Inequality: the buzzword and the norm

Gerald_G_Fairy_sitting_on_MoonIt appears the latest economic buzzword and current explanation for economic problems is inequality.

Historically inequality has been the norm for most large-scale societies.  Just think Roman Empire and Europe during  the Middle Ages.  Wherever societies have been large enough to have rulers who did not know all their subjects some people have used their strength to exploit others and most of the time the others were left just at a subsistence level.

Starting with the Industrial Revolution things started to change.  People became more efficient at extracting resources and making things which meant increasing prosperity.  A shortage of bodies in some parts of the world allowed more people to claim a share of that prosperity.  To some extent our income and standard of living is a function of the supply and demand for bodies.

It may be that this golden age of prosperity has not been experienced by all the people currently living on this planet and equality is still the norm for lots of places.

In the last few years things have been changing.  We have exploited the most easily accessible resources upon which our prosperity has been based and there are more and more people demanding a share of what we do have.

So there you have it.  We are returning to the norm where a few people are able to claim most of the available resources.  And some people will say we can overcome all economic problems if we can return to more equal economy.

Job prospects for young people and grandchildren

This week’s issue of The Economist on jobs has left me feeling down and discouraged, especially the article on youth employment.

I was born in Western Canada during the 1940s and except for three years in England and Belgium I have lived here all my life.  This means most of my life has been lived through an unprecidented period of prosperity and in one of the most prosperous corners of the planet.  There is now reason to fear that prosperity is coming to an end.

At my age the end of prosperity will not be terribly serious but  my grandchildren are coming into their school years – one grandson started kindergarten yesterday – and I fear for their prospects and the future of all the young people throughout the world.

If we lived in a perfect world it should be possible to rearrange our economy so that most people could continue to live comfortable and fulfilling lives.   However, most of us most of the time think and act in our own short-term interests as opposed to our own long-term interests let alone the long-term interests of everyone.

I consider myself and my generation to be extremely lucky in the time and place in which we happened to be born and raised.

The golden years of prosperity

“The years 1950 to 1973 were a golden age of unparalleled prosperity,” according to Angus Maddison in his 2007 book, Contours of the World Economy.

“World per capital GDP rose at an annual rate of near 3 per cent, world GDP about 5 per cent and exports almost 8 per cent. Performance was better in all regions than in any earlier phase. There was a significant degree of convergence in per capita income and productivity, with most regions growing faster than the US (the lead economy).

“After 1973, there was a marked slowdown. Global growth was cut by half. There was substantial divergence between regions and performance in many of them was below potential.” (pages 71 and 72.)

I am curious about the timing of the end of the golden age – 1973.

In 1972 The Club of Rome published the book The Limits to Growth which suggested that economic growth would be slowed by limited resources. At the time the book was controversial but maybe the authors were not so far off the mark.

Recently we noted a report by the World Wildlife Fund that the world’s population is currently using resources at 150 per cent of the sustainable level. I wonder if we were using resources at 100 percent level about 1973?

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