresh approach to its stubbornly high levels of inequality<figure><img src="https://images.theconversation.com/files/196302/original/file-20171124-21795-dy91f4.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>It is widely accepted that South Africa is one of the <a href="https://theconversation.com/south-africa-needs-to-fix-its-dangerously-wide-wealth-gap-66355">most unequal</a> societies in the world – the top 10% of the population earn about 60% of all income and own 95% of all assets. But there are significant and critical gaps in the understanding of how this inequality is produced, and the systems of power that support its reproduction. </p>
<p>There has been no significant reduction in inequality in post-apartheid South Africa. At the start of the 1990s, South Africa had the <a href="http://www.tandfonline.com/doi/abs/10.1080/03768358908439466">highest Gini coefficient</a> of all 57 countries for which there were data at that time, at 0.66. South Africa remains one of the world’s most unequal countries: estimates vary depending on the measurement used, but <a href="http://nationalminimumwage.co.za/wp-content/uploads/2016/07/NMW-RI-Research-Summary-Web-Final.pdf">recent calculations</a> show the Gini coefficient for income remaining at 0.66 in 2015. The Gini coefficient is a measure which reflects levels of inequality, where 0 is absolute equality, and 1 is absolute inequality. Importantly, the Gini coefficient has historically been focused on income and not on assets and wealth. </p>
<p>Excellent research has been done on poverty in South Africa, including an emerging field of technical research that measures the magnitude of inequality. But we believe that the time has come for a new approach. This is based on insights from emerging scholarship that’s highlighting the confluence of how different systems of power shapes inequality. Of particular importance in South Africa is the nexus of race, class and gender in driving inequality. </p>
<p>To grapple with the multi-dimensional nature of inequality in all its forms, an interdisciplinary approach is required. To this end the University of the Witwatersrand in Johannesburg has launched <a href="https://www.wits.ac.za/news/latest-news/general-news/2017/2017-11/new-centre-at-wits-to-tackle-inequality-.html">a new centre</a> to drive a five-year, inter-disciplinary project on inequality. The project, the first of its kind in the global South, includes approximately 80 researchers from a number of universities across South Africa as well as other research entities from the global South. </p>
<p>A research agenda on inequality that is rooted in the south is long overdue given that countries share a range of common problems within the global economy. By drawing on the intellectual resources in South Africa and beyond, we hope to bring new knowledge, new insights and new policies to overcome the challenge of inequality. The Centre will be drawing on academic excellence of economists, historians, educationalists, sociologists, legal academics, healthcare researchers and a range of other disciplines to build the most comprehensive picture of inequality in the South. </p>
<h2>Gender, race and class - questions of power</h2>
<p>Gender inequality in wealth and income continues to be pervasive in South Africa. Significantly, black women continue to carry the burden of low-paid work. In 2015, there were 1.1 million domestic workers in South Africa, 887,000 of them women, who earned less than R3,500 <a href="http://new.nedlac.org.za/wp-content/uploads/2016/11/NMW-Report-Draft-CoP-FINAL1.pdf">per month</a>. </p>
<p>In community services, 1.2 million workers, of which approximately 800,000 are women, <a href="https://theconversation.com/how-the-search-for-a-national-minimum-wage-laid-bare-south-africas-faultlines-69382">earn less than R3,500 per month</a>. There are significant differences in the burden of care work and unpaid domestic work which falls predominantly on women. This is all in addition to the class and gender inequalities in unpaid work.</p>
<p>Its important to understand that economic inequality is only one manifestation of how patriarchal power shapes economic, social, sexual and political relations. Research has begun to both quantify the impacts of the intersection of power and gender, and to understand the dynamics. But much more work is necessary. </p>
<p>Class is growing as an important lens through which to understand the dynamics of inequality. Evidence from a 2012 <a href="http://www.tandfonline.com/doi/abs/10.1080/0376835X.2012.645639#.U7KE1vmSz9V">study</a> showed that intra-race inequality (inequality between members of the same race group) had exceeded inter-race inequality (between race groups). In 2008, income inequality among black South Africans was higher than in any other race group.</p>
<p>In 1993, <a href="https://doi.org/10.1080/0376835X.2012.645639">inequality within race groups</a> accounted for 48% of overall inequality. By 2008 this had increased to 62%. It is significant that inter-racial inequality had decreased markedly, and it must established if this trend has continued into this decade. </p>
<p>This points to the growing importance of a class-based approach to understanding inequality, in addition to a racial approach. This suggests not a declining significance of race - inter-racial inequality remains unacceptably high - so much as the growing importance of class. This has important implications for the way we understand ownership and control of assets and income, as well as access to economic and social opportunities. </p>
<h2>Wealth inequality</h2>
<p>Researchers investigating poverty and inequality in South Africa have had access to excellent poverty and income inequality. But very little has been written about the extent and dynamics of wealth inequality. </p>
<p>The wealth factor has attracted increasing attention since the seminal contribution by <a href="http://www.hup.harvard.edu/catalog.php?isbn=9780674430006">Thomas Piketty</a>. While income inequality examines the share of income that goes to different sections of the population, wealth inequality looks at the distribution of assets. </p>
<p>A recent insightful paper by economist <a href="https://theconversation.com/south-africa-needs-to-fix-its-dangerously-wide-wealth-gap-66355">Anna Orthofer</a> is the first significant investigation into wealth inequality in South Africa. The author used previously unpublished personal income tax data from the South African Revenue Service for the 2010-11 tax year. </p>
<p>Her results are striking. They underscore the importance of the distribution of wealth in any study of inequality. She found that while the top 10% of the population earn 56%-58% of all income, they own approximately 95% of all wealth. And 80% of the population own no wealth at all.</p>
<p>These findings show that the country has made little progress in addressing wealth inequality. In 1970 the richest 20% of the population was <a href="http://www.tandfonline.com/doi/abs/10.1080/03768358908439466">estimated</a> to own 75% of all wealth. A focus only on income inequality misses the highly skewed accumulation of assets which arises out of the country’s apartheid past. </p>
<h2>More effort needed</h2>
<p>There’s much more research that needs to be done to understand the dynamics of wealth inequality in South Africa and the relationship between wealth, political and social power. Our argument is that while technical solutions to addressing inequality are very important, they will not be politically feasible unless the social and political forces driving high levels of inequality in South Africa are clearly understood. </p>
<p>We argue that it is vital to identify the social forces both inside and outside the state that could build a broad coalition against inequality. This requires an understanding of power that goes beyond the power to control markets. We need to understand how power manifests in structural and institutional exclusion and discrimination. </p>
<p>We believe the <a href="http://www.wits.ac.za/scis/">Southern Centre for Inequality Studies</a> will be enormously beneficial in understanding inequality. It is not just a South African study. The idea of a Southern Centre means that we are placing our own country in the realm of Southern countries who face very similar challenges on inequality. It also allows us to broaden our research pool to a wider group of academics who are currently grappling with different aspects of this very important issue.</p><img src="https://counter.theconversation.com/content/87215/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Edward Webster is the interim director of Southern Centre for Inequality Studies (SCIS) which is funded by the Ford Foundation </span></em></p><p class="fine-print"><em><span>David Francis is the Research Manager at the Southern Centre for Inequality Studies (SCIS). The SCIS receives funding from The Ford Foundation. </span></em></p><p class="fine-print"><em><span>Imraan Valodia is the Dean of the Commerce, Law and Management Faculty at Wits University, which houses the Southern Centre for Inequality Studies. The SCIS receives funding from the Ford Foundation. </span></em></p>Extensive research has been done on poverty and inequality in South Africa but more is needed to better understand the status quo and mainly inter-sectional factors that drive inequality.Edward Webster, Professor Emeritus, Society, Work and Development Institute, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/747072017-04-20T10:11:23Z2017-04-20T10:11:23ZFour charts which should worry you about rising house prices and inequality<figure><img src="https://images.theconversation.com/files/165228/original/image-20170413-25901-elbxu0.jpg?ixlib=rb-1.1.0&rect=147%2C82%2C1046%2C743&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption"></span> <span class="attribution"><a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>When we want to measure the economic activity of a country, we tend to reach for the gross domestic product, or GDP. This may be <a href="https://theconversation.com/uk/topics/beyond-gdp-13319">an imperfect measure</a>, but it does allow us to track where the money comes from for every item bought and sold. It tells us whether we worked to earn it through wages, or whether it came from capital income – including stock dividends, rents and capital gains on assets such as housing. </p>
<p>When it comes to the US, economists became used to the idea that the share of GDP attributable to labour income fluctuated around 60% while the remaining 40% was capital income. Then came Thomas Piketty. His 2014 book, <a href="http://piketty.pse.ens.fr/en/capital21c2">Capital in the 21st century</a> explained that the labour share has actually been more unstable over the past century than commonly assumed. </p>
<p>Piketty’s data also showed that the capital share has increased quite significantly at the expense of the labour share over the past three decades. Both in the US and in the UK, for example, the labour share declined from about 70% in the 1970s to about 60% in recent years. This was seized upon as it helps to explain the <a href="http://inequality.org/wealth-inequality/">recent increase in wealth inequality</a>. A large majority of the population gets most of their income almost exclusively in the form of wages. Only a few lucky ones own enough financial assets such as real estate and stocks to earn the equivalent of an annual wage. </p>
<p>More than 80% of the stock market’s value in the US is held by the top 10%. With an average interest rate of 5%, US$1m in stocks are needed to get a return of US$50,000, which is close to the median household income. The person who can make a living from his capital income is certainly no average Joe. </p>
<h2>Capital gains</h2>
<p>A look at four charts helps to show why this matters, and the impact it can have on those without the means to live on income from capital assets.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/164882/original/image-20170411-26736-6occ7f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/164882/original/image-20170411-26736-6occ7f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/164882/original/image-20170411-26736-6occ7f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=349&fit=crop&dpr=1 600w, https://images.theconversation.com/files/164882/original/image-20170411-26736-6occ7f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=349&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/164882/original/image-20170411-26736-6occ7f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=349&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/164882/original/image-20170411-26736-6occ7f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=438&fit=crop&dpr=1 754w, https://images.theconversation.com/files/164882/original/image-20170411-26736-6occ7f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=438&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/164882/original/image-20170411-26736-6occ7f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=438&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="http://www.uueconomics.se/danielw/Data.htm">Author/Erik Bengtsson and Daniel Waldenström</a>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>The chart above shows the average capital share for 17 advanced economies from 1875 to 2012. This new dataset, based on work by <a href="http://www.uueconomics.se/danielw/Data_files/BengtssonWaldenstr%C3%B6m%20CS%20Appendix.pdf">Erik Bengtsson and Daniel Waldenström</a>, includes more countries than Piketty’s original analysis. The figure confirms the same inverted U-shaped pattern, with high values for the capital share at the beginning and at end of the 20th century, that Piketty found for some major economies such as the US and the UK. </p>
<p>He argued that three major global shocks, the two world wars and the Great Depression, led to a large reduction in wealth around the world. This destruction of capital can also explain the very low capital share in the post World War II period. The recent increase might thus simply represent a reversion towards a value that is more in line with the historic long-run average.</p>
<p>So why is this important for workers? Well, the next chart shows the net capital share in the US from 1929 until 2012. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/164883/original/image-20170411-26741-n80o88.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/164883/original/image-20170411-26741-n80o88.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/164883/original/image-20170411-26741-n80o88.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=351&fit=crop&dpr=1 600w, https://images.theconversation.com/files/164883/original/image-20170411-26741-n80o88.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=351&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/164883/original/image-20170411-26741-n80o88.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=351&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/164883/original/image-20170411-26741-n80o88.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=441&fit=crop&dpr=1 754w, https://images.theconversation.com/files/164883/original/image-20170411-26741-n80o88.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=441&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/164883/original/image-20170411-26741-n80o88.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=441&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="http://www.uueconomics.se/danielw/Data.htm">Author/Erik Bengtsson and Daniel Waldenström</a>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>Some economists argue that the net share is more relevant than the gross share if one is concerned about inequality. The net share excludes depreciation, the gradual decline in the value of physical capital such as machinery, which is normally included in the GDP figures – even though it is not an income stream to anybody. The data clearly shows the recent increase in the net capital share from a low of 22% in the early 1980s to a high of 30% in 2010. This means that an additional 8% of net national income now takes the form of capital income instead of wages.</p>
<p>So, why is it important if capital takes a larger slice of the pie? If the economy is still growing, surely everybody must win? Well, not quite. The answer is, of course, that capital ownership is highly concentrated. The increase in the capital share effectively means that capital incomes have grown at a faster pace than wages. This leads to a more unequal society since most of the stock market and even a significant portion of real estate is owned by a wealthy few. The more money invested in assets such as property and stocks, the less available to pay workers and boost productivity.</p>
<p>This can work out as a significant hit to the average worker. Net national income in the US was about US$48,700 per person in 2015. Had the net capital share remained at the low value of 22%, an additional US$3,900 per person would flow in the form of wages instead of capital income. This translates to an additional US$10,000 per employed person, certainly a sizeable amount of money.</p>
<h2>The importance of real estate</h2>
<p>Some researchers, including Piketty, point out that the recent increase in the capital share is related to the rising values of real estate. The next chart shows the average value of real house prices, adjusted for inflation, for the same 17 economies from 1870 until today. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/164892/original/image-20170411-26726-19rdamc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/164892/original/image-20170411-26726-19rdamc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/164892/original/image-20170411-26726-19rdamc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=360&fit=crop&dpr=1 600w, https://images.theconversation.com/files/164892/original/image-20170411-26726-19rdamc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=360&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/164892/original/image-20170411-26726-19rdamc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=360&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/164892/original/image-20170411-26726-19rdamc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=452&fit=crop&dpr=1 754w, https://images.theconversation.com/files/164892/original/image-20170411-26726-19rdamc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=452&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/164892/original/image-20170411-26726-19rdamc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=452&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="http://www.macrohistory.net/data/">Author/Jorda, Schularick and Taylor</a>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>House prices stayed fairly constant for almost a century after 1870. However, over the past 50 years real house prices have more than tripled. In some countries such as Australia, they have even increased by a factor of ten over the same time period. Furthermore, these are just national averages. Big cities, including New York, London, and Stockholm, have experienced even <a href="https://www.globalpropertyguide.com/most-expensive-cities">larger increases in the value of real estate</a>. </p>
<p>The following chart describes the impact of that and compares the median net worth of families in the US who are home owners with those who are renters. The gap widened significantly during the years of the housing boom. The net worth of home owners exceeded those of renters <a href="https://www.federalreserve.gov/econres/scfindex.htm">by a factor of about 46 in 2007</a>. House prices have <a href="http://www.macrohistory.net/data/">recovered from the bust in 2008</a> and are now as high as before the crisis.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/164894/original/image-20170411-26706-1y9kta.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/164894/original/image-20170411-26706-1y9kta.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/164894/original/image-20170411-26706-1y9kta.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=382&fit=crop&dpr=1 600w, https://images.theconversation.com/files/164894/original/image-20170411-26706-1y9kta.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=382&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/164894/original/image-20170411-26706-1y9kta.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=382&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/164894/original/image-20170411-26706-1y9kta.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=480&fit=crop&dpr=1 754w, https://images.theconversation.com/files/164894/original/image-20170411-26706-1y9kta.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=480&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/164894/original/image-20170411-26706-1y9kta.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=480&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.federalreserve.gov/econres/scfindex.htm">Author/Federal Reserve</a>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>This is a challenge chock full of concerns for policy makers – especially those politicians hoping to win the votes of home owners. But rising house prices, especially in big cities, and the rise of the capital share are both trends which decisively favour asset owners over workers and which slowly chisel out a crevice between the two. Inequality could well increase much further without adequate responses from national governments. These charts should be a simple way of explaining just why things such as subsidies for housing construction in high-demand areas, easing of zoning laws, and higher taxes on capital income should be put on the table by anyone serious about reducing inequality. </p>
<p><em>This article has been co-published with the <a href="https://www.weforum.org/system-initiatives/economic-growth-and-social-inclusion">World Economic Forum</a>.</em></p><img src="https://counter.theconversation.com/content/74707/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Julius Probst does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The soaring cost of housing has helped make capital ownership more profitable than work.Julius Probst, Phd candidate in Economic History with a focus on long-run economic growth, Lund UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/723662017-02-05T18:55:30Z2017-02-05T18:55:30ZIf we are reaching neoliberal capitalism’s end days, what comes next?<p>It is unfashionable, or just embarrassing, to suggest the taken-for-granted late-modern economic order – neoliberal capitalism – may be in a terminal decline. At least that’s the case in what former Australian prime minister Tony Abbott likes to call the <a href="https://www.aspistrategist.org.au/the-anglosphere-and-tony-abbott/">“Anglosphere”</a>.</p>
<p>What was once known as the <a href="https://en.wikipedia.org/wiki/Chicago_school_of_economics">Chicago school of economics</a> – the neoclassical celebration of the “free market” and “small government” – still closes the minds of economic policymakers in the US and its satellite economies (although perhaps less so in contemporary Canada).</p>
<p>But, in Europe, there has always been a deep distrust of the Anglo-American celebration of “possessive individualism” and its repudiation of community and society. Remember Margaret Thatcher’s <a href="http://www.thedailybeast.com/articles/2013/04/08/context-for-margaret-thatcher-s-there-is-no-such-thing-as-society-remarks.html">contempt for the idea</a> of “society”?</p>
<p>So, it is unsurprising that neoliberalism’s advocates dismiss recent European analyses of local, regional and global economies as the nostalgia of “old Europe”, even as neoliberalism’s failures stack up unrelentingly.</p>
<p>The consequences of these failures are largely unseen or avoided by policymakers in the US and their camp followers in the UK and Australia. They are in denial of the fact that not only has neoliberalism failed to meet its claimed goals, but it has worked devastatingly to undermine the very foundations of late-modern capitalism.</p>
<p>The result is that the whole shambolic structure is tottering on the edge of an economic abyss.</p>
<h2>What the consequences might be</h2>
<p>Two outstanding European scholars who are well aware of the consequences of the neoliberal catastrophe are French economist Thomas Piketty and German economist Wolfgang Streeck.</p>
<p>Piketty’s 2013 book, <a href="http://www.economist.com/blogs/economist-explains/2014/05/economist-explains">Capital in the Twenty-First Century</a>, charts the dangers of socioeconomic inequality in capitalism’s history. He demonstrates how this inequality can be – and has been over time – fundamentally destructive of sustained economic growth.</p>
<p>Most compellingly, Piketty documented in meticulous detail how contemporary neoliberal policies have constructed the worst forms of socioeconomic inequalities in history. His analysis has been underlined by the <a href="https://www.oxfam.org/en/research/economy-99">recent Oxfam report</a> that showed a mere eight multi-billionaires own the equivalent amount of capital of half of the global population.</p>
<p>Despite Piketty’s scrupulous scholarship, Western neoliberal economies continue merrily down the road to nowhere. The foundations of that road were laid by the egregiously ideological policies of Thatcher and Ronald Reagan – and slavishly followed by Australian politicians on all sides ever since.</p>
<p>Streeck’s equally detailed scholarship has demonstrated how destructive of capitalism itself neoliberal policymaking has been. His latest book, <a href="https://newleftreview.org/II/87/wolfgang-streeck-how-will-capitalism-end">How Will Capitalism End?</a>, demonstrates how this neoliberal capitalism triumphed over its opponents (especially communism) by devouring its critics and opponents, obviating all possible alternatives to its predatory ways.</p>
<p>If Streeck is correct, then we need to anticipate what a post-capitalist world may look like. He thinks it will be terrible. He fears the emergence of a neocorporatist state and close crony-like collaboration between big capital, union leaders, government and the military as the consequence of the next major global financial crisis.</p>
<p>Jobs will disappear, Streeck believes. Capital will be intensely concentrated in very few hands. The privileged rich will retreat into security enclaves dripping with every luxury imaginable. </p>
<p>Meanwhile, the masses will be cast adrift in a polluted and miserable world where life – as Hobbes <a href="http://www.rjgeib.com/thoughts/nature/hobbes-quotes.html">put it</a> – will be solitary, poor, nasty, brutish and short.</p>
<h2>What comes next is up to us</h2>
<p>The extraordinary thing is how little is known or understood of the work of thinkers like Piketty and Streeck in Australia today. </p>
<p>There have been very fine local scholars, precursors of the Europeans, who have warned about the hollow promises of “economic rationalism” in Australia. </p>
<p>But, like the Europeans, their wisdom has been sidelined, even as inequality has been deepening exponentially and its populist consequences have begun to poison our politics, tearing down the last shreds of our ramshackle democracy.</p>
<p>The time is ripe for some creative imagining of a new post-neoliberal world that will repair neoliberalism’s vast and catastrophic failures while laying the groundwork for an Australia that can play a leading role in the making of a cosmopolitan and co-operative world.</p>
<p>Three immediate steps can be taken to start on this great journey. </p>
<p>First, we need to see the revival of what American scholar Richard Falk called <a href="http://www2.warwick.ac.uk/fac/arts/history/students/modules/hi31v/syllabus/week19/falk.pdf">“globalisation from below”</a>. This is the enlivening of international civil society to balance the power of the self-serving elites (multinational managers and their political and military puppets) now in power. </p>
<p>Second, we need to come up with new forms of democratic governance that reject the fiction that the current politics of representative government constitute the highest form of democracy. There is nothing about representative government that is democratic. All it amounts to is what Vilfredo Pareto described as <a href="http://www.yourarticlelibrary.com/sociology/paretos-circulation-of-elites-characteristics-and-criticisms/43779/">“the circulation of elites”</a> who have become remote from – and haughtily contemptuous of – the people they rule. </p>
<p>Third, we need to see states intervening comprehensively in the so-called “free market”. Apart from re-regulating economic activity, this means positioning public enterprises in strategic parts of the economy, to compete with the private sector, not on their terms but exclusively in the interests of all citizens.</p>
<p>As Piketty and Streeck are pointing out to us, the post-neoliberal era has started to self-destruct. Either a post-capitalist, grimly neo-fascist world awaits us, or one shaped by a new and highly creative version of communitarian democracy. It’s time for some great imagining.</p>
<hr>
<p><em>This article is based on an <a href="http://johnmenadue.com/blog/?p=9274">earlier piece</a> published in John Menadue’s blog Pearls and Irritations.</em></p><img src="https://counter.theconversation.com/content/72366/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Allan Patience does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The crisis confronting neoliberal capitalism suggests that its internal contradictions are now undermining its very foundations. What can we expect from a post-neoliberal world?Allan Patience, Principal Fellow, Asia Institute, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/711052017-01-11T12:30:28Z2017-01-11T12:30:28ZIt’s official: inequality, climate change and social polarisation are bad for you<figure><img src="https://images.theconversation.com/files/152371/original/image-20170111-16015-zva0d7.jpg?ixlib=rb-1.1.0&rect=76%2C82%2C1827%2C1207&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption"></span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/goldline/16465412881/in/photolist-r5ZxAZ-qNCM8J-rKyEb4">Hero of the Poor/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>This year’s <a href="http://www3.weforum.org/docs/GRR17_Report_web.pdf">Global Risks Report</a> from the World Economic Forum warns that rising income inequality and societal polarisation could create further problems if urgent action isn’t taken -– and that’s after the car-crash that was 2016. Amen to that. It is somehow appropriate that the report is published just days after <a href="https://www.ft.com/content/cbda844a-d0ea-11e6-9341-7393bb2e1b51">the death of Tony Atkinson</a>, the social scientist who did more than any other to point to the importance of income inequality as an issue, and to argue that action could and should be taken. </p>
<p>We should all take note of Sir Andrew Dilnot, Warden of Nuffield College, who said Atkinson will be remembered for his “belief that things could be done to improve the world”. The new generation has its own figurehead in the battle against inequality, of course: the economist and author of <a href="http://www.economist.com/blogs/economist-explains/2014/05/economist-explains">Capital in the 21st Century</a>, <a href="https://theconversation.com/uk/topics/thomas-piketty-10011">Thomas Piketty</a>. It is no accident that Piketty had worked with Atkinson.</p>
<p>Both would have recognised the observation in this year’s risk report that:</p>
<blockquote>
<p>Pervasive corruption, short-termism and unequal distribution of the benefits of growth suggest that the capitalist economic model may not be delivering for people.</p>
</blockquote>
<p>It is ironic that the maxim “some are more equal than others” was coined by George Orwell <a href="https://www.quora.com/George-Orwell-author-What-does-All-animals-are-equal-but-some-animals-are-more-equal-than-others-mean">as a critique of socialism</a>. In the UK, we have had David Cameron’s mantra of “we’re all in this together”, followed by <a href="http://www.telegraph.co.uk/business/2016/11/21/theresa-may-backtracks-on-putting-workers-on-company-boards/">Theresa May’s rapid rowback</a> on a pledge to put workers on company boards, all while regional and class inequality continues to rise. Some seem to be in this more than others – or at least, some seem to be taking more out.</p>
<h2>Risk management</h2>
<p>Along with economic inequality and societal polarisation, intensifying environmental dangers makes up the top three trends identified by the report as shaping global developments over the next ten years. </p>
<p>For the first time in this global survey, all five environmental risks were ranked both high-risk and high-likelihood. Extreme weather events emerged as the single most prominent risk. Crucially, the report – which surveyed 750 experts on 30 global risks – notes that the likelihood of positive action being taken on the environment is undermined by the political fallout from rising inequality – a nice example of how social, economic, and political factors are inevitably intertwined. </p>
<p>The research of such issues therefore requires interdisciplinary work, and action needs to be co-ordinated, significant, and sustained.</p>
<h2>Artificial intelligence</h2>
<p>Of all the risks highlighted, the idea that we are struggling to keep pace with technological change is perhaps the most eye-catching. Of the 12 emerging technologies examined in the report, the experts involved found artificial intelligence and robotics to have the greatest potential benefits, but also the greatest potential negative effects and the greatest need for better governance. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/152359/original/image-20170111-6429-180pvni.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/152359/original/image-20170111-6429-180pvni.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/152359/original/image-20170111-6429-180pvni.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=398&fit=crop&dpr=1 600w, https://images.theconversation.com/files/152359/original/image-20170111-6429-180pvni.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=398&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/152359/original/image-20170111-6429-180pvni.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=398&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/152359/original/image-20170111-6429-180pvni.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/152359/original/image-20170111-6429-180pvni.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/152359/original/image-20170111-6429-180pvni.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">See? AI robots are a happy, smiley thing.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/cdevers/4456489056/in/photolist-7MNEWd-sRSEx-4Hx5CA-dYVSYp-azg5Ce-dZ2ueo-dZ2v6o-7MND9m-9P9KJY-hMzJfR-7MNzew-dZ2zRN-dZ2A5J-4KTiY4-uJ7Pvf-dZ2uvu-dYVNAz-dZ2zCJ-dYVQKp-dZ2zRC-dpK9K-4HCFvt-dYVTBn-nurxVW-7JvXoF-dYVMEc-dZ2xtu-dZ2x7G-6kBMSR-dYVTCa-dYVTnV-dYVQxT-dYVTkX-5JpQEE-dYVTz4-dZ2vxo-dZ2Ah5-dZ2v65-2UT6CQ-4HtZba-6EaJiU-HiWy89-dYVNq8-dYVN8c-dYVQQ4-3ahJ3L-dZ2v9Q-9M2QU4-dZ2vEW-dZ2xtA">Chris Devers/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>Excuse me if I sound despairing, but I recall my dad saying this 50 years ago, in the 1960s. The UK had by then not only invented the world’s <a href="http://www.tnmoc.org/explore/colossus-gallery">first electronic programmable computer at Bletchley Park</a> during the Second World War – a fact the British government kept secret for decades after – but also the world’s first intelligent robot at the University of Edinburgh <a href="http://www.aiai.ed.ac.uk/project/freddy/">in the early 1960s</a>. </p>
<p>The UK government then commissioned <a href="https://www.scribd.com/document/164398363/Lighthill-Report">the Lighthill Report</a> which concluded there was no future in artificial intelligence or robotics, and funding was slashed, and the UK’s lead was lost. </p>
<h2>End of history?</h2>
<p>The warnings in the Global Risks Report are welcome. It suggests history <a href="http://www.telegraph.co.uk/history/11219434/Berlin-Wall-How-the-Wall-came-down-as-it-happened-25-years-ago-live.html">did not end in 1989</a>, when socialism was studiously dismantled, along with the Berlin wall, and when the Soviet Union collapsed in on itself. Capitalism may have won, but that may prove fatal. With no more competition as a social system, and no more constraints, we got capitalism unleashed. </p>
<p>The orgy of free market privatisation, deregulation, and globalisation led in 2009 to the world’s first recession since the 1930s; and instead of that causing a return to sanity, the frenzy continued unabashed. Ten years on from the <a href="http://www.economist.com/news/schoolsbrief/21584534-effects-financial-crisis-are-still-being-felt-five-years-article">2007 beginnings of the global financial crash</a>, the rich have become even richer. </p>
<p>In the US, between 2009 and 2012, the incomes of the top 1% <a href="http://www3.weforum.org/docs/GRR17_Report_web.pdf">grew by more than 31%</a>, compared to less than 0.5% for the remaining 99% of the population. Tax avoidance and evasion have continued (despite being <a href="https://theconversation.com/uk/topics/panama-papers-26281">exposed by the Panama papers</a>). </p>
<p>So, left to its own devices, the excesses of capitalism are, the report suggests, threatening the very system itself. </p>
<h2>Where do we go from here?</h2>
<p>One of the lessons being learned from the votes in favour of <a href="https://theconversation.com/uk/eu-referendum-2016">Brexit in Britain</a> and the rise of <a href="https://theconversation.com/uk/topics/donald-trump-10206">Donald Trump in the US</a> is that society has become more polarised geographically as well as in other ways. The UK electorate were told we were “all in this together”, and that the economy was booming. Bank of England Chief Economist <a href="http://www.bbc.co.uk/news/business-38186053">Andrew Haldane reported in December</a> that of the 12 UK regions only two were richer than before the 2007-08 financial crisis. </p>
<p>Any guesses? No need to hold you in suspense: it’s London and the South East. And economics commentator <a href="https://www.theguardian.com/commentisfree/2017/jan/10/blunt-heckler-economists-failing-us-booming-britain-gdp-london">Aditya Chakrabortty reports</a> that when interviewing people even in those two regions, people believed growth to be based on rising house prices and debt. </p>
<p>In the US, while Hilary Clinton won the popular vote, she lost the states that felt left behind, for whom Trump promised to “drain the swamp” – pointing to Washington DC and the political elite.</p>
<p>So, to have the effect it desires, the World Economic Forum’s report needs to be debated in working class hubs like Sunderland in the UK and Michigan in the US – not in London and Washington. And where are they planning to discuss it? Why the Swiss ski resort of Davos, of course. </p>
<p>Mind you, the <a href="http://www.snow-forecast.com/resorts/Davos/webcams/latest">lack of snow in the town</a> this week might concentrate those corporate minds on the implications of climate change at the very least.</p><img src="https://counter.theconversation.com/content/71105/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jonathan Michie does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The World Economic Forum draws a straight line from social injustice to many of the risks facing the world in 2017.Jonathan Michie, Professor of Innovation & Knowledge Exchange, University of OxfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/677132016-10-27T19:09:42Z2016-10-27T19:09:42ZIs Piketty’s ‘Capital in the Twenty-First Century’ really the most unread bestseller?<p>Amid the astonishing <a href="http://www.hup.harvard.edu/catalog.php?isbn=9780674430006">list of accolades</a> collected by Thomas Piketty’s “Capital in the Twenty-First Century,” the book is often also said to be <a href="http://www.afr.com/news/economy/thomas-piketty-debunks-australias-meritocracy-fairy-tale-20161023-gs8sb6">one of the most unread bestsellers</a>. Is this true, and does it matter?</p>
<p>No, it’s not true, or at least the person who made up the story never claimed it was. Rather, the dubious award came with a disclaimer: </p>
<blockquote>
<p>This is not remotely scientific and is for entertainment purposes only!</p>
</blockquote>
<p>Somewhere along the line the joke was lost, or became a different kind of joke.</p>
<p>The story was created by Jordan Ellenberg in the <a href="http://www.wsj.com/articles/the-summers-most-unread-book-is-1404417569">Wall Street Journal</a> about two years ago. As a lark, Ellenberg, an American mathematician, invented the “Hawking Index” (HI). The index was so-named after Stephen Hawking’s A Brief History of Time, which has sold more than 10 million copies and is widely referred to as “the most unread book of all time”.</p>
<p>To work out the HI, Ellenberg used the “Popular Highlights” feature in Amazon’s Kindle reader, which lists the five most frequently highlighted passages in a book. He assumed that the highlights of books read to the end would be scattered throughout the text. If people didn’t get past the first chapter, the highlights would be clustered at the beginning. To arrive at the HI, the page numbers of a book’s top five highlights were averaged, and then divided by the number of pages in the book. The higher the number, he assumed, the more that was read.</p>
<p>Ellenberg found that the most read bestseller was Donna Tartts’ The Goldfinch, since all five of the top highlights were from the last 20 pages, giving a completion score of 98.5%. The story about Piketty’s tome was born of the fact that nothing was highlighted beyond page 26, giving a score of 2.6%.</p>
<p>The less than scientific rigour was tipped by the 28.3% score given to F. Scott Fitzgerald’s The Great Gatsby, just pipping the 25.9 given to E. L. James’ Fifty Shades of Grey. If most people cannot get through either a 170 page classic novel or 500-odd pages of smut, something is awry with the reading public, or the HI is not what it pretended to be. </p>
<p>Sampling issues aside, the main problem is that the index doesn’t tell of the most read books, but where people mark them up, from which Ellenberg has drawn a questionable inference. A safer assumption is that the index will reveal a book’s most striking or useful passages. As Ellenberg noted, Tartt’s high score arose from mark-ups where the narrative falls away to spell out the book’s themes. In The Great Gatsby, readers tend to highlight a Nick Carraway line about a third of the way into the text that forms “the axis around which the novel spins”. In Fifty Shades, readers (apparently) mark-up the names of the Operas mentioned for followup.</p>
<p>In Capital in the Twenty-First Century, the first 26 pages encapsulate the rationale and results of the work. Typical of a scholarly book, it begins with a thesis and the balance contains the supporting argument and evidence. The distillation is bound to be the most marked up, no matter how much is read. Indeed, once you get the gist, you can dip or browse for more profit in any number of reading strategies.</p>
<p>If the HI could be retrospectively applied to E. P. Thompson’s The Making of the English Working Class, it would always fall on the famous preface. The result would be a lower score than Capital in the Twenty-First Century for what is probably the most cited history book of the last century.</p>
<h2>Don’t be put off</h2>
<p>The HI was pitched as entertainment, and the most entertained of all is probably Ellenberg. Does it matter? Not to the author, I imagine. With sales now <a href="http://www.smh.com.au/business/increase-property-taxes-to-curb-rising-inequality-thomas-pikettys-first-australian-interview-20161008-gry23l.html">exceeding 2.5 million worldwide</a>, even if the HI was what is purported, a score of 2.4% would give 60,000 completed reads in a trade where publishers can <a href="http://harvardmagazine.com/2015/01/the-wild-west-of-academic-publishing">only count on sales of about 300 copies</a>. </p>
<p>The unfortunate consequence would be if people are put off. A 700-page book of economics is never going to be a walk in the park, but Piketty’s style is at the lucid end. As I noted in a <a href="http://australianpe.wixsite.com/japehome/jape-74">full-scale review</a>, one of the book’s charms is the way that the author illustrates the changing social consciousness of inequality with contemporaneous novels and television.</p>
<p>Unlike the US, France and the UK, Piketty’s book hasn’t appeared in Australia’s bestselling lists. As <a href="http://evatt.org.au/papers/wealth-nation.html">the new report on wealth inequality</a> that Frank Stilwell and I prepared for the Evatt Foundation shows, this is not due to a lack of relevance. If it’s because Australians fall for Ellenberg’s canard, the joke will end up on 99% of us.</p><img src="https://counter.theconversation.com/content/67713/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christopher Sheil does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A 700-page book of economics was never going to be a walk in the park.Christopher Sheil, Visiting Fellow in History, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/675522016-10-25T19:11:19Z2016-10-25T19:11:19ZPiketty challenges us to consider if we need to rein in wealth inequality<p>French economist Thomas Piketty, currently <a href="http://www.monash.edu/news/thomas-piketty-at-melbourne-town-hall">in Australia</a>, is known for his focus in on the inequality of wealth. His book on the topic has sold two and a half million copies worldwide, which is quite amazing for a book full of economic statistics and graphs.</p>
<p>Piketty concludes, optimistically, by saying that we don’t have to accept the inevitability of wealth inequality. If there were the political will we could, as a society, reduce inequality. This includes his argument for an <a href="http://www.abc.net.au/news/2016-10-24/celebrated-economist-suggests-inheritance-tax/7961270">inheritance tax</a>. </p>
<p>Piketty spends less time explaining why excessive wealth inequality matters. This requires more attention because we cannot presume that there is sufficiently widespread public knowledge about the importance of the issue.</p>
<p>Some people evidently <a href="http://www.afr.com/opinion/editorials/thomas-piketty-can-spare-us-the-lecture-australia-a-land-of-opportunity-20161024-gs97cn#">think wealth inequality is a good thing</a>, because they believe it creates stronger economic incentives. It is that sort of reasoning that leads them to favour the Turnbull government’s proposed cuts to company tax rates, even though it would create yet more economic inequalities.</p>
<p>Meanwhile the International Monetary Fund has <a href="http://www.imf.org/external/pubs/ft/sdn/2014/sdn1402.pdf">published research</a> showing that more equality is also conducive to superior macroeconomic performance. Coming from such a usually conservative source, that should shake the belief that inequality is good for the economy.</p>
<p>There is also lots of other social science research showing the social problems that result from widening inequality. This includes the important research work reported by Wilkinson and Pickett in their book <a href="https://www.theguardian.com/books/2009/mar/13/the-spirit-level">The Spirit Level</a>, which explains “why more equal societies almost always do better”. It shows that more equal societies are generally happier and have a lower incidence of social problems, such as physical and mental illness, obesity, crime and violence and low levels of educational attainment. Other studies show that more equality is conducive to more sustainable and peaceful social arrangements. </p>
<p>More equal societies have healthier democracies too, as US economist <a href="https://www.amazon.co.uk/Price-Inequality-Joseph-Stiglitz/dp/0718197380">Joseph Stiglitz has argued</a>, because there is less tendency for wealthy elites to corrupt political institutions.</p>
<h2>Why Australia should care</h2>
<p>These concerns are currently of great significance for Australia. And we now have the data necessary to understand the dimensions of the challenge. </p>
<p>A <a href="http://evatt.org.au/papers/wealth-nation.html">new Australian report on wealth inequality</a> by the Evatt Foundation, drawing on the best data available, shows Australia is not the egalitarian nation that many people think it is. Rather, in terms of wealth inequalities, we’re mid-ranking on the international league table. And we’re becoming more unequal.</p>
<p>Currently, the wealthiest 10% of Australian households have approximately half of the total private wealth in the country. The top 1% of households alone have 15% of the total wealth.</p>
<p>At the other end of the spectrum, 40% of households have effectively no wealth. Most of them have modest current incomes, whether from wages or welfare, and they spend it all (and sometimes more, going into debt). Nothing is accumulated over time. Struggling to pay for housing is a big factor keeping them out of the wealth accumulation process enjoyed by those who have more substantial wealth.</p>
<p>Two wealth gaps are widening. One is between the top 10% of Australian households and the next 40% of “middle Australia”. The other is between those two groups and the bottom 40% who are effectively “out of the loop,” as far as sharing in economic prosperity.</p>
<p>These are the hallmarks of an unequal society, not an egalitarian society, as my colleague Chris Sheil and I <a href="https://theconversation.com/land-of-the-fair-go-no-more-wealth-in-australia-is-becoming-more-unequal-63327">have argued previously</a>. </p>
<p>I’ve also <a href="https://theconversation.com/why-we-should-put-an-inheritance-tax-back-into-the-spotlight-1634">put the case for inheritance taxation</a> as one of the policy measures that could be considered if we’re serious about reining in inequalities. Piketty’s presence here in Australia makes it timely to reconsider these issues and kickstart some policy action.</p>
<p>Slowing down the intergenerational transmission of inequality would be a good start to reversing the growing inequalities with which Piketty and the new Evatt Foundation report are concerned. That means having an inheritance tax.</p>
<p>Most other developed countries have taxes on inherited wealth. Australia used to have inheritance taxation too, until Queensland Premier Joh Bjelke-Petersen initiated the collapse of those arrangements in the late 1970s.</p>
<p>The case for an inheritance tax is well established. The last major review of the Australian tax system, chaired by former Treasury head Ken Henry, <a href="http://taxreview.treasury.gov.au/content/FinalReport.aspx?doc=html/publications/papers/Final_Report_Part_2/chapter_a3.htm">supported it in principle.</a></p>
<p>The exact form of the tax needs careful consideration. Should it be on the estate itself, or on the windfall incomes that it provides for the participants? What minimum wealth threshold should be set? And, above that threshold, what rate or rates of taxation should apply? Other countries vary in their treatment of these issues, so it is important that we develop a system that is appropriate for local circumstances.</p>
<p>Of course, any such tax would be opposed by the wealthy elite. You wouldn’t expect otherwise. But if the tax threshold were set at, say A$2 million, only a tiny proportion of households would be affected. And the rest of us would benefit directly from the extra revenues, which might then be used to pay for universal free tertiary education, for example, or a major increase in public housing. </p>
<p>We would also benefit indirectly from living in a more cohesive society with less of those problems that the social science researchers have shown to be correlated with extreme inequalities.</p><img src="https://counter.theconversation.com/content/67552/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Frank Stilwell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Some people evidently think wealth inequality is a good thing, but there’s plenty of evidence to show the problems it causes.Frank Stilwell, Emeritus Professor, Department of Political Economy, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/668062016-10-17T01:05:35Z2016-10-17T01:05:35ZWhy inequality is the most important economic challenge facing the next president<figure><img src="https://images.theconversation.com/files/141882/original/image-20161015-30244-15qbcd0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">U.S. middle class, R.I.P.?</span> <span class="attribution"><span class="source">Middle class demise via www.shutterstock.com</span></span></figcaption></figure><p>In a recent issue of The Economist, President Barack Obama <a href="http://www.economist.com/news/briefing/21708216-americas-president-writes-us-about-four-crucial-areas-unfinished-business-economic">set out four major economic issues</a> that his successor must tackle. As he put it:</p>
<blockquote>
<p>“… restoring faith in an economy where hardworking Americans can get ahead requires addressing four major structural challenges: boosting productivity growth, combating rising inequality, ensuring that everyone who wants a job can get one and building a resilient economy that’s primed for future growth.”</p>
</blockquote>
<p>It’s hard to quibble with the items on the president’s list. Slow productivity growth, rising inequality, inadequate employment and the lack of sustainable economic growth all are important problems that a President Clinton or Trump will have to face. </p>
<p>But just how important are these issues? Does one, above all, deserve to be at the top of the next president’s economic to-do list? </p>
<p>Rather than rank these items, it is probably better to follow the advice of American theologian Reinhold Niebuhr’s <a href="http://skdesigns.com/internet/articles/prose/niebuhr/serenity_prayer/">serenity prayer</a>: We should courageously change what we can while accepting what we cannot. </p>
<p>And <a href="https://theconversation.com/us/topics/income-inequality-2790">inequality</a> is the only item on that list that a president can influence in a significant way. It also happens to be, in my mind, the most important one – critical for solving the other three problems as well as preventing the disappearance of the middle class.</p>
<h2>The problem of inequality</h2>
<p>A glimpse of the latest data shows clearly why reducing the gap between the richest and poorest Americans should be presidential priority number one. It’s been widening for decades. </p>
<p>For example, research by the French economist Thomas Piketty showed that the top 1 percent of U.S. households <a href="https://www.amazon.com/Capital-Twenty-First-Century-Thomas-Piketty/dp/1491591617">received more than a fifth</a> of all U.S. income in 2013, compared with less than a tenth in the late 1970s and early ‘80’s. Back then, trickle-down economics was coming into vogue. <a href="https://www.imf.org/external/pubs/ft/sdn/2015/sdn1513.pdf">But as it turns out</a>, the extra income going to the top 1 percent did not trickle down to the other 99 percent; all the gains went to the top of the distributional pyramid – and then some. </p>
<p><a href="https://www.aier.org/research/measuring-middle-class">My own work</a> on inequality has focused on the size of the middle class in nine developed nations. According to the ancient Greek philosopher Aristotle, a <a href="https://underground.net/aristotle-and-the-middle-class/">thriving middle class is critical</a> for a democratic society. It also provides a buffer between the rich and the poor, thus mitigating the class struggle that <a href="https://www.marxists.org/archive/marx/works/1848/communist-manifesto/ch01.htm">Karl Marx predicted</a> would destroy capitalism. </p>
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<p>Besides having the smallest middle class of the nine countries I study, the U.S. also experienced the sharpest decline in its size over the past several decades. The U.S. middle class shrank from 58.3 percent of all households in the '70s to only 50 percent in 2013. </p>
<p>Why does it matter if the rich are getting richer and the poor poorer? Not only is greater inequality a threat to our democratic capitalist society, it’s bad for the economy and causes a whole host of other problems – including other items on the president’s list.</p>
<p>Since the rich save more, whenever they receive more income, <a href="http://www.tandfonline.com/doi/abs/10.1080/00213624.2015.1042794">total consumer spending tends to fall</a> and unemployment rises. This lowers economic growth, reduces government tax revenues and makes it harder to solve other economic and social problems.</p>
<p>And as the wealthy earn more and need to find a place to invest or park their excess cash, financial institutions tend to take more aggressive risks to boost returns for their investors in order to avoid losing those savings to a competitor. Increased risk-taking is what led to the global economic meltdown in 2008.</p>
<p>Furthermore, households have many fixed expenses. When their income falls, people must borrow in order to pay their monthly bills. This process, however, is not sustainable; at some point debt repayments will exceed the ability of people to repay, causing credit to dry up. As a result, people risk losing their homes and their ability to pay for basic necessities.</p>
<p>Too much inequality also has negative consequences for our health. As British epidemiologists Richard Wilkinson and Kate Pickett document in their book, “<a href="https://www.amazon.com/Spirit-Level-Equality-Societies-Stronger/dp/1608193411">The Spirit Level</a>,” a great deal of evidence shows that inequality is associated with health problems (such as obesity, infant mortality and lower life expectancy) as well as social problems like crime and addiction.</p>
<p>Finally, inequality makes it easier for the very rich to affect political outcomes through campaign contributions and lobbying. Coming full circle, this makes it more difficult to solve the inequality problem through government tax and spending policies. </p>
<h2>The challenge of our time</h2>
<p>The good news is that the next president can do things that would directly help solve the inequality problem. Some solutions he or she can pursue alone; others will require the cooperation of Congress. </p>
<p>First some direct actions. The U.S. government purchases goods and services from many businesses and must decide whom to hire for this. If government policy favors companies that provide better pay to average workers – or that have lower ratios of CEO pay to average pay – the president can help increase the income of many Americans. </p>
<p>To take one recent example of this, in September the <a href="https://www.dol.gov/whd/flsa/eo13658/index.htm">president signed</a> an executive order that increased the minimum wage to US$10.20 for workers who are getting paid under a federal contract. The next president can increase this even more and can require greater employment benefits for contract workers. These income and benefit gains will be replicated elsewhere in the workforce. </p>
<p>Support from Congress, however, would be necessary to raise the minimum wage for all workers, which has been stuck at $7.25 since 2009 and <a href="http://oregonstate.edu/instruct/anth484/minwage.html">has been falling</a> (in real inflation-adjusted terms) ever since.</p>
<p>Also with the help of Congress, the next president could employ both tax and spending policies to reduce income inequality. As <a href="https://www.jstor.org/stable/25511161?seq=1#page_scan_tab_contents">my study</a> shows, such policies are major determinants of the size of the middle class across nations. </p>
<p>And cross-national data show that top tax rates and income inequality are <a href="http://www.nber.org/papers/w17616">highly correlated</a>. Sharp cuts in the top rates in the 1980s explains why <a href="http://webarchive.taxpolicycenter.org/taxfacts/Content/PDF/toprate_historical.pdf">inequality has gotten so much worse</a> since then. </p>
<p>Evidence from our own country and from other countries shows that good policies and programs do make a difference. Inequality reached a low point in the U.S. after World War II when taxes were high, labor unions were strong and the New Deal provided a strong safety net to average Americans. And other developed nations, such as France and Norway, with more programs and stronger programs to support middle-class and lower-income workers have not experienced the same surge in inequality that we’ve had in the U.S. Some of these programs include paid family leave, more robust unemployment compensation, health care for all and higher minimum wages. </p>
<h2>Beyond a president’s control</h2>
<p>While President Obama’s other concerns are important, unfortunately they are beyond the control of the Oval Office. </p>
<p>Improving productivity is a lofty goal. Productivity is the most important determinant of future living standards on average. Unfortunately, economists don’t understand the key forces causing productivity to grow, and some of what economists do understand does not provide much reason for hope. </p>
<p>William Baumol <a href="http://pages.stern.nyu.edu/%7Ewbaumol/OnThePerformingArtsTheAnatomyOfTheirEcoProbs.pdf">has argued</a> that productivity inevitably grows more slowly in a service economy. His famous example concerns a Mozart horn quintet. Unlike manufacturing, you can’t improve productivity here by using capital equipment to reduce the number of musicians, for then it is no longer a horn quintet. Playing the piece faster won’t help either – the piece was written to be performed at a certain pace.</p>
<p>In “<a href="http://press.princeton.edu/titles/10544.html">The Rise and Fall of American Growth</a>,” Northwestern’s Robert Gordon contends that we have reached the end of the Industrial Revolution. All the big discoveries and innovations that can improve productivity growth have already been made. Therefore, we must expect slower productivity growth in the future. </p>
<p>Increasing the number of good jobs is likewise difficult. Other than government employment, most jobs are created by the private sector, and the government cannot mandate that firms hire more workers. The federal government can only spend money to create jobs, but this does not mean that those jobs will be good jobs. </p>
<p>In addition, promoting jobs conflicts with another challenge facing the next president: ensuring sustainable growth while dealing with climate change. More jobs require more production, more commuting and more pollution. <a href="http://degrowth.org/wp-content/uploads/2011/05/Victor_Growth-Degrowth-and-Climate-Change.pdf">Mitigating climate change</a> will require slower economic growth given the trade-off between growth and pollution.</p>
<h2>The bottom line</h2>
<p>The biggest economic challenge facing the winner of the Nov. 8 election will be to grapple with the scourge of rising inequality in the face of great resistance from some of the richest and most powerful citizens.</p>
<p>Few economic issues are as important as inequality is the source of so many other problems the U.S. faces – and thus essential to their solution. </p>
<p>This is more than just an economic issue. Less income polarization could reduce some of the political polarization that has increased along with rising income inequality since the 1980s, and has led to a degenerative presidential campaign this year. As focus has shifted to the moral failings of both candidates, the real issues at stake are being ignored – especially inequality, which also happens to be the cause of so many of the anxieties being expressed by voters. </p>
<p>Dealing with the problem of inequality will actually make America great, rather than simply irate.</p><img src="https://counter.theconversation.com/content/66806/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steven Pressman does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Finding a way to reduce inequality is key not only to solving a host of other problems but also to rescuing America’s fast-disappearing middle class.Steven Pressman, Professor of Economics, Colorado State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/561792016-03-14T10:06:04Z2016-03-14T10:06:04ZWe’ve been measuring inequality wrong – here’s the real story<figure><img src="https://images.theconversation.com/files/114900/original/image-20160313-11288-1cgzoel.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A look at spending inequality suggests America is a bit more equal than we thought.</span> <span class="attribution"><span class="source">Economic inequality via www.shutterstock.com</span></span></figcaption></figure><p>Despite appearances to the contrary, the 2016 presidential follies managed to feature at least a few policy discussions amid all the name-calling.</p>
<p><a href="http://www.latimes.com/nation/la-na-campaign-income-20150205-story.html">Income inequality</a> in particular has animated voters on both sides of the partisan divide, but the solutions advocated by candidates from each party are markedly different.</p>
<p><a href="https://www.washingtonpost.com/news/wonk/wp/2016/01/11/hillary-clinton-wants-the-rich-to-pay-higher-taxes-heres-how-high/">Democrats claim</a> higher taxes on the rich and more benefits for the poor are the best ways to reduce inequality. <a href="http://www.bloomberg.com/politics/articles/2015-11-12/rising-income-inequality-causes-republicans-to-shift-rhetoric-but-not-policy">Republicans argue</a> what we really need is more growth, accomplished by lowering taxes to spur work and investment with, it seems, benefit cuts to make up lost revenue.</p>
<p>Remarkably, this debate has taken place based on partial and inappropriate indicators of U.S. inequality. Each party is dead certain about how to address inequality, yet neither knows what it is. Neither has a comprehensive and conceptually correct measure of inequality. The right measure is not how much wealth or income people have or receive but their spending power after the government has levied taxes on those resources and supplemented those resources with welfare and other benefits. </p>
<p>In a <a href="http://www.kotlikoff.net/sites/default/files/U.S.%20Inequality%2C%20Fiscal%20Progressivity%2C%20and%20Marginal%20Taxation%203-14-16.pdf">recent study</a>, we provide the first picture of actual U.S. inequality. We account for inequality in labor earnings and wealth, as <a href="http://www.economist.com/blogs/economist-explains/2014/05/economist-explains">Thomas Piketty</a> and many others do. And we get to the bottom line: what does inequality in spending look like after accounting for government taxes and benefits? </p>
<p>Our findings dramatically alter the standard view of inequality and inform the debate on whether and how best to reduce it. </p>
<h2>The methodology</h2>
<p>Our study focuses on lifetime spending inequality because economic well being depends not just on what we spend this minute, hour, week or even year. It depends on what we can expect to spend through the rest of our lives. </p>
<p>Measuring lifetime spending inequality for a representative sample of U.S. households was a massive, multiyear undertaking, which may explain why ours is the first such study. </p>
<p>It required two big things. The first was developing software that properly measures lifetime spending, taking into account all possible survival scenarios households face (e.g., a husband dies in 22 years and a wife in 33 years). Second, it required accounting, in meticulous detail, for all the taxes households will pay and for all the benefits they will receive under each scenario. Our list included everything from personal income taxes (with its copious provisions) to estate taxes to Social Security benefits (eight kinds). <a href="http://www.kotlikoff.net/sites/default/files/U.S.%20Inequality%2C%20Fiscal%20Progressivity%2C%20and%20Marginal%20Taxation%203-14-16.pdf">Our paper</a> lays out all the gory details.</p>
<p>The raw data came from the Federal Reserve’s <a href="http://www.federalreserve.gov/econresdata/scf/scfindex.htm">2013 Survey of Consumer Finances</a> (SCF), which we ran through a computer program called The Fiscal Analyzer (TFA). We designed TFA to calculate the present value of the annual spending, including final bequests, a household can sustain given its “resources” (current wealth plus the present value of their projected future labor earnings), its taxes and benefits, and limits on its borrowing capacity. Our lifetime spending measure appropriately weights the spending arising under each survival scenario. The weights are the probabilities of the survival scenario in question and account for the fact that the <a href="https://www.washingtonpost.com/news/wonk/wp/2015/09/18/the-government-is-spending-more-to-help-rich-seniors-than-poor-ones/">rich live longer</a> than the poor. </p>
<p>One final methodological point: since we are comparing lifetime spending inequality, it makes no sense to compare households of different ages, with very different lifespans. So we divided them up by age cohorts (30-39, 40-49, etc).</p>
<p>Next we ranked the households in each cohort according to the size of their resources, as defined above. Finally, we split the households into five equal groups or quintiles, with the lowest quintile having the lowest amount of resources and so on. We also considered households ranked in the top 5 percent and top 1 percent based on resources. </p>
<h2>The results</h2>
<p>So what did we learn?</p>
<p>First, spending inequality – what we should really care about – is far smaller than wealth inequality. This is true no matter the age cohort you consider. </p>
<p>Take 40-49-year-olds. Those in the top 1 percent of our resource distribution have 18.9 of net wealth but account for only 9.2 percent of the spending. In contrast, the 20 percent at the bottom (the lowest quintile) have only 2.1 percent of all wealth but 6.9 percent of total spending. This means that the poorest are able to spend far more than their wealth would imply – though still miles away from the 20 percent they would spend were spending fully equalized. </p>
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<p>The fact that spending inequality is dramatically smaller than wealth inequality results from our highly progressive fiscal system, as well as the fact that labor income is distributed more equally than wealth. </p>
<p>The top 1 percent of 40-49-year-olds face a net tax, on average, of 45 percent. This means that the present value of their spending is reduced by the fiscal system to 55 percent of the present value of their resources. So someone in that age group who has resources with a present value of US$25.5 million can spend $14 million of it after fiscal policy. </p>
<p>For the bottom 20 percent, the average net tax rate is negative 34.2 percent. In other words, they get to spend 34.2 percent more than they have thanks to government policy (they get to spend, on average, $552,000 over their lifetimes, which exceeds their $411,000 in average lifetime resources). The table below illustrates this for all quintiles.</p>
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<p>To be clear, spending power remains extremely unequal. </p>
<p>Our point is that the fiscal system, taken as a whole, does materially reduce inequality, not in what people own or earn, but in what they get to spend. </p>
<p>This limits the scope to further equalize spending power by taxing the top 1 percent at a much higher rate. Indeed, among 40-49-year-olds, confiscating all the remaining spending power of the top 1 percent (with a 100 percent tax rate) and giving it to the poorest 20 percent would leave the latter group with 16.1 of total spending power, which is still less than 20 percent. And this hypothetical calculation assumes the jobs and incomes of those workers aren’t adversely affected by such a policy, which they most certainly would be.</p>
<h2>Impact on work incentives</h2>
<p>Another key finding is that U.S. fiscal policy acts as a serious disincentive to work longer hours or harder for more pay. </p>
<p>Our system’s plethora of taxes and benefits – designed with a multitude of income and asset tests and with little regard to how they work as a whole – have left many households facing high to super high net marginal tax rates. These rates measure what a household gets to spend (in present value) over its remaining lifetime in exchange for earning more money now.</p>
<p>For example, a typical 40-49 year-old in any of the bottom three quintiles (poor to middle class) of our resource distribution will only get to spend about 60 cents of every dollar he or she earns. For the richest 1 percent in that age group, it’s just 32 cents. </p>
<p>We often hear critics of the tax system, such as <a href="http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html?_r=0">billionaire Warren Buffett</a>, suggest that the rich pay very little on average or at the margin in taxes. This reflects their omission of a long list of current and future taxes plus their failure to focus on lifetime spending. </p>
<h2>Judging rich and poor</h2>
<p>One more major finding. Our standard means of judging whether a household is rich or poor is based on current income. But this classification can produce huge mistakes. </p>
<p>For example, only 68.2 percent of 40-49-year-olds who are actually in the third resource quintile using our data would be so classified based on current income. In other words, nearly a third of the people we identified as middle income are being misclassified as either richer or poorer. Similarly, among the poorest 20 percent of 60-69-year-olds, about 36 percent are actually poorer than commonly understood. </p>
<p>Consequently, relying on average current-year net tax rates to assess fiscal progressivity, as is standard practice, can be far off the mark. </p>
<h2>Facing fiscal facts</h2>
<p>Facts and figures are hard things. They upset prior views and demand attention. </p>
<p>The facts revealed in our study should change views. Inequality, properly measured, is extremely high, but is far lower than generally believed. The reason is that our fiscal system, properly measured, is highly progressive. And, via our high marginal taxes, we are providing significant incentives to Americans to work less and earn less than they might otherwise. </p>
<p>Finally, traditional static measures of inequality, fiscal progressivity and work disincentives that a) focus on immediate incomes and net taxes rather than lifetime spending and lifetime net taxes and b) lump the old together with the young create highly distorted pictures of all three issues.</p>
<p>As candidates and voters debate inequality and the best ways to reduce it, it’s important to start with the actual facts. That will make it far easier to figure out which policies, if any, should be changed going forward. </p>
<p>Raising taxes and benefits as Democrats advocate will, unless existing tax and benefit systems are properly reformed, come at the cost of even larger work disincentives. Lowering taxes, as Republicans advocate – presumably funding this with benefit cuts – will improve work incentives but may exacerbate spending inequality unless the benefit cuts disproportionately hit the rich. </p>
<p>Fortunately, we now have the machinery in place to accurately assess fiscal reforms in a manner consistent with economic theory and common sense.</p><img src="https://counter.theconversation.com/content/56179/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alan Auerbach receives funding from the Sloan Foundation.</span></em></p><p class="fine-print"><em><span>Laurence J Kotlikoff is President of Economic Security Planning, Inc., whose ESPlanner software is the core code underlying TFA. Economic Security Planning, Inc. provided its ESPlanner code for free use in this study. It also provided significant funding for the study. Other funding was provided by the National Center of Policy Analysis under the auspices of former NCPA President, John Goodman, Boston University, the University of California at Berkeley, and the Sloan Foundation. Kotlikoff is a shareholder of Economic Security Planning, Inc. and he and his company could benefit financially from this study. Kotlikoff receives research funding from the Sloan Foundation. </span></em></p>A new study on inequality analyzes the impact of fiscal policy, dramatically altering the standard view of rich and poor in America. It may also change how voters and candidates think about the issue.Alan Auerbach, Robert D. Burch Professor of Economics and Law and Director, Burch Center for Tax Policy and Public Finance, University of California, BerkeleyLaurence J. Kotlikoff, Professor of Economics, Boston UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/502532015-11-06T04:22:46Z2015-11-06T04:22:46ZThe case for a national minimum wage to tackle inequality in South Africa<figure><img src="https://images.theconversation.com/files/100933/original/image-20151105-16249-1cq6za1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Mine workers walking outside a hostel in Rustenburg. A national minimum wage could help narrow the income gap. </span> <span class="attribution"><span class="source">Reuters/Siphiwe Sibeko</span></span></figcaption></figure><p>Minimum wages have played a central role in reducing inequality in countries as diverse as Indonesia, the UK and Brazil. Traditionally seen as a means to ensure workers earn enough to meet their basic needs, more attention over the last two decades has been given to minimum wages as a means to help create a more equitable society.</p>
<p>South Africa is one of the most unequal societies in the world with a Gini coefficient (where zero is perfect equality and one is perfect inequality) of a <a href="http://nationalminimumwage.co.za/wp-content/uploads/2015/09/NMW-RI-Descriptive-Statistics-Final.pdf">staggering 0.66</a>, more than double the average of <a href="http://www.oecd.org/social/income-distribution-database.htm">OECD countries</a>. </p>
<p>French economist Thomas Piketty recently <a href="https://www.nelsonmandela.org/news/entry/transcript-of-nelson-mandela-annual-lecture-2015">stressed</a> the potential role a national minimum wage can play in tackling these stubbornly high levels of inequality.</p>
<p>Wage differentials, not unemployment, is the <a href="http://ideas.repec.org/a/taf/deveza/v29y2012i1p19-34.html">main source of inequality</a> in South Africa, responsible for about 56% of inequality. Unemployment is responsible for approximately 35% and differences in remittances and investment income make up the remainder.</p>
<p><a href="http://www.statssa.gov.za/publications/Report-02-11-02/Report-02-11-022014.pdf">On average</a> the top 10% of wage earners take home 24 times more than the bottom 10%, while the top 5% earn almost 50 times more than the bottom 5%, up from 30 times in 2010. Disturbingly, inequality has increased since the fall of <a href="https://ideas.repec.org/a/taf/deveza/v29y2012i1p19-34.html">apartheid</a>.</p>
<h2>The promise of minimum wages</h2>
<p>Given this, altering the wage distribution in South Africa through increasing wages for the working poor could have a dramatic impact. International experiences offer us imperfect but valuable insights into the potential role of a national minimum wage, set at an appropriate level above many of the <a href="http://nationalminimumwage.co.za/wp-content/uploads/2015/04/NMW-Fact-Sheet-1.pdf">low current sectoral minima</a>.</p>
<p>Three questions emerge. What are the potential consequences for levels of employment? What impact do minimum wages have on the wage distribution? And what are the “spillover effects” of minimum wages?</p>
<p>Evidence from the developed world on the impact of minimum wages on employment is unequivocal. Minimum wage increases have very small, negligible or statistically insignificant disemployment effects. The most comprehensive <a href="https://ideas.repec.org/a/bla/brjirl/v47y2009i2p406-428.html">meta-analyses</a> show that employment impacts converge around zero. </p>
<p>Evidence from the developing world is more scarce and contradictory. But overall the findings are similar. Minimum wages tend to have small or insignificant employment <a href="http://nationalminimumwage.co.za/wp-content/uploads/2015/09/0221-Effect-of-Minimum-Wages-on-Employment-in-Emerging-Economies-A-Literature-Review.pdf">effects</a>. </p>
<h2>Redistributive impact</h2>
<p>The redistributive impact of the minimum wage centres on its ability to raise earnings at the bottom end of the wage distribution (that is, for poor workers) more than for those at the middle or top end of the distribution (higher earners). While not uniform, this was observed in the formal sector for 10 out of 19 <a href="https://openknowledge.worldbank.org/handle/10986/8337">Latin American</a> countries and in the informal sector for 14 out of the 19.</p>
<p>In Indonesia, large increases to minimum wages were made in two phases: 1990-94 and 2000-02. Although differentiated by sector, on aggregate between 1993 and 2000 a 1% increase in the minimum wage led to a 1% increase in real wages for the lowest earners compared with a 0.5% increase for those around the 80th percentile. That increased real average wages for the poorest at a higher pace.</p>
<p>This corresponded with a decrease in wage inequality measured through the Gini coefficient from 0.46 in 1993 to 0.41 in 2000. Overall, between 1993 and 2007 the ratio between the 90th and 10th percentiles <a href="http://www.adb.org/sites/default/files/publication/28407/economics-wp196.pdf">declined</a> from 9.72 to 7.21. </p>
<p>The introduction of a national minimum wage in the <a href="http://eprints.lse.ac.uk/48937/">UK</a> in 1999 boosted wages for the lowest earners and accounted for 50% of the reduction of wage inequality between 1998 and 2010. </p>
<p>In Brazil, the national minimum wage was increased by 70% between 2004 and 2012. During this period the overall Gini coefficient <a href="https://openknowledge.worldbank.org/handle/10986/8337">fell</a> from 0.58 to 0.52, wage inequality dropped from 0.47 to 0.40 and real average and median earnings increased by 28% and 46% respectively.</p>
<p>Estimates from the OECD and various <a href="https://ideas.repec.org/p/bwp/bwppap/iriba_wp12.html">academics</a> show that increases in wages and changes in the distribution of labour earnings in Brazil accounted for between 40% and two thirds of the fall in income inequality in the 2000s. This <a href="http://www.cgdev.org/files/1426568_file_Lustig_et_al_IneqLA_FINAL.pdf">was</a>:</p>
<blockquote>
<p>… a consequence of both declining labour and non-labour income inequality, with both having approximately equal weight. </p>
</blockquote>
<p>Increases to the <a href="http://www.rdw2015.org/uploads/submission/full_paper/376/wagedist_uma.pdf">minimum wage</a> were therefore central in reducing wage inequality as they consistently raised wages at the bottom end at a higher rate than those at the top.</p>
<p>While differences emerge across sectors and demographics similar results have been shown for <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2002938">Russia</a>, <a href="http://www.rdw2015.org/uploads/submission/full_paper/376/wagedist_uma.pdf">India</a> and <a href="http://www.nber.org/papers/w9800">Colombia</a>.</p>
<p>On the other hand, when real national minimum wages declined in <a href="https://www.wider.unu.edu/publication/changes-labour-market-conditions-and-policies">Mexico</a>, between 1979 and 1988, and the <a href="http://www.nber.org/papers/w5093">US</a>, between 1979 and 1988, inequality increased.</p>
<h2>Spillover effects</h2>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/100922/original/image-20151105-16268-5lupjm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/100922/original/image-20151105-16268-5lupjm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/100922/original/image-20151105-16268-5lupjm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/100922/original/image-20151105-16268-5lupjm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/100922/original/image-20151105-16268-5lupjm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/100922/original/image-20151105-16268-5lupjm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/100922/original/image-20151105-16268-5lupjm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Contrary to popular belief, a national minimum wage does not necessarily cause job losses.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<p>The positive “spillover effects” of minimum wages are particularly strong in developing countries. A <a href="http://www.ilo.org/global/publications/books/WCMS_314464/lang--en/index.htm">study of ten</a> finds that average wages in the informal sector rose due to the institution or increase of minimum wages, with South Africa demonstrating the highest increases. <a href="http://www.nber.org/papers/w9800">Studies</a> of Latin American countries show the same. </p>
<p>This <a href="https://openknowledge.worldbank.org/handle/10986/22016">“lighthouse effect”</a> means that minimum wages in the formal sector serve as indicators of a fair wage in the informal sector as well as a tool for increasing the bargaining power of workers. Interestingly, in the case of Brazil, Mexico, Argentina and Uruguay minimum wages have a stronger impact on equalising wages in the informal sector than in the formal sector.</p>
<p>Minimum wages can also raise other forms of income if these are indexed against the national minimum wage. In Brazil 6% of workers in the formal sector, 20% in the informal sector and 5% of the self-employed earn an exact multiple of the minimum wage.</p>
<p>In addition, pension and welfare benefits for the elderly and disabled, as well as unemployment insurance, are linked to the level of the minimum wage. These have also been instrumental in reducing <a href="https://ideas.repec.org/p/rio/texdis/393.html">inequality</a>.</p>
<h2>Why Piketty is right</h2>
<p>While differentiated, the international evidence tells us that increasing or instituting a national minimum wage, provided it is set at the right level, can significantly increase wages for the lowest paid. It can help to close wage gaps between the rich and the poor, without negative impacts on employment. </p>
<p>It is also most effective, in tandem with other measures, to reduce inequality.</p>
<p>All this indicates that Piketty is correct to argue that the national minimum wage can be “an important tool to reduce extreme wage inequality”.</p>
<hr>
<p><em>This article is based on a forthcoming paper by Jana Mudronova, looking at the relationship between inequality, poverty and the national minimum wage.</em></p><img src="https://counter.theconversation.com/content/50253/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jana Mudrovona is a part of a research initiative receiving funding from FES and Oxfam for the National Minimum Wage Research Initiative.</span></em></p><p class="fine-print"><em><span>Gilad Isaacs receives funding from FES and Oxfam for the National Minimum Wage Research Initiative. </span></em></p>International experiences indicate that South Africa could reduce income inequality by introducing a national minimun wage.Jana Mudronova, PhD Candidate, University of the WitwatersrandDr Gilad Isaacs, PhD Candidate at SOAS; Researcher, Corporate Strategy and Industrial Development, School of Economic and Business Science, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/485312015-10-06T04:06:30Z2015-10-06T04:06:30ZHow South Africa can disrupt its deeply rooted educational inequality<figure><img src="https://images.theconversation.com/files/97073/original/image-20151002-23090-vvp779.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Girls walk to school in South Africa's poor Eastern Cape province.</span> <span class="attribution"><span class="source">Siphiwe Sibeko/Reuters</span></span></figcaption></figure><p>If one were to measure an education system’s strength purely on access, South Africa would be a schooling success story. Since the end of apartheid in 1994 there has been a dramatic <a href="http://www.ci.org.za/depts/ci/pubs/pdf/general/gauge2014/ChildGauge2014_childrencount_education.pdf">increase</a> in the number of children attending primary and secondary school. University enrolments <a href="http://www.sanews.gov.za/south-africa/more-south-africans-higher-education">are also up</a>.</p>
<p>Government has used policy to forcefully change patterns of school access that were <a href="http://newlearningonline.com/new-learning/chapter-5/apartheid-education">highly racialised</a> during apartheid. It has prioritised teacher development and is trying to <a href="http://www.equaleducation.org.za/content/2013/09/26/New-draft-norms-and-standards_12-September-2013.pdf">create</a> norms and standards for school infrastructure. It should be commended for this work.</p>
<p>But for all of this progress, educational inequality remains deeply entrenched. Education is a crucial mechanism for helping children to climb out of poverty - but poor children <a href="http://jae.oxfordjournals.org/content/16/5/849.short">bear the brunt</a> of bad teaching, disorganised or malicious administration and a lack of everything from desks and chairs to toilets, libraries and science labs. </p>
<p>French economist <a href="http://piketty.pse.ens.fr/en/cv-en">Thomas Pikkety</a>, who on October 3 delivered the 13th Nelson Mandela Annual Lecture in Johannesburg, has written extensively about inequality <a href="http://www.economist.com/blogs/economist-explains/2014/05/economist-explains">in education</a>. What is entrenching inequality in a system that appears committed to equalising access to education and reversing inequalities from the past? Can we disrupt entrenched educational inequality?</p>
<h2>Enough short term thinking</h2>
<p>Historically, spending on schooling was racially skewed and <a href="https://nicspaull.files.wordpress.com/2011/04/svdb-2007-apartheids-enduring-legacy-inequaliti.pdf">heavily favoured</a> white children. This has been changed since 1994 and
<a href="http://data.worldbank.org/indicator/SE.XPD.PRIM.PC.ZS">spending</a> has become infinitely more equitable.</p>
<p>Some may suggest that this change in spending should lead to an equalisation of outcomes in terms of retention and success rates. But a look at the country’s annual matric results - the final performance of Grade 12 students as they complete their secondary schooling - shows this is simply not so. Inequality can’t be bought out of existence.</p>
<p>If schools don’t have <a href="http://repository.up.ac.za/bitstream/handle/2263/41581/Skelton_Leveraging_2014.pdf?sequence=1">appropriate infrastructure </a> or learning materials, pupils are being poorly taught and are living in economically depressed communities, a single, simple spend won’t make much difference. They will perform badly in their matric year.</p>
<p>It is time we took a long term view of education and schooling: one that looks at these things across their lifespan rather than just at matric as an exit point from schooling. It is about reframing the value of education to include its social, political and cultural purpose. </p>
<p>We know about returns on investment in schooling, and what is not emphasised is the value that education can play in teaching young people to participate actively in a young democracy. Such education goes beyond the teaching of maths and science. It is about educating a citizenry for engaging in a diverse society and about building solidarity across race, class and gender in the service of social cohesion. </p>
<p>There is no shared conceptualisation of educational problems because there are such varied ideas about what is causing them and how they can be solved.</p>
<h2>Building blocks</h2>
<p>So where do we start? Firstly, good quality early childhood education may be a way to break the cycle of inequality. Research tells us that children with <a href="http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTCY/EXTECD/0,,contentMDK:20259127%7EmenuPK:527099%7EpagePK:148956%7EpiPK:216618%7EtheSitePK:344939,00.html">strong school foundations</a> have a much greater chance of later academic success and, ultimately, will earn a better income than their peers.</p>
<p>These young children’s teachers must be particularly well equipped to teach numeracy and literacy. Our research shows that a foundation in these crucial subjects will improve academic performance in all areas across their school careers.</p>
<p>This early education must be coupled with access to health care and attentive, involved parenting.</p>
<h2>Lifelong learning</h2>
<p>The work cannot stop at primary or secondary school. Changing the post school sector is a crucial way to disrupt inequality. A diversified post school sector will offer programmes that can be matched to students’ interests, skills and the needs of the labour market.</p>
<p>Young people need more choices. University is <a href="https://theconversation.com/history-explains-why-black-south-africans-still-mistrust-vocational-training-46998">viewed by too many</a> South Africans as the only option to equip them for a successful, financially secure future. There are other options, such as Technical Vocational Education and Training colleges, but these have a <a href="http://mg.co.za/article/2013-10-04-turning-around-the-fet-colleges">reputation</a> for bad quality.</p>
<p>This view is enforced by a lack of properly qualified staff for these colleges; a lack of both infrastructure and teaching resources; weak student financial aid and support and poor institutional governance. These issues must be tackled, because these colleges are a valuable resource for both students and the economy.</p>
<p>More attention must also be paid to <a href="http://www.abet.co.za/">adult</a> learning and education. Many South Africans have already missed out on the building blocks in childhood, adolescence or as young tertiary students. </p>
<h2>There’s more to it than education</h2>
<p>All of these measures are important - but ultimately, undermining inequality involves recognising that education is just one part of the larger tapestry. All of the ills that society faces land on the doorstep of education and schooling, setting schools up for failure. </p>
<p>The role of big business in driving inequality cannot be ignored. Nor can that of government when it allocates funds inadequately to schools, universities and colleges. These funding regimes impact students from poor households most because they depend on government funding to access education at all levels.</p>
<p>Academic and author John Marsh puts it best in his <a href="http://monthlyreview.org/product/class_dismissed/">book</a> Class Dismissed: </p>
<blockquote>
<p>So yes, by all means fix schools, reward good teachers … end the soft bigotry of low expectations. The problem, however, is when our notion of social and economic justice starts and stops with education (…) This is dangerous talk – dangerous because by wrong assignment of causes, it persuades that the cure is possible .</p>
</blockquote><img src="https://counter.theconversation.com/content/48531/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ruksana Osman does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A lot has changed for the better in South Africa’s education system - but inequality remains a thorn in the country’s side. How can we disrupt educational inequality?Ruksana Osman, Professor and Dean of Humanities, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/478042015-10-02T04:39:23Z2015-10-02T04:39:23ZWhy inequality matters – for the rich and the poor<figure><img src="https://images.theconversation.com/files/96957/original/image-20151001-23072-kq9819.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Workers in a bank watch as Occupy Wall Street protesters march in New York as part of the populist movement protesting economic inequality.</span> <span class="attribution"><span class="source">Reuters/Joshua Lott </span></span></figcaption></figure><p>In the last decade there has been a renaissance in studies stressing the relevance of inequality worldwide, particularly in the aftermath of the 2008 global financial crisis. The loud cry of the <a href="http://www.theguardian.com/world/ng-interactive/2015/sep/16/occupy-wall-street-four-years-later-timeline">Occupy movement</a> gained worldwide attention in its denunciation of the increasing polarisation of incomes and assets in the hands of an infamous 1%. </p>
<p>Thomas Piketty’s <a href="http://www.amazon.com/Capital-Twenty-First-Century-Thomas-Piketty/dp/1491534656">Capital in the Twenty-first Century</a> has largely supported the claims of global social movements that capitalism is moulding a world for the few against the many. It is not a coincidence that the name of his book recalls Karl Marx’s famous <a href="https://www.marxists.org/archive/marx/works/download/pdf/Capital-Volume-I.pdf">critique of political economy</a>. </p>
<p>Since the 1950s, mainstream economic narratives have been obsessed with modelling the relationship between inequality and growth. They also deployed questionable indicators of inequality based on an “average” distribution (the Gini coefficient). </p>
<p>Piketty has broken this mould. His work has focused on the extremes of the distribution and on elite’s capture since the origins of capitalism in western economies. </p>
<p>This enabled him to highlight what capitalism does best if left unchecked: namely, increasing returns to capital, rewarding and reproducing the creation of wealth. The book has been widely reviewed – favourably and unfavourably. Truth is, whatever one thinks about it, it returned inequality to the core of political economy debates on capitalism where it belongs.</p>
<h2>Roots of inequality</h2>
<p>In many instances, the historical roots of intercountry inequalities lie in slavery and colonialism. This is too often overlooked by contemporary economic analyses whose timeline is generally quite narrow. The <a href="http://www.theguardian.com/world/2015/sep/30/slavery-reparations-call-overshadows-david-camerons-visit-to-jamaica">Jamaican government</a> is currently reminding the UK that slavery can hardly be dismissed as a “thing of the past”.</p>
<p>Intracountry and intercountry inequalities interplay in the world economy. The increasing polarisation of the income shares of capital and labour is embedded in an equally polarised global division of labour. </p>
<p>This counterpoises countries hosting the majority of the world’s rich, led by the US, and those gathering the majority of the world’s working poor – Asia, Africa and Latin America. In the post-colonial era national capital has played its own role in processes of exploitation and dispossession against the working poor. </p>
<p>British-Indian writer <a href="http://www.theguardian.com/books/2014/mar/21/capital-portrait-twenty-first-century-delhi-review">Rana Dasgupta</a> has illustrated how these processes unfolded in the making of Delhi as a modern metropolis. Intriguingly, he has done so in a book also called Capital - a portrait of Delhi in the 21st century.</p>
<p>Even emerging economies like India or China, which are experiencing “global convergence”, are building their economic fortune on the shoulders of the working poor.</p>
<h2>The cost of inequality</h2>
<p>The human and social cost of highly unequal processes of capitalist development for low classes and for the working poor is substantial. This should be the primary reason for our interest in inequality. </p>
<p>The <a href="https://www.opendemocracy.net/roger-southall/south-africas-massacre-peeling-onion">Marikana tragedy</a>, which saw South African police firing on striking miners with live ammunition killing thirty-four, has indicated the violent nature of the struggles over resources and income shares. Piketty himself refers to the Marikana case to highlight the extreme consequences of fights over redistribution. </p>
<p>In Cambodia in 2014, <a href="http://theconversation.com/cambodian-sweatshop-protests-reveal-the-blood-on-our-clothes-21811">workers were shot</a> in the streets of Phnom Penh as they asked for an increase in their minimum wage. Inequality must be fought because it perpetuates social injustice.</p>
<p>Even those hardly moved by these arguments are increasingly aware of the challenges highly unequal distributions of income and wealth imply. Inequality was high on the agenda at the <a href="http://www.theguardian.com/public-leaders-network/2015/jan/25/davos-2015-overriding-pessimism-over-growing-inequality">World Economic Forum 2015</a> in Davos, certainly not your average activists’ network. This is because high levels of inequality have clear economic and social costs. </p>
<p>High inequality may undermine growth, as in South Africa. It can lead to violence and tensions, compelling the rich to live in gated communities, like in Brazil. In <a href="http://theconversation.com/gated-communities-lock-cities-into-cycles-of-inequality-33516">Buenos Aires</a> there were 90 gated communities in the 1990s. They became 285 by 2001, and 541 by 2008. </p>
<p>The proliferation of borders, fences and walls, not only in <a href="http://www.theguardian.com/global-development/2014/may/02/gated-communities-blade-runner-dystopia-unhappiness-un-joan-clos">urban spaces</a>, is gaining momentum across the world, even in developed countries, leading to increasingly segregated livelihoods. In the end, also the rich may not want to live like this.</p>
<h2>What to do about it?</h2>
<p>This is hardly an easy question to answer. Economics studies, even bestsellers like Piketty’s, still tell us little about who is more likely to bear the brunt of inequality. This is a crucial issue as inequality is a <a href="http://www3.qeh.ox.ac.uk/pdf/qehwp/qehwps81.pdf">“horizontal”</a>, “group phenomenon” experienced collectively. </p>
<p>And income and wealth – material inequality – may only represent the final outcome of far more rooted structures of oppression. </p>
<p>Ultimately, inequality is experienced on the basis of class, gender, race, caste or geographical provenance. In South Africa, one cannot understand inequality without addressing the legacy of apartheid. In India, one cannot decouple inequality from colonialism and <a href="http://www.thehindu.com/opinion/lead/contours-of-caste-disadvantage/article6442860.ece">caste</a>. In the US, inequality is linked to racial discrimination. In Europe, it is increasingly linked to migration, as many undocumented migrant workers are subjected to “slavery-like” <a href="http://www.reuters.com/article/2009/09/28/us-italy-immigrants-tomatoes-idUSTRE58R1TW20090928">working conditions</a>.</p>
<p>The fight against inequality must be fought on many fronts. It is a fight worth fighting. As highlighted in all books of the Capital “trilogy” mentioned here, from Marx to Piketty and Dasgupta, inequality is a key functioning mechanism of capitalism. It must be addressed as a matter of social justice. </p>
<p>Furthermore, it may also soon become both economically unviable and socially undesirable for the few to exclude the many. As the few reinforce fences and gates, the many may be really becoming too many, particularly across the developing world. They may even start demanding their share.</p><img src="https://counter.theconversation.com/content/47804/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>In the past, Alessandra Mezzadri has received funding from ESRC-DfID and from the British Academy. </span></em></p>The Marikana tragedy has indicated the violent nature of the struggles over resources and income shares. Inequality must be fought because it perpetuates social injustice.Alessandra Mezzadri, Lecturer in Development Studies, SOAS, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/483892015-10-01T04:40:28Z2015-10-01T04:40:28ZWhy inequality will not be fixed with Pikettian posturing and distorted data<figure><img src="https://images.theconversation.com/files/96823/original/image-20150930-5804-1r1irvq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Women wait in line to fill buckets from a communal clean tap in Masiphumelele, Cape Town, South Africa. The country has extremely high levels of inequality.</span> <span class="attribution"><span class="source">Nic Bothma/Reuters</span></span></figcaption></figure><p>In the hot ideological wars South Africans wage, perhaps none is as violent to the truth as the rejigging of the Gini coefficient measuring income inequality.</p>
<p>This number is zero if everyone shares income perfectly equally and one if only a sole person gets it all. Before state redistribution kicks in, South Africa’s Gini, as <a href="http://www.worldbank.org/en/news/press-release/2014/11/04/south-africa-lifts-36-million-out-of-poverty-thanks-to-its-fiscal-policies">measured</a> last November by the World Bank, is a shocking 0.77. This is the highest of any major country. But a curious strategy of revising the Gini downwards was recently adopted by the World Bank and its local allies.</p>
<p>Thomas Piketty’s visit reminds us of the need to reconsider South African inequality-fibbery. The World Bank’s Pretoria staff now <a href="https://openknowledge.worldbank.org/bitstream/handle/10986/20661/921670WP0P131400SAEU60for0web01029b.pdf?sequence=1">claim</a> the Gini can be reduced to 0.59 if state social grants, education and health spending are included in the calculation. </p>
<p>This is a not-so-rigorous finding because state-funded benefits enjoyed by corporations and the rich magically <a href="http://mg.co.za/article/2014-11-13-south-africas-inconvenient-truths">evaporate</a> from the <a href="http://ccs.ukzn.ac.za/default.asp?2,68,3,3497">bank’s analysis</a>. Nevertheless it triggered a landslide of <a href="http://www.bdlive.co.za/opinion/2014/12/02/income-redistribution-now-depends-on-broader-tax-base">commentators</a> and economists heralding how well redistribution was going. A state grant to a poor family to raise each child, the most common form of transfer that goes to 16 million caregivers, is just <a href="http://www.gov.za/services/child-care-social-benefits/child-support-grant">R330 per month</a>, or US$0.75 a day. </p>
<p>That cacophony must have been in South African Finance Minister Nhlanhla Nene’s ear when he <a href="http://mg.co.za/article/2015-03-06-nene-falls-in-with-big-business">reduced</a> the real value of funds given to the poorest by 3% in this year’s <a href="http://www.treasury.gov.za/comm_media/speeches/2015/2015030301%20-%20Speech%20Deloitte's%20Post%20Budget%20Breakfast.pdf">budget</a>. He simultaneously allowed the rich to increase their annual offshore expatriation from <a href="http://www.southafrica.info/news/business/budget-analysis-260215.htm#.VgwFm_mqqko">R4 million to R10 million</a>.</p>
<h2>The neoliberals’ co-opting of Piketty</h2>
<p>Piketty, a genuine social democrat, would be aghast at this interim outcome of South Africa’s recent inequality debate. Yet the French economist is being enthusiastically embraced and co-opted to advance the neoliberal agenda. As one long-standing South African business leader put it <a href="http://www.bdlive.co.za/opinion/2015/09/28/pikettys-fix-for-inequality-in-sync-with-development-plan">this week</a>:</p>
<blockquote>
<p>The extent to which several of Piketty’s points for reducing inequality resonate with the overall thrust of the National Development Plan is striking.</p>
</blockquote>
<p>The <a href="http://www.gov.za/issues/national-development-plan-2030">plan</a> has been endorsed by big business and the conservative opposition for its neoliberal macroeconomic policy and mega infrastructure projects. In reality, it is severely wanting on inequality. </p>
<p>It projects that by 2030 its strategies will reduce the Gini only from 0.69 to 0.60. That means the income share earned by the poorest 40% will rise from 6% to just 10%. As Neil Coleman, from the Congress of South African Trade Unions, has <a href="http://www.dailymaverick.co.za/opinionista/2013-04-03-national-development-plan-the-devil-is-in-the-economic-detail/#.Vgnt9SuS-Qc">argued</a> in the strongest critique of the plan to date:</p>
<blockquote>
<p>0.6 would still make our levels of inequality higher than any other major country in the world! This long-term target (which Brazil has surpassed by far in less than 10 years) is an embarrassment for a country claiming to be serious about combating inequality.</p>
</blockquote>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/96820/original/image-20150930-5787-11euau5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/96820/original/image-20150930-5787-11euau5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/96820/original/image-20150930-5787-11euau5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/96820/original/image-20150930-5787-11euau5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/96820/original/image-20150930-5787-11euau5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/96820/original/image-20150930-5787-11euau5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/96820/original/image-20150930-5787-11euau5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">French economist and academic Thomas Piketty book</span>
<span class="attribution"><span class="source">Reuters/Charles Platiau</span></span>
</figcaption>
</figure>
<p>The full-on neoliberal onslaught desired by the businessman – he <a href="http://www.bdlive.co.za/opinion/2015/09/28/pikettys-fix-for-inequality-in-sync-with-development-plan">advocates</a> user charges and fiscal discipline – has faced resistance from a working class that the World Economic Forum has <a href="http://reports.weforum.org/global-competitiveness-report-2015-2016/">found</a> to be the most militant on earth each year since 2012.</p>
<p>Justifiably, the workers demand higher levels of social spending, for South Africa <a href="http://www.keepeek.com/Digital-Asset-Management/oecd/social-issues-migration-health/divided-we-stand/public-social-expenditure-in-oecd-countries-and-emerging-economies_9789264119536-graph23-en#page1">ranks</a> a pathetic fifth from the bottom of 40 major countries in this category (as a share of GDP). Borrowing locally to raise state spending makes sense. The most recent public debt and deficit <a href="http://www.businessinsider.com/chart-of-the-day-this-country-defaulted-and-now-it-has-one-of-the-healthiest-public-sectors-in-the-world-2012-3">analysis</a> from Barclays Capital considers South Africa substantially under-borrowed (in local terms not foreign debt) compared to its peers. </p>
<p>A classical Keynesian policy of growth-through-redistribution is certainly desirable in this terribly unequal society. That’s why I’m very sympathetic to my colleagues <a href="https://theconversation.com/what-south-africa-can-learn-from-piketty-about-addressing-inequality-47658">Imraan Valodia</a> and <a href="https://theconversation.com/pikettys-contribution-to-unpacking-inequality-timely-and-relevant-48070">Vishnu Padayachee</a>, who believe Piketty’s influence can revive this tradition. </p>
<h2>Marxist economic insights ignored</h2>
<p>We apparently require much more revolutionary political impulses in society if even the Keynesian project is to advance. Setting aside the threat to co-opt Piketty into the National Development Plan, I’m worried about a different danger of Pikettian posturing – the delegitimisation of perhaps the strongest <a href="http://www.sahistory.org.za/r-turner/pdfs/Turner%20by%20Nash.pdf">tradition(s)</a> within South African political economy, Marxism.</p>
<p>According to Piketty’s <a href="http://www.hup.harvard.edu/catalog.php?isbn=9780674430006">Capital in the 21st Century</a>:</p>
<blockquote>
<p>Modern economic growth and the diffusion of knowledge have made it possible to avoid the Marxist apocalypse … Marx totally neglected the possibility of durable technological progress and steadily increasing productivity.</p>
</blockquote>
<p>This flippancy is what you expect from someone who brags openly about his <a href="http://www.newstatesman.com/politics/2014/05/marx-i-never-really-managed-read-it-interview-thomas-piketty">ignorance</a> about the Marxian intellectual framework: </p>
<blockquote>
<p>I never managed really to read it … Das Kapital, I think, is very difficult to read and for me it was not very influential.</p>
</blockquote>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/96828/original/image-20150930-5785-1pqu5nj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/96828/original/image-20150930-5785-1pqu5nj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=826&fit=crop&dpr=1 600w, https://images.theconversation.com/files/96828/original/image-20150930-5785-1pqu5nj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=826&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/96828/original/image-20150930-5785-1pqu5nj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=826&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/96828/original/image-20150930-5785-1pqu5nj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1038&fit=crop&dpr=1 754w, https://images.theconversation.com/files/96828/original/image-20150930-5785-1pqu5nj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1038&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/96828/original/image-20150930-5785-1pqu5nj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1038&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A bust of Karl Marx in London.</span>
<span class="attribution"><span class="source">EPA/Andy Rain</span></span>
</figcaption>
</figure>
<p>There are various well-read Marxist rebuttals to Piketty by, among others, <a href="http://davidharvey.org/2014/05/afterthoughts-pikettys-capital/">David Harvey</a>, <a href="https://thenextrecession.files.wordpress.com/2014/04/maito-esteban-the-historical-transience-of-capital-the-downward-tren-in-the-rate-of-profit-since-xix-century.pdf">Esteban Maito</a>, <a href="http://adamdavidmorton.com/tag/thomas-piketty/">Adam David Morton</a> and <a href="https://thenextrecession.wordpress.com/2014/04/23/a-world-rate-of-profit-revisited-with-maito-and-piketty/">Michael Roberts</a>. Some reflect on his unfamiliarity with the idea of the “rising organic composition of capital”. This is when higher capital intensity in production causes falling profitability over time.</p>
<p>This is the core process behind overproduction crises in Marx’s schema. Without comprehending those tendencies, Piketty has no clue about the crisis of “overaccumulation” which now bedevils the world economy. Widespread gluts are to him mainly the manifestations of inefficient distributional economics.</p>
<p>Piketty also fails to analyse (as Marx does) long periods of speculative finance. He terms these immaterial capital as a dismissal of their importance. In contrast, Marxists like <a href="http://libcom.org/files/The%20Limits%20to%20Capital.pdf">Harvey</a> have long argued that bailouts of private creditors using monetary and public debt mechanisms would simply displace, not resolve, the contradictions.</p>
<h2>What’s wrong with Piketty’s analysis</h2>
<p>Piketty’s central thesis in Capital in the 21st Century is that:</p>
<blockquote>
<p>When the rate of return on capital exceeds the rate of growth of output and income, as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based. </p>
</blockquote>
<p>First, he uses a terribly stilted measure of GDP, expertly <a href="http://www.zedbooks.co.uk/node/21032">demolished</a> by the University of Pretoria’s Lorenzo Fioramonti. Second, the central problem with this, as has been <a href="http://www.washingtonpost.com/news/wonkblog/wp/2015/03/19/meet-the-26-year-old-whos-taking-on-thomas-pikettys-ominous-warnings-about-inequality/">pointed</a> out by his right-wing critics too, is its mishandling of residential capital. </p>
<p>The Piketty inequality critique is vital – but only if he can withstand the neoliberal embrace, and if local Keynesians can amplify his arguments against the South African Reserve Bank and the country’s National Treasury. </p>
<p>Nevertheless, there are obvious intellectual reasons to be suspicious of Piketty. But all this matters little. It is the challenge of changing the political balance of forces that far transcends our ideological bantering, isn’t it?</p><img src="https://counter.theconversation.com/content/48389/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Patrick Bond is affiliated with the National Union of Metalworkers of South Africa as an (unpaid) advisory board member of the Numsa Research and Policy Institute. His employment with the Universities of Witwatersrand and KwaZulu-Natal is through the generosity of the neoliberal South African state. </span></em></p>Thomas Piketty’s visit reminds us of the need to reconsider South African inequality-fibbery. His inequality critique is vital, but only if it can withstand the neoliberal embrace.Patrick Bond, Professor of Political Economy, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/483562015-09-30T13:58:26Z2015-09-30T13:58:26ZQ&A: Can Corbyn revolutionise the financial sector and the Bank of England?<p>Labour party leader Jeremy Corbyn this week <a href="http://labourlist.org/2015/09/corbyn-reveals-big-names-in-new-economic-advisory-committee/">unveiled his new team</a> of economic advisers. He hopes they will help build a set of policies capable of countering the narrative of belt-tightening austerity which delivered David Cameron and George Osborne into Downing Street back in May.</p>
<p>Corbyn and shadow chancellor John McDonnell are scheduled to meet four times a year with the seven-strong group which includes people like <a href="https://theconversation.com/profiles/thomas-piketty-192724">Thomas Piketty</a> and <a href="https://theconversation.com/profiles/mariana-mazzucato-185270">Mariana Mazzucato</a>. Also on the panel is <a href="https://theconversation.com/institutions/city-university-london">City University</a> professor Anastasia Nesvetailova, an expert on the international financial sector and its role in the global financial crisis of 2007-09. We asked her to give her thoughts on four policy areas reportedly under consideration by Corbyn and his team:</p>
<p><strong>Q: The new Labour leadership has <a href="http://www.fundweb.co.uk/news-and-analysis/labour-leader-corbyn-backs-financial-transaction-tax/2023764.article">indicated support</a> for a financial transaction tax, but why does support for this ebb and flow so much?</strong></p>
<p><a href="https://theconversation.com/explainer-what-is-the-robin-hood-or-tobin-tax-48335">The idea for the Tobin tax</a>, so called after the economist James Tobin suggested it in the late 1960s to early 1970s, has been long debated. This concept of applying a relatively tiny tax to every financial transaction tends to be evoked in the midst of financial crises and instability, or whenever the costs of finance to society appear to outweigh the benefits of deregulated finance. </p>
<p>It may be comparatively mature as a concept then, but the Tobin tax has been difficult to implement in real policies. During its early life, the idea was eclipsed by the paradigm of <a href="http://www.economicshelp.org/blog/274/uk-economy/economic-impact-of-margaret-thatcher/">monetarism and free markets</a> of the 1970s and 1980s. And throughout there have remained unresolved technical issues <a href="http://www.economist.com/blogs/economist-explains/2013/09/economist-explains-1">about its implementation</a>. </p>
<p>One major divisive issue has been the scope of a possible tax: should it be universal and global (to minimise regulatory <a href="http://www.investopedia.com/terms/a/arbitrage.asp">arbitrage</a>), or can it be implemented on a different scale by individual nation states? The Tobin tax was originally proposed to target the foreign exchange market – a segment of financial <a href="http://www.cnbc.com/2013/10/08/forex-is-wild-west-market-as-abuse-probes-begin.html">volatility, speculation and bubbles</a>. Today though, we know that the foreign exchange market is only one part of the financial system – albeit a very large part at about <a href="http://www.dailyfx.com/forex/education/trading_tips/daily_trading_lesson/2014/01/24/FX_Market_Size.html">a US$5 trillion daily trading volume</a>. </p>
<p>Many other financial transactions today are multi-layered and multi-jurisdictional – very often they involve complex credit contracts. And so a tax designed when the realities of financial markets were quite different and less advanced may not be applicable to all financial transactions today uniformly. </p>
<p>Another issue is how to tailor such a measure to the complexity of today’s financial structures and not harm the needs of businesses and consumers who rely on the foreign exchange market for their daily business needs. Finance is famously prone to speculation and bubbles, but it is an organic and very central sphere of economic activity in advanced, highly financialised capitalism; we need to be cautious about tinkering with the inner workings. </p>
<p><strong>Q: Is there a future for Britain free of the dominance of the financial sector?</strong></p>
<p>This is a tricky question, because it presumes that the financial sector is counterpoised to the rest of economic activity. In reality, we are all part of finance today, and that includes <a href="http://www.bbc.co.uk/news/business-27868278">the shadow banking system</a> – a complex set of non-bank financial intermediaries, transactions and entities. Overall, the City of London financial sector plays a crucial role in providing market and funding opportunities for the economy. A better question would be to ask: how can the financial sector today work for society?</p>
<p>It is true that competition and financial innovation can and does spur economic growth and makes our daily lives much easier: it is convenient to rely on credit cards when you travel or to be able to take a mortgage. But financial innovation is also inherently very risky. <a href="http://www.levyinstitute.org/about/minsky/">Hyman Minsky</a>, the theorist of financial fragility who did not live to see many of his predictions come true, said that in advanced capitalism there is always a trade-off between financial innovation and economic stability. Looking back at the unresolved legacy of the 2007-09 crisis, it is clear that the question about who should assume the risks incurred by the financial industry during the “good times”, has not been addressed by policy-makers fully. </p>
<p>Instead, society and the state, were made to work for finance: in 2007-08, the risks from financial innovation were socialised and austerity measures followed. This happened against the big gains from financial innovation that had been privatised by the finance industry. As a result, despite the progress on the financial reforms since 2008, we are ill-prepared for the next financial crisis, which according to Minsky, is certain to come. </p>
<p><strong>Q: What should a new Bank of England mandate look like?</strong></p>
<p>The Bank of England should remain independent, but it should have the power and the tools to continue to act as a stabiliser of the economy and be able to intervene with a diverse and flexible range of tools during a period of financial crisis or instability. It is important to understand that uncertainty about central banks’ mission and mandate today is not a unique problem of the UK. </p>
<p>During the crisis of 2007-09, the central banks on both sides of the Atlantic stepped in and played <a href="http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6720760/Ben-Bernanke-defends-Federal-Reserves-role-in-financial-crisis.html">a role that they were not meant to</a>. We are lucky that they did so. Against many economic dogmas, they were not simply lenders of last resort, they made the markets, as <a href="http://press.princeton.edu/class_use/courses/mehrling/">my colleague Perry Mehrling</a> argues in his book New Lombard Street. They made the markets when liquidity vanished and when private participants, buyers and sellers, simply would not pick up the phone. </p>
<p>In the wake of Lehman, along with the governments, central banks saved the payment system from a collapse. And although it was meant as a temporary solution, there was no exit strategy from that role. Up to this day, central banks are de facto in charge of much more than simply price stability. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/96786/original/image-20150930-5798-29ebhm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/96786/original/image-20150930-5798-29ebhm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/96786/original/image-20150930-5798-29ebhm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=249&fit=crop&dpr=1 600w, https://images.theconversation.com/files/96786/original/image-20150930-5798-29ebhm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=249&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/96786/original/image-20150930-5798-29ebhm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=249&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/96786/original/image-20150930-5798-29ebhm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=313&fit=crop&dpr=1 754w, https://images.theconversation.com/files/96786/original/image-20150930-5798-29ebhm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=313&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/96786/original/image-20150930-5798-29ebhm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=313&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Notes and queries. How can the BoE be better put to use?</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/nataliejohnson/398006982/in/photolist-BaTBm-nR3wHL-hgvadi-6bZtDe-7mXcSb-egi8F5-atDhbx-dd82Gu-65jEgL-atFVp5-pCwa3V-oANzmt-9mbNnN-oDmmZJ-fDk8uD-8XUQAb-msJNhU-dd823c-5v1JtB-62qLSj-6c4CeW-jSz5Yn-4j1Qd5-atDgqa-4cryQP-6qmiYP-3Sc8Pa-4C6eGg-nCSKCZ-5VTEM1-6bZruX-atFVL1-78Zm94-6c4Cwh-p7eT5s-nA4dbG-atFX2q-nBNYpp-nBSKG3-dBF8Ez-fE8UMi-eZweQj-fjRuUk-nzBEH8-p4qzvo-hkAS1q-sYYpQt-nYQaDM-7AcTfS-dBNAGs">natalie</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<p>The problem is that the formal mandate of the Bank of England is too narrow for what is required of the central bank in the advanced financialised context. The risk is that during the next financial crisis they may not have the tools to intervene. Central banks are major actors in financially advanced economies and in any plans for a major recovery they are likely to remain so. They will need new tools to deal with what will be an unavoidably a complex crisis. </p>
<p><strong>Q: Is there a feasible place for public ownership in the banking sector?</strong></p>
<p>Again, an interesting question because somehow it assumes that public ownership is alien to the banking system. In reality, public ownership is already present in finance: as a policy measure when banks are nationalised and a potential measure when a bank is identified as a systemically important institution and its failure threatens the economic stability. </p>
<p>One of the major triggers of the great transformation of banking in late 20th century was the move (in the US) to put investment banks <a href="http://business.time.com/2009/04/28/publicly-traded-investment-banks-big-mistake/">into the hands of markets</a> and the ownership of shareholders. The major consequence of that decision was that the risks that previously were theoretically containable in closed partnerships arrangement, were potentially socialised. Simply put, large bank holding companies trading in the markets have systemic consequences for the economy – and a collapse may trigger systemic risks beyond this particular institution. </p>
<p>This is exactly what happened in 2007-09, when the UK government had to <a href="http://www.nao.org.uk/highlights/taxpayer-support-for-uk-banks-faqs/">nationalise several banks</a> in order to save them from a collapse. Since banks are crucial systemic institutions in our economy, and since they perform many utility-like functions (payments, clearing) critical for the economic security of the country, it can be argued that public ownership is best suited to guard the public interest in utility banking. And in fact, given our experience in the financial crisis, it can be argued that they were, in effect already nationalised.</p>
<p>I can anticipate a counterpoint from the banking industry: public ownership is wasteful, it stifles innovation and competition. But while the benefits of privately-owned banking groups are difficult to quantify, <a href="http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHURVoSUqpho">data suggests</a> that bank executives and managers were rewarded handsomely even as their institutions were making losses and were on a public liquidity drip and, further, that in finance, innovation takes the form of regulatory arbitrage and avoidance, rather than the benign pursuit of the public good.</p><img src="https://counter.theconversation.com/content/48356/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anastasia Nesvetailova does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>One of Jeremy Corbyn’s picks for his economic advisory team is doubtful about the viability of a Robin Hood tax, but sees little obstacle to public ownership in the banking sector.Anastasia Nesvetailova, Professor of International Politics, Director of the Global Political Economy MA, City, University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/483342015-09-30T04:43:29Z2015-09-30T04:43:29ZFactCheck: is South Africa the most unequal society in the world?<figure><img src="https://images.theconversation.com/files/96649/original/image-20150929-30974-8zmu9n.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Thomas Piketty argues that education is a big equaliser in a highly unequal society like South Africa. But it must be good quality education. </span> <span class="attribution"><span class="source">Reuters/Rogan Ward</span></span></figcaption></figure><p><em>It is often said that South Africa is the most unequal society in the world. Business and Economy Editor Andile Makholwa put a few questions to <a href="http://www.dpru.uct.ac.za/professor-haroon-bhorat-director-dpru-school-economics-uct">Haroon Bhorat</a>, Professor of Economics and Director of the Development Policy Research Unit at the University of Cape Town.</em> </p>
<p><strong>Is it true that South Africa is the most unequal society in the world? How unequal is it?</strong></p>
<p>Depending on the variable used to measure inequality, the time period, and the dataset, South Africa’s Gini coefficient ranges from about <a href="http://beta2.statssa.gov.za/publications/Report-03-10-06/Report-03-10-06March2014.pdf">0.660 to 0.696</a>. The Gini coefficient is the measure of income inequality, ranging from 0 to 1. 0 is a perfectly equal society and a value of 1 represents a perfectly unequal society.</p>
<p>This would make South Africa one of the most consistently unequal countries in the world. I say “consistently” because you may find a Gini of say 0.7 for a country that has had only one survey in the last 20 years. This is not a consistent measure. Or you may find a society that has undergone civil war. </p>
<p><strong>How do we compare with other developing countries? What’s better or worse about South Africa than say India or Brazil?</strong> </p>
<p><a href="https://www.imf.org/external/pubs/ft/fandd/1997/09/pdf/clements.pdf">Brazil’s Gini</a> was very similar to South Africa’s in 1994. Since then, inequality in Brazil has <a href="http://www.mistra.org.za/Library/ConferencePaper/Documents/Why%20Inequality%20Matters-South%20African%20Trends%20and%20Interventions.pdf">fallen</a> given the rapid rise in secondary school enrolment and graduation rates (without sacrificing quality), the introduction of conditional cash transfers and strong economic growth. </p>
<p>India’s poverty levels remain higher than South Africa, but its inequality levels are <a href="http://www.oecd.org/els/soc/49170475.pdf">much lower</a> than that of Brazil and South Africa. In contrast to both economies, South Africa since democracy has seen a moderate reduction in poverty levels, combined with a sharp rise in income <a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1474271">inequality</a> since 1994. This has all been amid single-digit economic growth.</p>
<p><strong>How do we know how unequal South Africa is compared with other countries. What measures are used and what matters when measuring inequality? What’s missing in the measurements?</strong></p>
<p>Global datasets on measuring inequality, such as those produced by <a href="http://www.wider.unu.edu/publications/working-papers/2015/en_GB/wp2015-019/">UNU-WIDER</a> and the <a href="http://data.worldbank.org/indicator/SI.POV.GINI">World Bank</a>, allow us to make these cross-country comparison. Other measures of inequality include the <a href="http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/EXTPA/0,,contentMDK:20238991%7EmenuPK:492138%7EpagePK:148956%7EpiPK:216618%7EtheSitePK:430367,00.html">Theil Index</a> (to measure the contribution of between and within-group inequality to overall inequality) and the <a href="http://www.oxfordreference.com/view/10.1093/oi/authority.20110810104408650">Atkinson Index</a>.</p>
<p>One key omission in the measurement of inequality (and poverty) is that they are income-based. Hence, we do not account for non-income welfare among individuals and households. Access to public services such as energy and water together with a specific measurement of the accumulation of private assets are excluded from our standard measures of inequality and poverty. </p>
<p>The United Nations’ <a href="http://hdr.undp.org/en/content/human-development-index-hdi">Human Development Index</a> is one attempt at trying to incorporate some of these non-income dimensions into our measurement of welfare.</p>
<p><strong>Why is inequality so pronounced in South Africa?</strong></p>
<p>There are myriad reasons, but some of the key factors include skewed initial endowments (or assets that people and households have) post-1994 in the form of, for example, human capital, access to financial capital, and ownership patterns. All of these, and other endowments, served to generate a highly unequal growth trajectory, ensuring that those households with these higher levels of endowments gained from the little economic growth there was. </p>
<p>In addition, we are an economy characterised by a growth path which is both skills-intensive and capital-intensive, thus not generating a sufficient quantum of low-wage jobs – which is key to both reducing unemployment and inequality.</p>
<p><strong>What can be done about it? Is there anything the political economist Thomas Piketty can teach us?</strong> </p>
<p>Piketty’s thesis in part argues that schooling is critical for reducing inequality in the long-run. Human capital accumulation is one possible mechanism through which to overcome a growth path where the rate of return on capital ( r ) exceeds the rate of economic growth (g) – r>g. </p>
<p>To generate a more equal growth path, thus equalising r and g, it is argued that the schooling and educational pipeline plays a potentially crucial role in an economy’s long-run growth trajectory.</p><img src="https://counter.theconversation.com/content/48334/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Haroon Bhorat does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Twenty years ago, Brazil and South Africa were in a similar position when it comes to inequality. Brazil has made significant progress in addressing this, but South Africa hasn’t.Haroon Bhorat, Professor of Economics and Director of the Development Policy Research Unit, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/480702015-09-29T04:45:09Z2015-09-29T04:45:09ZPiketty’s contribution to unpacking inequality: timely and relevant<figure><img src="https://images.theconversation.com/files/96446/original/image-20150928-440-1uzatt9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A view of Alexandra township, a slum overlooking the Sandton skyscrapers in Johannesburg. Addressing inequality has been a major challenge for South Africa.</span> <span class="attribution"><span class="source">Reuters/Juda Ngwenya</span></span></figcaption></figure><p>Not many economists with something approaching a rockstar status visit South Africa. So the visit by French political economist Thomas Piketty, author of the bestselling <a href="http://www.amazon.com/Capital-Twenty-First-Century-Thomas-Piketty/dp/1491534656">Capital in the Twenty-first Century</a>, appears to be eagerly awaited by academics, especially those broadly on the left, and by many South Africans.</p>
<p>In 1976, <a href="http://www.nybooks.com/articles/archives/2007/feb/15/who-was-milton-friedman/">Milton Friedman</a>, then the rising rockstar economist of the <a href="https://ideas.repec.org/p/swe/wpaper/2013-35.html">anti-Keynesian</a> right wing in the US and Europe, made a visit to South Africa. He was wined and dined by the President Nico Diederichs and Finance Minister Owen Horwood. He and his economist wife Rose met with leading South African businessmen, political leaders and the South African Reserve Bank governor, among others. </p>
<p>Friedman’s message to South Africa was both political and economic. He was mightily impressed by what he described as:</p>
<blockquote>
<p>The unbelievably sophisticated economy you have developed at the tip of Africa, thousands of miles away from any similar civilisation.</p>
</blockquote>
<p>Friedman urged the West to support South Africa and Rhodesia as bastions against Soviet penetration. </p>
<p>Two nights before the couple left, then-South African Reserve Bank Deputy Governor Gerhard de Kock remarked:</p>
<blockquote>
<p>Friedman’s visit will have at least a ten-year impact on South Africa’s economic thinking.</p>
</blockquote>
<p>De Kock was right. What followed were major changes in <a href="http://www.abebooks.co.uk/Milton-Friedman-South-Africa-Visit-Graduate/8209428865/bd">monetary policy</a>, including those recommended by the De Kock Commission on Monetary Policy. </p>
<p>I am not sure whether Piketty will have a similar impact on economic thinking in South Africa today. I do predict, though, that ministers and former ministers will be bounding up the stairs to join him on his many platforms around the country. I would not be surprised if they expressed their total support for his analysis and his ideas. </p>
<p>Some, without the slightest sense of irony, may well make a case that they were and are the true champions of the struggle against poverty, inequality and unemployment in democratic South Africa. This despite the fact that they arrogantly relegated left, social democratic options such as the Freedom Charter and the Reconstruction and Development Programme to the dustbin of history.</p>
<p>Instead, in 1996 they opted for the neoliberal Growth, Employment and Redistribution Strategy, a macroeconomic policy. So a rewriting of the recent economic history of South Africa may well be one outcome of the Piketty visit. </p>
<h2>Piketty’s demolition of what went before</h2>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/96445/original/image-20150928-456-5fd3yo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/96445/original/image-20150928-456-5fd3yo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/96445/original/image-20150928-456-5fd3yo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/96445/original/image-20150928-456-5fd3yo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/96445/original/image-20150928-456-5fd3yo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/96445/original/image-20150928-456-5fd3yo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/96445/original/image-20150928-456-5fd3yo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Piketty’s message is timely and relevant.</span>
<span class="attribution"><span class="source">Reuters</span></span>
</figcaption>
</figure>
<p>To date, data from the relatively short post-second world war period up until the end of the 20th century has been read mostly in sympathy with a neo-classical interpretation. In this period the hypothesis behind the <a href="http://economics.about.com/cs/economicsglossary/g/kuznets_curve.htm">Kuznets Curve</a> was the dominant thinking about development and income inequality. This argues that inequality first increases in the early stages of development, reaches a maximum at an intermediate level of income, and then declines as the country achieves a high level of per capita income. </p>
<p>Into this picture steps Piketty. With his 300-year-old datasets he demolishes the Kuznets hypothesis. He shows instead that the turn away from inequality over time and in the course of development and global integration is not assured. And, he argues, intervention in the market mechanism is required to arrest and reverse the increasing share of income that capital relentlessly claims over time.</p>
<p>Piketty shows that it was the interventions between 1914 and 1945 that arrested the trend towards greater and greater inequality. These included taxation policies in the 1920s and 1930s which were less favourable to the owners of capital. </p>
<p>He shows that <a href="http://wiser.wits.ac.za/system/files/documents/Padayachee%20--%20Piketty%20--%20May%2019.pdf">patrimonial capital</a> is the largest contingent of total capital. Central to understanding capitalists’ drive to accumulate is increasing economies of scale. Whereas Karl Marx focused on the increasing economies of scale of industry, Piketty shows how the same benefits of scale apply to investment performance of capital.</p>
<p>Despite some reservations about his analysis and his policy prescriptions I believe that Piketty does convey an important and timely message. He combines a grasp of western economic history and an analysis of long run historical data to point to the nature, form and variety that western capitalism has assumed over an extended time. Sharply widening inequalities of income and wealth between rich and poor is the most blatant. </p>
<p>Piketty does indeed have something to say to the beneficiaries of this variety of capitalism who praise and parrot this model and its values. This includes the corporates and the ever-richer elites and to many in aspirant and new middle classes in countries including South Africa and India. </p>
<h2>So, what are Piketty’s answers?</h2>
<p>Piketty is right to point to the need for a robust debate about the kind of state – a social state, he calls it – that is required at the beginning of the 21st century to regulate a rampant inegalitarian capitalism. New institutions and instruments are needed to regain control over globalised financial capitalism, and “to achieve a just social order”. But when it comes to specifics, Piketty’s economic policy prescriptions are not very convincing. </p>
<p>In my view, they do not take progressive macroeconomic policy much further. If anything it sets back thinking in this crucial policy arena, both at national and global level. His policy response to the crisis he correctly analyses, as <a href="http://aotcpress.com/articles/faces-thomas-piketty-reflections-1-bestseller/">Chris Gregory notes</a>, is constructed:</p>
<blockquote>
<p>… in the narrowest apolitical, mathematical tradition of 20th century mainstream economics. </p>
</blockquote>
<p>An international tax on capital is not likely to be implementable under current national or regional political models. Action is more likely to originate at a national, not international level. In my view this would include a serious relook at old and new forms of control over currency, capital mobility and banking regulation. </p>
<p>Piketty has little to say about all this, apart from noting (on the basis of China’s admittedly opaque and unstable system of capital regulation) that:</p>
<blockquote>
<p>… capital controls are one way of regulating and containing the dynamics of wealth inequality.</p>
</blockquote>
<p>But how would this work in more democratic, transparent and liberal regimes than the China of today?</p>
<p>By way of contrast, and much more practically, Nobel Prize-winning economist Joseph Stiglitz has <a href="http://www.washingtonpost.com/news/wonkblog/wp/2015/05/12/liberals-have-a-new-manifesto-for-fighting-inequality-and-its-very-liberal/">teamed up</a> with others to push for US national economic policy options aimed at curbing the flow of economic gains to the wealthiest and most powerful. Those he has teamed up with include New York Mayor Bill de Blasio and US Senator Elizabeth Warren.</p>
<p>Their argument is based on the <a href="http://community-wealth.org/sites/clone.community-wealth.org/files/downloads/report-stiglitz.pdf">premise</a> that “equality and economic performance are complementary rather than opposing forces”. On the agenda are policies such as increased taxes on the wealthy to fund education, affordable housing and job-creating infrastructure, as well as minimum wages and benefits for the poor. </p>
<p>These issues, and a few others, are of relevance to South Africa today. The others would include an appropriate form and shape of a “social state”, tax policy, a national minimum wage, and capital controls to curb the billions of dollars leaving South Africa legally and illegally. Perhaps Piketty can be persuaded to share his views on these matters.</p><img src="https://counter.theconversation.com/content/48070/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Vishnu Padayachee does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Will Thomas Piketty’s visit to South Africa trigger the rewriting of the country’s recent economic history? His analysis and ideas on how to address inequality are hard to ignore.Vishnu Padayachee, Distinguished Professor and Derek Schrier and Cecily Cameron Chair in Development Economics, School of Economics and Business Sciences, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/482552015-09-29T04:44:52Z2015-09-29T04:44:52ZThe study of inequality has been mainstreamed – what now for the left?<figure><img src="https://images.theconversation.com/files/96511/original/image-20150928-30967-4g6efj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Global South is engineering new anti-poverty strategies, leaving traditional left analysts in a quandry.</span> <span class="attribution"><span class="source">Reuters/Nacho Doce</span></span></figcaption></figure><p>It could be said that mainstream economic research is informing the left’s long-term critique of trickle-down economics.</p>
<p>Three extensive pieces of research illustrate how the study of inequality has been mainstreamed. Thomas Piketty, in <a href="http://www.hup.harvard.edu/catalog.php?isbn=9780674430006">Capital in the Twenty-First Century</a>, confirms that market-led growth deepens inequality and good redistributive policies improve growth. Tracing changes in inequality since 1921, <a href="http://www.ilo.org/wcmsp5/groups/public/---ed_dialogue/---actrav/documents/publication/wcms_247981.pdf">Kate Pickett and Richard Wilkinson</a> show that among the richest countries, it is the more unequal ones that do worse according to almost every quality of life indicator.</p>
<p>Another important voice is the re-emergence of Keynesian arguments against inequality. In a more recent study <a href="http://www.ilo.org/wcmsp5/groups/public/---ed_dialogue/---actrav/documents/publication/wcms_247981.pdf">Herr, Ruoff and Salas</a> argue that financialisation is part of a neoliberal political project designed to increase the share of income going towards profits, thereby increasing inequality. </p>
<p>Three broad conclusions can be drawn from these studies of inequality:</p>
<ul>
<li><p>First, levels of inequality were reduced between the 1920s and the early 1970s by the use of a series of policy instruments, such as progressive taxation and nationalisation. Also key were the growth and development of trade unions. </p></li>
<li><p>Second, inequality has a negative affect on the quality of life, including life expectancy, levels of violence and other societal problems.</p></li>
<li><p>Third, the growth in levels of inequality since the seventies is the result of a political project designed to increase the power of capital over labour. This is especially so of finance capital. This <a href="http://www.boeckler.de/pdf/v_2014_10_30_herr_ruoff.pdf">“neoliberal revolution”</a> has not only increased the share of income going to profits. It has also weakened trade unions and eroded the institutional gains made by workers in advanced capitalist countries after the second world war.</p></li>
</ul>
<h2>Social policy as the panacea</h2>
<p>There has been widespread discussion in recent years of policy instruments such as conditional cash transfers, the basic income grant and increasing taxes on the rich, including a financial transaction tax on high frequency fines. But a number of debates remained unresolved.</p>
<p>One is around social policy. Armando Barrientos and David Hulme suggest that a <a href="http://r4d.dfid.gov.uk/Output/186955/">“quiet revolution”</a> is taking place in social policy in the Global South. They argue that social protection is now better grounded in development theory. </p>
<p>This is especially in an understanding of the factors preventing access to economic opportunity and leading to persistent poverty and vulnerability. The initially dominant conceptualisation of social protection as social risk management is being extended by approaches grounded in basic human need and capabilities.</p>
<p>In practice, this has <a href="http://r4d.dfid.gov.uk/Output/186955/">involved</a> the:</p>
<blockquote>
<p>… rapid up-scaling of programmes and policies that combine income transfers with basic services, employment guarantees or asset building. </p>
</blockquote>
<p>Many of these programmes and policies have been dismissed by the left as <a href="http://econpapers.repec.org/article/gigafjour/v_3a46_3ay_3a2012_3ai_3a2-3_3ap_3a33-62.htm">neo-liberal</a> and <a href="http://ndabaonline.ukzn.ac.za/NewsletterPrinter.aspx?id=26">tokenistic</a>. The question raised by our research is whether, as <a href="http://www.osisa.org/sites/default/files/schools/ferguson_2009_users_of_neoliberalism.pdf">Ferguson</a> provocatively puts it:</p>
<blockquote>
<p>Can we on the left do what the right has, in recent decades, done so successfully, that is, to develop new modes and mechanisms of government? And (perhaps more provocatively) are the neoliberal “arts of government” that have transformed the way that states work in so many places around the world inherently and necessarily conservative, or can they be put to different uses? To ask such questions requires us to be willing at least to imagine the possibility of a truly progressive politics that would also draw on governmental mechanisms that we have become used to terming “neoliberal”.</p>
</blockquote>
<p>The growing institutionalisation of social assistance as a right through intense political struggle is the story in India, Brazil and South Africa. James Ferguson <a href="http://www.osisa.org/sites/default/files/schools/ferguson_2009_users_of_neoliberalism.pdf">suggests</a> that this:</p>
<blockquote>
<p>… redefines groups in poverty as citizens (social citizens). A deepening of democracy follows. </p>
</blockquote>
<p>These emerging welfare regimes of the South, what Ian Gough calls <a href="http://eprints.lse.ac.uk/51023/1/Gough_social_policy_regimes_2013.pdf">informal security regimes</a>, rely on informal work as well as a variety of livelihood strategies such as street trading, the extended family, and the villages and communities within which they are embedded.</p>
<p>But, these schemes merely temporarily alleviate the conditions of the poor; they do not enable the poor to escape poverty. Unlike the social assistance schemes in South Africa and India, the focus of Brazil’s <a href="http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:21447054%7EpagePK:64257043%7EpiPK:437376%7EtheSitePK:4607,00.html">Bolsa Familia</a> programme is not on providing jobs for the unemployed poor. Instead, this scheme and its predecessors focus on a combination of income grant and means to enhance “human capital” development. </p>
<p>This means-tested cash benefit is attached to certain conditions, mainly school attendance and health checks for children.</p>
<h2>What’s needed to bring about real change</h2>
<p>A final key unresolved issue is an identification of the social forces that will align with the union movement. It is important to note that fundamental differences in the perceptions of the role of trade unions exist – differences that have divided the trade union movement since unions first emerged in 19th-century Europe. </p>
<p>The division lies between those who discern significant potential in trade union activity, and those who argue that such activity does not in itself facilitate the transformation of capitalist society. Some hold that it may even inhibit it.</p>
<p>Could the surge of worker and popular resistance worldwide provide the global trade union movement with an opportunity for the optimistic tradition to re-emerge? Could global labour take the lead in developing <a href="http://socialistregister.com/index.php/srv/article/view/18814#.VglNfvnvPIU">a broad coalition</a> of social forces that combines initiatives for change from within government with support for developing wider, more radical sources of power outside?</p>
<p>If the labour movement is to play this broader role, new forms of organisation, new sources of power and new forms of worker solidarity will need to be constructed. </p>
<p>A broader role for labour will require reviving and redefining the role of labour as a <a href="https://books.google.co.za/books?id=FuUmIixUldwC&pg=PA162&lpg=PA162&dq=Flanders,+unions+as+sword+of+justice&source=bl&ots=Hb-Nahmls0&sig=-H45BIYNgfhYpVLoUXD9U9N5L5w&hl=en&sa=X&ved=0CCQQ6AEwAWoVChMI6eW47uKZyAIVS78UCh2cewLh#v=onepage&q=Flanders%2C%20unions%20as%20sword%20of%20justice&f=false">“sword of justice”</a> in the fight against inequality and not as a “defender of vested interest”.</p>
<p>Globalisation must be seen not only as a constraint. It is also an opportunity for new forms of transnational networks to build a movement at various levels, worker to worker, worker to communities, union to union and between labour scholars.</p>
<hr>
<p><em>The article is drawn from Webster, E. and Morris, C. Trade Unions and the Challenge of Economic Inequality: An Unresolved Debate. In Alexander Gallas, A., Herr, H., Hoffer, F. and Scherrer, C. (eds.). Combating Inequality: The Global North and South. London: Routledge.</em></p><img src="https://counter.theconversation.com/content/48255/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Edward Webster is the outgoing director of the Chris Hani institute.</span></em></p>Could the surge of worker and popular resistance worldwide provide the global trade union movement with an opportunity to take the lead in developing a broad coalition of social forces?Edward Webster, Professor Emeritus, Society, Work and Development Institute , University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/434732015-07-16T04:11:48Z2015-07-16T04:11:48ZPiketty’s Capital should force a rethink on animals as property<figure><img src="https://images.theconversation.com/files/86213/original/image-20150624-801-puix3k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Thomas Piketty's book provides new tools to consider the property status of animals in contemporary society.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/cafnr/14586152023/in/photolist-odVQPH-odVR2r-oc5Cxm-oa7w5J-nUEnxG-obRx1z-nUFitX-odVR3t-odVR4v-fzuwSK-69qDD8-nNXSHq-8MBDdG-6E9gSG-qbjVpn-dedY5Z-trHPP-48y2cj-7xHJjx-dt1idf-6GXjNB-oc1hpL-oc9SwZ-oa7vVL-oc1hsw-nUEnod-oc9SGt-nUExCn-oc9Szz-nUE5fY-odVQWg-obRwTF-nUExCT-7iih8a-4u8FDC-4u3HzZ-4u6Ren-4uaTxd-qxK5VN-4u6Rik-bJhYnX-bvobAm-4u6RiP-7KLNLv-bJhZmt-bJhZwa-4u6RgX-4uaTLh-cAJD81-bJhYeT">Morgan Lieberman</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span></figcaption></figure><p><em>This article is part of the <a href="https://theconversation.com/au/topics/democracy-futures">Democracy Futures</a> series, a <a href="http://sydneydemocracynetwork.org/shortcodes/images-videos/articles-democracy-futures/">joint global initiative</a> with the <a href="http://sydneydemocracynetwork.org/">Sydney Democracy Network</a>. The project aims to stimulate fresh thinking about the many challenges facing democracies in the 21st century.</em></p>
<hr>
<p>Thomas Piketty’s <a href="http://www.hup.harvard.edu/catalog.php?isbn=9780674430006">Capital in the Twenty-First Century</a> argues that there are good reasons that human labour should be treated separately from capital. The most obvious is that:</p>
<blockquote>
<p>Human capital cannot be owned by another person or traded on a market. </p>
</blockquote>
<p>Seeing as we do not live in a slave society anymore, it makes no sense to treat human labour as a form of “capital”. </p>
<p>But what about animals as capital? Should animals be treated like other forms of property such as land, machinery and “stocks”? What role do animals that are owned by humans play in the concept of global wealth?</p>
<p>And does potentially owing animals ethical and political consideration contribute to the need for a different understanding of them and their relationship to wealth? </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/86179/original/image-20150624-19411-48erwe.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/86179/original/image-20150624-19411-48erwe.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=384&fit=crop&dpr=1 600w, https://images.theconversation.com/files/86179/original/image-20150624-19411-48erwe.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=384&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/86179/original/image-20150624-19411-48erwe.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=384&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/86179/original/image-20150624-19411-48erwe.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=482&fit=crop&dpr=1 754w, https://images.theconversation.com/files/86179/original/image-20150624-19411-48erwe.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=482&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/86179/original/image-20150624-19411-48erwe.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=482&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Animals used in food production are often known as livestock and are used as a commodity.</span>
<span class="attribution"><span class="source">Socially Responsible Agricultural Project/flickr</span></span>
</figcaption>
</figure>
<h2>A matter of value?</h2>
<p>We tend to take it for granted that animals can be owned as property and that animals cannot be said to “labour” like humans. Today, the reality for many of the animals that humans have direct contact with is that they are owned as property and are used as commodities. </p>
<p>Most would argue that there is no problem with owning animals as property. Some believe this helps to promote welfare. For example, animal welfare scientist <a href="https://www.voiceless.org.au/who-we-are/john-webster">John Webster</a> suggests that markets are the only realistic way for humans to <a href="http://www.ncbi.nlm.nih.gov/pubmed/11352481">value the animals</a>. The argument is premised on the idea that owning animals facilitates a self-interest in promoting their welfare. </p>
<p>This perspective can be seen in responses to PETA’s <a href="http://www.peta.org.au/the-issues/wear/jona-weinhofen-reveals-the-bloody-truth-behind-every-wool-coat/">campaign</a> to raise awareness about the use of sheep in the wool industry. Advocates for the wool industry have objected to PETA, arguing that the welfare of sheep is a <a href="http://www.adelaidenow.com.au/news/south-australia/farmers-condemn-false-peta-campaign-about-cruel-shearing-practices-in-australias-wool-industry/story-fni6uo1m-1227300055571">priority</a> for the industry. </p>
<p>In this view, property owners have <a href="http://www.theguardian.com/world/bush-mail/2015/apr/14/jona-weinhofen-should-stick-to-guitar-his-anti-shearing-ad-is-a-work-of-fiction">an interest in the humane treatment</a> of the animals they own. </p>
<p>Liberal Democrat senator David Leyonhjelm even proposed <a href="http://www.theguardian.com/world/2015/mar/18/david-leyonhjelm-wants-native-wildlife-kept-as-pets-to-prevent-extinction">private ownership of native wildlife</a> as a means to protect these animals from extinction.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/86180/original/image-20150624-27696-1qcqugj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/86180/original/image-20150624-27696-1qcqugj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=790&fit=crop&dpr=1 600w, https://images.theconversation.com/files/86180/original/image-20150624-27696-1qcqugj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=790&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/86180/original/image-20150624-27696-1qcqugj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=790&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/86180/original/image-20150624-27696-1qcqugj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=993&fit=crop&dpr=1 754w, https://images.theconversation.com/files/86180/original/image-20150624-27696-1qcqugj.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=993&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/86180/original/image-20150624-27696-1qcqugj.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=993&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Australian musician Jona Weinhofen stars in PETA’s controversial anti-wool campaign.</span>
<span class="attribution"><span class="source">PETA</span></span>
</figcaption>
</figure>
<p>These views differ dramatically from the sort of arguments that animal rights theorists have put forward. <a href="https://law.newark.rutgers.edu/faculty/faculty-profiles/gary-l-francione">Gary Francione</a>, renowned for his contribution to <a href="http://en.wikipedia.org/wiki/Animals,_Property,_and_the_Law">animal rights theory</a>, challenges private ownership by highlighting how this relationship favours the rights of property owners rather than animals. </p>
<p>As in other areas of law, property owners demand a right to maximum enjoyment of their own property. This does not always lead to a neat fit between the interests of property owners and the interests of the animals they own. Francione argues that the interests of human owners will always prevail over the interests of their animals. </p>
<p>Regardless of individual views on this question, there is no doubt that animals as property are a growing feature of world economies. The most recent United Nations Food and Agriculture Organisation (UNFAO) figures estimate a world standing population of close to 30 billion <a href="http://faostat.fao.org/site/569/default.aspx#ancor">livestock animals</a>. This “standing stock” annual figure does not include food animals such as live fish that can be owned as property in aquaculture farms. Fish are some of the most <a href="http://www.foodprocessing-technology.com/features/featurethe-10-most-traded-food-and-beverage-commodities-4181217/">intensively traded</a> food commodities in the world. </p>
<p>The desire for efficiency in the production of animals for food has led to large increases in both the number of animals held in stocks and the number of animals that are killed each year. UNFAO <a href="http://www.fao.org/docrep/019/i3440e/i3440e.pdf">observes</a> that from 1980 to 2010, the world’s standing population of chickens increased by 272%, while the number of chickens slaughtered rose by 305% – from 18.4 billion to 56.2 billion. </p>
<p>The animals we use contribute significantly to global economies as a source of wealth. </p>
<h2>Merit or theft?</h2>
<p>Although Piketty does not directly address animals in his book, he provides us with the tools to consider the problem of owning animals as property in a different way.</p>
<p>One of the driving questions in Piketty’s book is the role of <a href="https://theconversation.com/whats-wrong-with-merit-why-equal-treatment-does-not-reward-the-most-deserving-18317">merit</a> in democracies. Today’s democracies value the principles of earning power and resources from labour and skill, rather than gained through privilege.</p>
<p>Piketty makes the extraordinary claim that in:</p>
<blockquote>
<p>… all societies, there are two ways of accumulating wealth: through work or inheritance. </p>
</blockquote>
<p>Piketty goes on to explain that theft and pillage are excluded, “although these are not totally without historical significance”. </p>
<p>“Theft and pillage” might extend to a variety of circumstances of historical wealth generation, whether in the cases of slavery that have haunted human history, or in the European ransacking of resources (human and non-human) as part of the colonial project. Today, we can ask whether modern forms of <a href="http://tribune.com.pk/story/662841/bangladesh-garment-factories-failing-to-pay-minimum-wage/">low wage</a> and <a href="http://articles.latimes.com/2013/jan/09/world/la-fg-pakistan-kilns-20130110">bonded</a> labour might fall into the category of “theft”.</p>
<p>However, we might equally ask if our property claims over non-human animals also represent a persistent form of “theft” in contemporary economies. Do we have a right to the wealth that we accumulate from animals? Is all of this wealth – value acquired from living beings – ours to take? </p>
<h2>A different kind of debt</h2>
<p>Recent <a href="http://philosophy.tamu.edu/html/bio-Palmer.html">perspectives</a> in animal philosophy and ethics have suggested that we need to pay more attention to our <a href="http://cup.columbia.edu/book/animal-ethics-in-context/9780231129046">relational obligations</a> to animals. Others have <a href="http://histcon.ucsc.edu/faculty/singleton.php?&singleton=true&cruz_id=haraway">argued</a> that our ethics should recognise the way in which we are <a href="https://www.upress.umn.edu/book-division/books/when-species-meet">co-shaped by the animals</a> that are around us. While others have <a href="http://www.vanderbilt.edu/AnS/philosophy/_people/_oliver.html">stated</a> that we have a “<a href="http://cup.columbia.edu/book/animal-lessons/9780231147262">fundamental indebtedness</a>” towards animals that must be acknowledged.</p>
<p>Quantifying our <a href="http://cup.columbia.edu/book/animal-lessons/9780231147262">debt</a> to animals need not be merely abstract. Some estimates suggest that global livestock industries are worth <a href="http://rstb.royalsocietypublishing.org/content/365/1554/2853">US$1.4 trillion</a>. Wild fish capture and aquaculture are also significant global industries. In 2010, UNFAO estimated the value of wild-caught fish and aquaculture fish to be <a href="http://www.fao.org/docrep/016/i2727e/i2727e.pdf">US$217.5 billion</a>. </p>
<p>The industries and profits animals generate represent a great deal of human entrepreneurship, labour and investment. However, it would be pure arrogance to insist that animals themselves play no part in producing global wealth and that the full value of their lives and bodies belongs to us.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/86215/original/image-20150624-790-1f99fgn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/86215/original/image-20150624-790-1f99fgn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/86215/original/image-20150624-790-1f99fgn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/86215/original/image-20150624-790-1f99fgn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/86215/original/image-20150624-790-1f99fgn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/86215/original/image-20150624-790-1f99fgn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/86215/original/image-20150624-790-1f99fgn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Should animals be considered as fellow citizens rather than property?</span>
<span class="attribution"><span class="source">Sangudo/flickr</span></span>
</figcaption>
</figure>
<p>The growing interest in the role that the non-human may play in shaping the future of democracies raises important questions. Should we recognise some animals as having some of the legal statuses that we <a href="http://www.independent.co.uk/news/world/americas/sandra-the-orangutan-inside-argentina-zoo-granted-human-rights-in-landmark-ruling-9940202.html">award humans</a>? Or, should we go as far as to recognise domestic animals as <a href="https://global.oup.com/academic/product/zoopolis-9780199599660?cc=au&lang=en&">citizens</a>?</p>
<p>Such social justice proposals remain impossible to imagine in a world that is economically and socially invested in animals for food and resources. However, a different future could await us. If humans are no longer able to be defined as possessions in contemporary democracy, then further developments may force us to reconsider animals as property.</p><img src="https://counter.theconversation.com/content/43473/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dinesh Wadiwel does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Should animals be treated like other forms of property such as land, machinery and “stocks”? What role do animals that are owned by humans play in the concept of global wealth?Dinesh Wadiwel, Director, Master of Human Rights, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/367142015-01-26T17:36:01Z2015-01-26T17:36:01ZThe digital economy is no leveller, it’s a source of inequality<figure><img src="https://images.theconversation.com/files/69990/original/image-20150126-24525-jb6n0x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Servers. Servants or masters?</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/traftery/4773457853/in/photolist-8gPdHt-6gYLHR-4H1hyC-7H6iUU-2Wrvx-3nmcK5-65cUp7-5RvGZs-6NAXg-n6mHgT-Je5v9-9v7Kgx-iygJ-6iUZPe-6FjB2M-iLD3xL-NhE1s-bjtT-2XQgfL-6cjdcD-JebAB-6gYLjx-2kAaZ-cKbUb-cfXKY1-mZJBc2-8XH6Na-5fipyz-4YVJXw-4kkb8-7YNxq-bf2wtK-exjsm-6h3W3W-4PGC7o-3M87z-ac3oaX-6JT4iU-8NwzC-eWnwZ-akqkB-VX9x-8cd3Np-5nSsLu-tCk6d-7oFUpS-cEeN1-2JXe1q-8bpdqd-cqqwcb">Tom Raftery</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>When we think about income and wealth inequalities we are tempted to lay blame on the old way of doing things. In <a href="https://theconversation.com/the-inherent-vice-of-capitalism-underpins-the-value-of-piketty-27249">Capital in the Twenty-First Century</a>, Thomas Piketty picks out inherited money as a driver of unsustainable disparities between the global rich and poor. <a href="http://www.oxfam.org.uk/blogs/2015/01/richest-1-per-cent-will-own-more-than-all-the-rest-by-2016">Oxfam recently pinpointed</a> the high-profit finance and pharmaceutical industries as engines of inequality that distribute wealth to the wealthy. </p>
<p>This view is consistent with those who <a href="http://googlepolicyeurope.blogspot.co.uk/2014/10/promoting-social-mobility-through.html">place their faith in the digital economy</a> as some kind of solution. It is held up as an alternative to traditional forms of economic activity, and one which can generate sustainable growth and narrow inequality. Lower barriers of entry into its markets (“anyone can start a business on the internet!”) is said to widen opportunities and lead to a more equitable distribution of wealth. </p>
<p>It is for this reason that many politicians and academics continue to advocate the aggressive expansion of the digital economy, especially into areas which have not witnessed much of this type of economic activity. Sadly, it’s not quite as simple as that.</p>
<h2>Creative licence</h2>
<p>The expansion of the digital economy has gone hand-in-hand with the growth of the creative industries. The UK’s pioneering development of <a href="http://eprints.lse.ac.uk/15478/1/Cultural_industries_and_cultural_policy_%28LSERO%29.pdf">policy on the creative industries</a> in the late 1990s was predicated partly on the desire to exploit the intellectual property generated by burgeoning digital technology. That applied particularly to those single operators and small businesses that proliferated in the cultural and creative sectors. </p>
<p>Similar policies have been used in countries at varying levels of development in the early years of the 21st century. Look at the UN’s enthusiastic promotion of the creative economy, and its suggestion that these kind of structural reforms could work in <a href="http://unctad.org/en/Pages/DITC/CreativeEconomy/Creative-Economy-Programme.aspx">both the developed world and in emerging markets</a>. This explains why much research on developmental economics focuses on narrowing the so-called digital divide in order to give more equal access to a global economic system which promises prosperity for all.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/69998/original/image-20150126-24525-xstg9a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/69998/original/image-20150126-24525-xstg9a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/69998/original/image-20150126-24525-xstg9a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/69998/original/image-20150126-24525-xstg9a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/69998/original/image-20150126-24525-xstg9a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/69998/original/image-20150126-24525-xstg9a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/69998/original/image-20150126-24525-xstg9a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/69998/original/image-20150126-24525-xstg9a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Lighting up Manhattan. New York by night.</span>
<span class="attribution"><span class="source">Victoria Dimmock</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>But what if the problem is the digital economy itself rather than our incapacity to fully exploit the opportunities it seemingly presents? The first chapter of <a href="http://www.theguardian.com/business/2014/apr/16/michael-lewis-flash-boys-wall-street-insane">Michael Lewis’s book Flash Boys</a> opens with a story about construction workers on a project to lay a tunnel for fibre-optic cables as straight as they possibly could, even if this involved digging through mountains or river beds. The reason: to connect financial exchanges in New York and Chicago by the shortest possible route and give the operators a crucial few milliseconds advantage when processing transactions.</p>
<p>A huge amount of money is required to carry out such projects, and to buy the supercomputers that can manipulate the data and run the trading programs. It starts to look like a rigged game and it is difficult to see how a digital economy in which financial speculation is so prominent can reduce inequality.</p>
<h2>Stuck in the middle with you</h2>
<p>There are undoubtedly other sectors of the digital economy where lower barriers of entry do encourage smaller operators. The early development of search engines and social networking were characterised by experimentation by single operators or small groups of people, sometimes students, at home or at university. This pioneering <a href="http://www.entrepreneur.com/article/217567">image of isolated entrepreneurs</a> developing great companies from scratch goes hand-in-hand with radical sounding rhetoric about taking on vested interests. </p>
<p>In this worldview, cutting out the middle man, a superfluous type of employee who will not move with the times, is seen as a demonstrably good thing. Thus, taxi drivers who complain about having their business <a href="https://theconversation.com/fares-fair-uber-sparks-battle-for-taxi-supremacy-in-london-26363">taken away by Uber</a> are often described as inflexible and prone to over-charging. But the middle-man has not disappeared in the digital economy; they have just got richer. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/69996/original/image-20150126-24505-1nsybvy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/69996/original/image-20150126-24505-1nsybvy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/69996/original/image-20150126-24505-1nsybvy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/69996/original/image-20150126-24505-1nsybvy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/69996/original/image-20150126-24505-1nsybvy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/69996/original/image-20150126-24505-1nsybvy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/69996/original/image-20150126-24505-1nsybvy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/69996/original/image-20150126-24505-1nsybvy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Moshi Monsters. The power of all-consuming music.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/designateddisaster/3927540010/in/photolist-6Z4EP5-2NXAG-2yWJtK-87Ed1P-oKLg9h-5ujKi9-419dPf-419dyY-414Yt6-414YJz-414Zsg-419cwd-419cph-419e9N-419e4w-6JRM6K-3qcwN-79Unzn-4y6zjb-6JTuMr-6JXzGA-6JVhds-6JVgsW-6JRLwp-7psV9X-7psUVZ-7pwMCq-7psUri-85a78u-85a76Q-29J3Wf-FZii6-dvQnA-dvQCQ-adMwgi-6xJ6vd-6xDWki-6xDWnr-6xDWi8-6xDWgr-6xDWh6-7YqEEG-egrZi4-oth5ER-rvN5T-6JRsvB-7knjjr-FZb2y-61uGHh-7Xqw85">Daniel Gable</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>Think of the music industry. Online stores have resulted in the loss of many jobs as a result of physical record stores closing down. However, our changing habits have not cut out the middle-man. We buy most of our music from <a href="https://www.apple.com/uk/itunes/charts/">intermediaries like Apple</a>. Even record labels, seemingly superfluous to the online music industry, <a href="http://www.thevinylfactory.com/vinyl-factory-releases/future-records-we-meet-8-young-record-labels-pushing-vinyl-forwards-in-2014/">continue to flourish</a>. </p>
<p>In other words, while the poorer middle-men – record store assistants, or taxi drivers – have been ruthlessly squeezed, wealthier intermediaries continue to prosper. Even the supposedly lower barriers to entry in these industries have not prevented monopolies emerging in online markets in a way that is not as prominent in markets offline. </p>
<h2>A role for universities</h2>
<p>It would be easy to finish this piece with a long list of proposed solutions to these inequities. But what is really needed is the necessary intellectual work of persuading wider society that the digital economy does indeed pose problems. This is not helped by the sense that higher education, one of the best placed sectors to lead this debate, is not always up to this task. </p>
<p>While the views that are expressed in this article are shared by many in this sector, It is often difficult to seek institutional support for research in this area when the coalition government’s policy of requiring humanities-based schools and departments to be financially self-sustaining has driven many of them into the arms of big business or into partnership with STEM (Science, Technology, Engineering and Mathematics) colleagues who might not be as interested in a critical examination of the foundations of the digital economy. </p>
<p>Many of these solutions involve digital technology, with big data being the latest whose application promises to <a href="http://www.rcuk.ac.uk/research/infrastructure/big-data">address various social and economic woes</a>. How welcome it would be if funding bodies could also increase the number of schemes which ask why the rapid growth of the digital economy over the past two decades has failed both to reduce inequality and save us from the most severe financial crisis since the 1930s.</p><img src="https://counter.theconversation.com/content/36714/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew White does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>When we think about income and wealth inequalities we are tempted to lay blame on the old way of doing things. In Capital in the Twenty-First Century, Thomas Piketty picks out inherited money as a driver…Andrew White, Associate Professor of Creative Industries & Digital Media, University of NottinghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/362402015-01-15T19:32:34Z2015-01-15T19:32:34ZArtificial Intelligence should benefit society, not create threats<figure><img src="https://images.theconversation.com/files/68952/original/image-20150114-6375-plrdfn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Science fiction has plenty of tales of AI turning against society including the popular Terminator movie franchise, here depicted on brick wall art.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/garryknight/7468555248">Flickr/Garry Knight</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Some of the biggest players in Artificial Intelligence (AI) have joined together calling for any research to focus on the benefits we can reap from AI “while avoiding potential pitfalls”. Research into AI continues to seek out new ways to develop technologies that can take on tasks currently performed by humans, but it’s not without criticisms and concerns.</p>
<p>I am not sure the famous British theoretical physicist <a href="http://www.hawking.org.uk/">Stephen Hawking</a> does irony but it was somewhat ironic that he recently welcomed the arrival of the smarter predictive computer software that controls his speech by <a href="https://theconversation.com/is-stephen-hawking-right-could-ai-lead-to-the-end-of-humankind-34967">warning us</a> that:</p>
<blockquote>
<p>The development of full artificial intelligence could spell the end of the human race.</p>
</blockquote>
<p>Of course, Hawking is not alone in this view. The serial entrepreneur and technologist Elon Musk <a href="https://theconversation.com/elon-musk-is-right-we-need-to-talk-about-artificial-intelligence-33577">also warned</a> last year that:</p>
<blockquote>
<p>[…] we should be very careful about artificial intelligence. If I had to guess at what our biggest existential threat is, it’s probably that.</p>
</blockquote>
<p>Both address an issue that taps into deep, psychological fears that have haunted mankind for centuries. What happens if our creations eventually cause our own downfall? This fear is expressed in stories like Mary Shelley’s Frankenstein.</p>
<h2>An open letter for AI</h2>
<p>In response to such concerns, an <a href="http://futureoflife.org/misc/open_letter">open letter</a> has just been signed by top AI researchers in industry and academia (as well as by Hawking and Musk).</p>
<p>Signatures include those of the president of the <a href="http://www.aaai.org/">Association for the Advancement of Artificial Intelligence</a>, the founders of AI startups <a href="http://deepmind.com/">DeepMind</a> and <a href="http://vicarious.com/">Vicarious</a>, and well-known researchers at Google, Microsoft, Stanford and elsewhere.</p>
<p>In the interests of full disclosure, mine is also one of the early signatures on the list, which continues to attract more support by the day. </p>
<p>The open letter argues that there is now a broad consensus that AI research is progressing steadily and its impact on society is likely to increase.</p>
<p>For this reason, the letter concludes we need to start to research how to ensure that increasingly capable AI systems are robust (in their behaviours) and
beneficial (to humans). For example, we need to work out how to build AI systems that result in greater prosperity within society, even for those put out of work.</p>
<p>The letter includes a link to a document outlining some <a href="http://futureoflife.org/static/data/documents/research_priorities.pdf">interdisciplinary research priorities</a> that should be tackled in advance of developing artificial intelligence. These include short-term priorities such as optimising the economic benefits and long-term priorities such as being able to verify the formal properties of AI systems.</p>
<h2>The AI threat to society</h2>
<p>Hollywood has provided many memorable visions of the threat AI might pose to society, from Arthur C. Clarke’s <a href="http://www.imdb.com/title/tt0062622/">2001: A Space Odyssey</a> through <a href="http://www.imdb.com/title/tt0093870/">Robocop</a> and <a href="http://www.imdb.com/title/tt0088247/">Terminator</a> to recent movies such as <a href="http://www.imdb.com/title/tt1798709/">Her</a> and <a href="http://www.imdb.com/title/tt2209764/">Transcendence</a>, all of which paint a dystopian view of a future transformed by AI. </p>
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<p>My opinion (and one many of my colleagues share) is that AI that might threaten our society’s future is likely still some way off.</p>
<p>AI researchers have been predicting it will take another 30 or 40 years now for the last 30 or 40 years. And if you ask most of them today, they (as I) will still say it is likely to take another 30 or 40 years.</p>
<p>Making computers behave intelligently is a tough scientific nut to crack. The human brain is the most complex system we know of by orders of magnitude. Replicating the sort of intelligence that humans display will likely require significant advances in AI. </p>
<p>The human brain does all its magic with just 20 watts of power. This is a remarkable piece of engineering. </p>
<h2>Other risks to society</h2>
<p>There are also more imminent dangers facing mankind such as climate change or the ongoing global financial crisis. These need immediate attention.</p>
<p>The <a href="http://www.fhi.ox.ac.uk/">Future of Humanity Institute</a> at the University of Oxford has a <a href="http://www.global-catastrophic-risks.com/docs/global-catastrophic-risks.pdf">long list of threats</a> besides AI that threaten our society including:</p>
<ul>
<li>nanotechnology</li>
<li>biotechnology</li>
<li>resource depletion</li>
<li>overpopulation.</li>
</ul>
<p>This doesn’t mean that there are not aspects of AI that need attention in the near future. </p>
<h2>The AI debate for the future</h2>
<p>The <a href="http://www.stopkillerrobots.org/">Campaign to Stop Killer Robots</a> is advancing the debate on whether we need to ban fully autonomous weapons.</p>
<p>I am organising a debate on this topic at the next <a href="http://www.aaai.org/Conferences/AAAI/aaai15.php">annual conference</a> of the Association for the Advancement of Artificial Intelligence later this month in Austin, Texas, in the US.</p>
<p><a href="http://www.hrw.org/bios/stephen-goose">Steve Goose</a>, director of Human Rights Watch’s Arms Division, will speak for a ban, while <a href="http://www.cc.gatech.edu/people/ronald-arkin">Ron Arkin</a>, an American roboticist and robo-ethicist, will argue against it. </p>
<p>Another issue that requires more immediate attention is the impact that AI will have on the nature of work. How does society adapt to more automation and fewer people needed to work?</p>
<p>If we can get this right, we could remove much of the drudgery from our lives. If we get it wrong, the <a href="http://www.economist.com/news/finance-and-economics/21592635-revisiting-old-argument-about-impact-capitalism-all-men-are-created">increasing inequalities</a> documented by the French economist <a href="http://piketty.pse.ens.fr/en/">Thomas Piketty</a> will only get worse.</p>
<p>We will discuss all these issues and more at the first <a href="http://www.cse.unsw.edu.au/%7Etw/aiethics/Introduction.html">International Workshop on AI and Ethics</a>, also being held in the US within the AAAI Conference on Artificial Intelligence.</p>
<p>It’s important we start to have these debates now, not just to avoid the potential pitfalls, but to construct a future where AI improves the world for all of us.</p><img src="https://counter.theconversation.com/content/36240/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Toby Walsh does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Some of the biggest players in Artificial Intelligence (AI) have joined together calling for any research to focus on the benefits we can reap from AI “while avoiding potential pitfalls”. Research into…Toby Walsh, Professor, Research Group Leader, Optimisation Research Group , Data61Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/336072014-10-30T12:05:00Z2014-10-30T12:05:00ZIf Russell Brand has a thesis, it’s time for his viva<p>As we hurtle towards peak Russell Brand, I have a question. Treat it as rhetorical if you like but if anyone has an actual answer, they would be warmly welcomed. </p>
<p>My question is: what has Brand actually revealed to us about the society in which we live? What nugget of truth has he mined that wasn’t already demonstrably obvious to anyone during the past three or four decades?</p>
<p>Have some people become too disenfranchised or just too lazy to seek out answers for themselves? Is their only recourse, as <a href="http://www.theguardian.com/commentisfree/2014/oct/24/britain-russell-brand-revolution-newsnight">Hadley Freeman</a> recently suggested in The Guardian, to turn to someone that can make politics seem sexy?</p>
<p>Musician and activist Billy Bragg says Brand has invoked a tradition of celebrities using their position as a platform for change. But I think Brand’s “contribution” is problematic and even dangerously populist in its aims. If he has a thesis, we need to poke at it like we would any other. He needs to be rigorously interrogated in the academic style of a viva because everyone else who comes up against him – and particularly those in journalism – don’t seem to be doing a very good job. </p>
<p>Drop the sex and there is no obvious material basis for the lionisation of Brand. He may continue to present himself as a provocative figure but the things he actually has to say are not all that provocative. Nor does he add anything beyond those all too often muted voices – such as grass-roots community groups – that have been challenging inequality and social injustice for generations. </p>
<p>But perhaps there is also no need to criticise Brand directly. He is a symptom of a wider and increasing lack of desire to invest in communities or society and the ideas that underscore them. We live in a world of ideas and concepts, moments and events, all foreshadowed by precarity and by their own planned obsolescence. Brand is in that sense just another <a href="https://theconversation.com/ice-bucket-good-neknomination-bad-its-all-just-self-promotion-30929">ice-bucket challenge</a> or <a href="http://www.bbc.co.uk/news/magazine-29342126">#bringbackourgirls</a>. The good intention might be there but it’s often all too fleeting to really matter or ultimately make a difference. </p>
<p>Our retreat from critical analysis and the loss of interest in questioning everything we see around us – including Brand – is a trend that has me very worried.</p>
<h2>Branding exercise</h2>
<p>Brand could offer something vital to society. He could offer himself as a much-needed resource for practising and fine-tuning the sort of critical faculties we should all be directing at those in power and those who challenge power.</p>
<p>We should debate Brand, not simply condemn or revere his stance. We should read and position his ideas in wider contexts that expose them to the complexities they seek to remedy. Brand might not have the answers – he says as much himself. But before we allow him a platform (and make no mistake, he has one), it must be asked whether his ideas lead anywhere at all, for you or those to whom they appear to mean so much – for those that find them so revolutionary.</p>
<p>To my mind this is what many interviews with Brand have singularly failed to do over the past year or so. Few have seriously challenged him. Far too many interviewers have opted for a playful run-around of spiritual and pseudo left-leaning universal truisms conducted mostly at the behest of Brand himself.</p>
<p>The result of Jeremy Paxman’s <a href="https://www.youtube.com/watch?v=3YR4CseY9pk">Newsnight interview</a> with Brand was airtime sucked-up by a discussion that eschewed any complexity and rendered fundamental principles about democracy basic to the point of embarrassing. And yet, for some, such as <a href="http://www.theguardian.com/culture/2013/dec/28/what-we-liked-2013-russell-brand-jeremy-paxman-newsnight">Zoe Williams in The Guardian</a>, Brand emerges from these shallow depths as some kind of prophet or soothsayer (<a href="http://www.users.globalnet.co.uk/%7Eloxias/tiresias.htm">Tiresias</a> with a penchant for waistcoats?).</p>
<p>Brand’s ability to take charge of media interviews comes as no surprise. Perhaps it is simply an automatic reaction born of the years of experience at managing an audience that he forged in the white heat of celebrity PR. But the reality is that, based on the sheer gravity of Brand’s proposals (yes, I do take them seriously, or rather I see the seriousness of them), not to mention the ubiquity of his present platform to espouse them, a thorough critical appraisal is needed.</p>
<p>Someone needs to conduct a viva with Russell Brand. After years of graft, exploring a subject to its depths and producing a thesis, this is what we expect of every PhD student, and I think Brand should face the same rigour. I’m not advocating inflicting an ivory tower tradition in order to silence or tame Brand – quite the opposite. This is about demanding rigour in order to test serious ideas, irrespective of where they are presented or by whom. </p>
<p>Why do I suggest such an ultra-academic examination? Because I fear some enterprising university will soon step forward to offer Brand an honorary doctorate in philosophy or political science or whatsoever academic camp he’s deemed to fall into for the purposes of a silk, a ceremony and a scroll, and that really would be icing on the cake. If his ideas are serious, they need a serious response. Let’s see what they’re made of.</p><img src="https://counter.theconversation.com/content/33607/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Robert Herian receives funding from Arts and Humanities Research Council (AHRC).</span></em></p>As we hurtle towards peak Russell Brand, I have a question. Treat it as rhetorical if you like but if anyone has an actual answer, they would be warmly welcomed. My question is: what has Brand actually…Robert Herian, Lecturer in Law, The Open UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/301572014-08-11T20:25:05Z2014-08-11T20:25:05ZThomas Piketty, climate change and discounting our future<figure><img src="https://images.theconversation.com/files/55770/original/2jnwjx3j-1407219362.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Economist Thomas Piketty has warned "climate change cannot be eliminated at the stroke of a pen".</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/40285098@N07/5665816965/in/photolist-7K4jVg-niKZFc-oaq5R6-oaAmk5-9CHHfh-9CEMCn-9CEMZp-9CHGRu-nT8RvT-ocwgiX">Parti Socialiste du Loiret/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span></figcaption></figure><p>French economist <a href="https://theconversation.com/topics/thomas-piketty">Thomas Piketty</a> and his book <a href="http://www.amazon.com/Capital-Twenty-First-Century-Thomas-Piketty/dp/067443000X/ref=sr_1_1_title_2_har?s=books&ie=UTF8&qid=1402906558&sr=1-1&keywords=capital">Capital in the Twenty-First Century</a> are a <a href="https://theconversation.com/coming-to-an-arena-near-you-economists-the-new-rock-stars-28496">global publishing phenomenon</a>. </p>
<p>But while Piketty’s writing on wealth inequality has been <a href="http://www.nytimes.com/2014/05/31/upshot/everything-you-need-to-know-about-thomas-piketty-vs-the-financial-times.html?_r=0">widely debated</a>, far fewer people know that he has some useful things to say about climate change and public capital.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/55771/original/2dh94gng-1407219494.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/55771/original/2dh94gng-1407219494.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/55771/original/2dh94gng-1407219494.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/55771/original/2dh94gng-1407219494.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/55771/original/2dh94gng-1407219494.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/55771/original/2dh94gng-1407219494.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/55771/original/2dh94gng-1407219494.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/55771/original/2dh94gng-1407219494.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>In particular, Piketty discusses the discount rate and the differences in approach between <a href="http://www.cambridge.org/au/academic/subjects/earth-and-environmental-science/climatology-and-climate-change/economics-climate-change-stern-review?format=PB">Lord Nicholas Stern</a> and Yale economist <a href="http://cowles.econ.yale.edu/books/nordhaus/balance.htm">William Nordhaus</a>.</p>
<p>The discount rate weighs future people’s benefits against costs borne by present people. It is the key to understanding action on climate change. The different views of Stern and Nordhaus go to the heart of how the planet addresses the climate change problem.</p>
<h2>Pay now or later? And at what cost?</h2>
<p>It seems to me that the main issue in terms of addressing the climate change problem is that, if we agree to reduce emissions now – and there is currently no global agreement in sight that provides for such reduction – people living in the future will benefit, not those living today. But we will, today, bear the costs of reducing such emissions. </p>
<p>Stern in <a href="http://www.cambridge.org/au/academic/subjects/earth-and-environmental-science/climatology-and-climate-change/economics-climate-change-stern-review?format=PB">The Economics of Climate Change</a>, better known as the Stern Review, concludes that strong action on climate change is urgently required; Nordhaus’s view is not so much. Nordhaus thinks climate change requires only a modest response now, with more significant action delayed for decades (read more in <a href="http://cowles.econ.yale.edu/books/nordhaus/balance.htm">A Question of Balance</a> and <a href="http://yalepress.yale.edu/yupbooks/book.asp?isbn=9780300189773">The Climate Casino</a>).</p>
<p>The discount rate accounts for these different approaches. It weighs future people’s benefits against costs borne by people in the present. If a cost benefit analysis uses a high discount rate, it discounts future benefits to a high degree, giving little weight to the interests of future people – on the basis that future people will be cleverer, richer and they’ll work it out (the Nordhaus approach). In contrast, Stern uses a low discount rate, and asks the present generation to make urgent sacrifices for the sake of future people.</p>
<h2>Piketty’s take on discount rates</h2>
<p>Piketty views Stern’s opinion as more reasonable. He argues, though, that more urgent need is: </p>
<blockquote>
<p>to increase our educational capital and prevent the degradation of our natural capital. This is a far more serious and difficult challenge, because climate change cannot be eliminated at the stroke of a pen (or with a tax on capital)</p>
</blockquote>
<p>He <a href="http://www.amazon.com/Capital-Twenty-First-Century-Thomas-Piketty/dp/067443000X/ref=sr_1_1_title_2_har?s=books&ie=UTF8&qid=1402906558&sr=1-1&keywords=capital">asks</a> whether we really know what we should invest in and how we should organise our response to the challenge. Should we “count on advanced research to make rapid progress” in renewable energy, or should we immediately impose limits on carbon consumption? Piketty’s view is that no one knows how these challenges will be met or the role of governments “in preventing the degradation of our natural capital in the years ahead”.</p>
<p>And no one does know. Piketty’s uncertainty is shared by Oxford’s John Broome, who <a href="http://www.amazon.com/Climate-Matters-Ethics-Warming-Norton/dp/0393063364/ref=tmm_hrd_title_0">notes</a> the current generation: </p>
<blockquote>
<p>will be sacrificing some of its own well-being for the sake of greater well-being that will come to people far in the future. Is the sacrifice worthwhile? Does it improve the world on balance? This is a question of weighing: How do increases in future well-being weigh against sacrifices of present well-being?</p>
</blockquote>
<p>Put another way, these questions highlight why the market may fail to adequately address the climate change problem. As Harvard’s Martin Nowak <a href="http://news.harvard.edu/gazette/story/2014/06/tomorrow-isnt-such-a-long-time/">says</a>: “Even if you want to cooperate with the future, you may not do so because you are afraid of being exploited by the present”.</p>
<p>The prevailing view at the international level about action on climate change seems to be, “Why should I care about future generations? What have they ever done for me?” And it’s those views about what future generations are worth that will determine climate change policy in 2014 and beyond.</p>
<h2>Smoke, mirrors – and emissions trading</h2>
<p>A larger question that Piketty doesn’t address is the usefulness of emissions trading schemes. </p>
<p>But it is a a question addressed in another important – albeit less famous – book, Philip Mirowski’s <a href="http://www.amazon.com/Never-Serious-Crisis-Waste-Neoliberalism/dp/1781680795/ref=sr_1_1?s=books&ie=UTF8&qid=1402908278&sr=1-1&keywords=never+let+a+serious+crisis+go+to+waste">Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown</a>, published late last year. </p>
<p>Mirowski <a href="http://www.amazon.com/Never-Serious-Crisis-Waste-Neoliberalism/dp/1781680795/ref=sr_1_1?s=books&ie=UTF8&qid=1402908278&sr=1-1&keywords=never+let+a+serious+crisis+go+to+waste">offers</a> a powerful critique of neoclassical economics. He argues that, for neoliberals, humans can never be trusted to know whether the environment is in crisis or not because:</p>
<blockquote>
<p>both nature and society are dauntingly complex and evolving; therefore, the neoliberal solution is to enlist the strong state to allow the market to find its own way to the ultimate solution.</p>
</blockquote>
<p>Emissions trading is a an elaborate “<a href="http://en.wikipedia.org/wiki/Bait-and-switch">bait-and-switch</a>” strategy, in which politicians are diverted from an original intention to reduce emissions into the endless technicalities of instituting and maintaining markets for carbon permits. The not unintended consequence is that the level of emissions continues to grow apace.</p>
<p>Once emissions trading is established, lobbying and “financial innovation” results in excess emissions trading permits and offsets, such that any cap on emissions never prevents emissions from growing. Mirowski argues that the “engineered glut of permits” – as we’ve seen with <a href="http://carbonmarketwatch.org/wp-content/uploads/2014/07/ETS-POLICY-BRIEF-JULY-2014_final_.pdf">the European Union’s emissions trading scheme, a problem Europe is now struggling to solve</a> – is not temporary, as unused or excess permits can be banked for future use. </p>
<p>It’s well understood, Mirowski <a href="http://www.amazon.com/Never-Serious-Crisis-Waste-Neoliberalism/dp/1781680795/ref=sr_1_1?s=books&ie=UTF8&qid=1402908278&sr=1-1&keywords=never+let+a+serious+crisis+go+to+waste">continues</a>, that emissions trading stifles technological innovation to curb emissions. Funds that ordinarily might have been used to alter energy infrastructure are “pumped into yet another set of speculative financial instruments, leading to bubbles, distortions of capital flows, and all the usual symptoms of financialization”.</p>
<p>For Mirowski, emissions trading does not curb global warming because it was never intended to do so; in practice, emissions trading – carbon permit trading – does not reduce emissions. Global experience to date might suggest that this is, in fact, correct.</p>
<h2>Why this debate about the future matters now</h2>
<p>Discount rates and emissions trading, of course, have present policy relevance. </p>
<p>At the end of next year in Paris, the world will meet to discuss whether developed and developing states alike will agree to emissions reduction targets from 2020 on.</p>
<p>In my view, the odds of such an agreement are about as good as seeing another Piketty proposal - a modest global tax on wealth - come true. Piketty understands such a proposal is “utopian”.</p>
<p>But in the meantime, in the United States the Environmental Protection Agency recently <a href="http://www2.epa.gov/carbon-pollution-standards">issued draft guidelines</a> on fossil fuel power plants, and has set a national target of a 30% reduction in carbon emissions from such plants by 2030 on 2005 levels. </p>
<p>Under the EPA plan it’s left up to individual US states to set their own emission reduction targets and how to meet those targets. And, at the state level, emissions trading schemes appear to be the preferred option. The <a href="http://www.rggi.org/">US Regional Greenhouse Gas Initiative</a> is an emissions trading scheme comprising nine northeastern states. <a href="http://www.arb.ca.gov/cc/capandtrade/capandtrade.htm">California</a> also has an emissions trading scheme. </p>
<p>Apart from the EU, a number of <a href="http://www.worldbank.org/en/news/feature/2014/05/28/state-trends-report-tracks-global-growth-carbon-pricing">developed and developing states around the world</a> have also set up emissions trading schemes, including New Zealand, parts of China, Kazakhstan, Quebec and elsewhere. </p>
<p>These emissions trading schemes offer some hope that, together with other action, “bottom-up” approaches might result in an alternative to international action on emissions reductions.</p><img src="https://counter.theconversation.com/content/30157/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Hodgkinson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>French economist Thomas Piketty and his book Capital in the Twenty-First Century are a global publishing phenomenon. But while Piketty’s writing on wealth inequality has been widely debated, far fewer…David Hodgkinson, Associate Professor, Law School, The University of Western AustraliaLicensed as Creative Commons – attribution, no derivatives.