Inequality of Income

Tim Worstall started an argument on the direction of Global Equality of Income, which this later Post critiques. I have written on related material over this Issue previously, but think I can add some ideation to my other less clear specifics. Tim sincerely believes that Global Inequality is narrowing, and says such Inequality should be studied by Populations rather than by Countries. I believe he is right in this aspect, but doubt his assurance that Inequality is narrowing. The entire process is troubled by In-Country economic activity–things like the internal Inflation rate, Government regulation and taxation, and Investment pressures.

Chinese labor is indeed drawing greater Pay, but Pay which is equivalently matched by Inflation, and that Pay is only going to that Labor which is concerned with the Export economy. The Chinese labor which work in internal Production industries are being squeezed by the Inflation generated by the Export economy. India matches this aspect of the Export economy; in both Cases, the Labor of the internal Production economies are being suppressed by lowering real Wages due to Export-generated Inflation. The Chinese and Indian labor actually being suppressed make up 75% of the Chinese Labor force, and 85% of the Indian Labor force. Categorization of these Labor forces being better-off is a major over-Statement, as overall Inflation in the two nations can be considered approximately a real 7% per Year.

Limitation of Investment Opportunity, high Consumer Prices–especially on Big-Ticket items, and Government pressure for a high Savings rate (at least in China) actually constrain the increase in Income for these Labor forces. China is particularly bad, considering the poor performance of the Chinese Banking system; where Bankers are corrupt and use acquired Funds to make bad loans (Chinese Bankers treat Deposits like the Federal Government treats the Social Security Trust Fund–no real Intent to repay the Deposits). One cannot claim Chinese or Indian labor is truly better off.

Central and South America serve as a great Counterpoint. Vast numbers of Laborers have been unemployed by the Globalization process south of the American border, Product Purchasers fleeing to the cheapest-Produced Product; irrespective of the Living Standards of Labor, or the hard-won Labor guarantees fought for by Labor over the decades. Globalization simply insists that Labor be left as bereft of Protection as Chinese or Indian labor, else they will be unemployed. I imagine there is some widening Inequality resident in this Practice.

Those who rant against all Trade barriers may willfully ignore such Conditions, but these impact Inequality most forcefully, and to the detriment of native Labor. An old adage was used in the 1920s: What is good for Business, is Good for America. It was not relatively true then–consider the following Great Depression–actually brought on by a lack of funded Consumers; and it again appearing to damage the American and World fabric Lifestyle. lgl