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cybercoma

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The best way to "help" the economic progress of those in poorer countries is to do business with them. Much of Asia has advanced considerably over the last few decades giving rise to a new global middle class of hundreds of millions of people, largely as a result of business interaction with the West. Global trade in fact vastly benefits huge numbers of people in the developing world, while actually putting downward pressure on wages in highly developed nations. Therefore, I don't think it can be said that global trade is unfair towards poor countries.

Many of the natural ecosystems in Asia have been drawn down to unsustainable levels as the human economy grew. Global trade has costs that are largely being ignored and it can also be said that global trade is a disaster.

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I believe that there is often a trade-off, increased inequality is the "price you pay" for a reduction in poverty.

That's just not true. Increasing inequality and ability to reduce poverty isn't mutually inclusive, there's no significant correlation. Sometimes there's increased inequality (ie: post-Communist countries), and sometimes there isn't.

Well in China and India there seems to be a trade-off:

720px-Gini_since_WWII.svg.png

It makes sense to me. In general, all else being equal, the greater the wealth available in a given population, the greater the chance that the wealth is unevenly distributed. Of course all else is not equal, there are good examples of decreasing poverty and decreasing/flat inequality that make good case studies for the study of new policies.

Example: here's an academic article from the OECD about South-East Asian poverty & income inequality, starting in Section 3, pg. 15. It shows using stats among the HPAE's (high performing asian economies) that all have had high growth and low inequality over the decades, but also that inequality has both dropped or risen at different points for some of these countries & there's no strong correlation either way between between GDP growth/poverty reduction and inequality among the HPAE's.

Also, tons of developing countries agreed to drastic neoliberalization of their economies (the "Washington Consensus") via IMF-imposed "structural adjustment programs" in the 80's in return for things like debt relief and many countries saw a decrease in GDP growth and other development metric growth as well as increased inequality in great part because of too much liberalization of their economies (some liberalization is good for growth obviously, but it must be directed properly to protect domestic interests in poor countries). I also highly recommend you read the short "conclusion" of the research paper (p. 34), as it will back up these claims, and echoes conclusions from countless other academic articles, ie:

Interesting paper, too bad it is from 2001, it would be very interesting to see the updated data. I love the topic but it does not make sense to discuss without data from the last 13 years.

What do you think about the post-Washington Consensus?

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It makes sense to me. In general, all else being equal, the greater the wealth available in a given population, the greater the chance that the wealth is unevenly distributed.

Do you have any data to support this? In a free market capitalist economy maybe this could be the case.

Interesting paper, too bad it is from 2001, it would be very interesting to see the updated data. I love the topic but it does not make sense to discuss without data from the last 13 years.

Fair point, more recent info would be better, but historical data is also relevant, and the GINI coeffecients and GDP growth rates for the years up to the late 90's are obviously never going to change. I just used the paper to prove my point that you don't have to have rising inequality to have poverty reduction.

What do you think about the post-Washington Consensus?

Better than the original Washington Consensus but I'm skeptical about the PWS because theories by their nature simplify complex problems, and it's extremely hard to simplify into one theory such complex problems with so many variables we don't fully understand yet among vastly different country contexts.

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But as Moonight Graham (I think) pointed out, we saw inequality AND rising incomes in Asia due to globalization.

Well, my point was that we saw both rising and increasing inequality at the same time as economic growth in the Asian Tiger countries (which has some links to globalization, but these countries often had strong government control on how liberalization of their economies proceeded in order to protect the countries' domestic interests instead of simply opening trade borders as freely as possible and letting foreign interests (rich countries, transnational corporations, investors etc.) aka "the invisible hand" aka "the free market" control how their economy proceeded.

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Decades of Communism and UN aid did not lift poverty in any significant way compared to being plugged in to the global commerce grid.

Cuba (still Communist) has one of the very highest literacy rates & access to education in the world, higher than the US, and also has a life expectancy equal to the US. than the US. Cuba also has a higher GDP-per-capita growth rate than either Canada and the US in every decade since the 1970 and projected into 2030., and a higher GDP growth rates (and projected growth rates until 2030) than the majority of other Latin American/South American countries, even higher than Brazil (except for the 1st half of the 1990's when Cuba lost assistance from lost support from the dissolved USSR). Cuba GDP growth rates & projected rates are also higher than former USSR states (including Russia) since the USSR dissolved in 1991, and the same with the average former Eastern Bloc states since 2000 (again, Cuba suffered in the 90's when USSR support vanished. Stats are from the US gov called "Historical Real Per Capita (GDP) Values" or find it here, & go to the far left of graph to see "Decade Average Annual" GDP-per-capita growth rates & projections.

Keep in mind Cuba has done this even with a fierce US trade embargo/sanctions.

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Inequality is a useful metric to track but I do not think we should set "equality goals".

Its not about equality its about breaking up large concentrations of wealth. Concentrated wealth is disasterous for an economy. Its the very worst thing that can happen. We have had to tackle it quite a few times. We imposed property taxes on the british lords to end the aristocracy, we broke the robber barons stranglehold on the economy with taxation, and we did the same with the railroad tycoons. The modern aristocracy is no different.

The only trick is figuring out how to do it without without compromising peoples faith in private property rights.

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It's not arrogant it's based on statistics. Use this tool and type in $18,000 for your income: www.globalrichlist.com $18k income makes you in the world's top 5% in US dollars, and in Canadian dollars you're in the global top 10%. Richer than 90-95% of the world = "vast majority".

Living on 18 G a year when single is tough. Anywhere from 10 to 14 G of that is simply for housing.

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Guest Derek L

The only trick is figuring out how to do it without without compromising peoples faith in private property rights.

Good luck with that indeed........But by the same token, is not that very thing happening with the outsourcing of employment to the developing world? That 80k a year CAW worker might very much so seem a robber baron to a dirt farmer in Africa…

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The best way to "help" the economic progress of those in poorer countries is to do business with them. Much of Asia has advanced considerably over the last few decades giving rise to a new global middle class of hundreds of millions of people, largely as a result of business interaction with the West. Global trade in fact vastly benefits huge numbers of people in the developing world, while actually putting downward pressure on wages in highly developed nations. Therefore, I don't think it can be said that global trade is unfair towards poor countries.

I agree about trade is the best "aid". But just because a handful of Asian countries have done well doesn't mean international trade laws/regulations and bi-lateral relations between rich & poor countries aren't rigged in favour of rich countries, and makes it quite a bit harder for developing countries to catch up to developed economies. Examine the rules and functioning of the WTO, examine international IP laws that make technology transfer extremely difficult & expensive for countries. There's no democracy in international trade, it's cut-throat power politics, and the only rule of law is rigged so it often doesn't apply to rich countries when they want anyways, the rich dominate the poor even if a few countries are fortunate enough to claw their way out of the bottom. It's not called "The East Asian Miracle" for nothing.

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There is enough wealth in the world to support everyone on it to a satisfactory standard. Greed keeps this from happening. The pursuit of wealth has become the driving force behind most of our societies. Top league athletes and actors make gross amounts of money for doing nothing of benefit to the world. Some celebrities are famous for no reason I have ever seen except bad behavior. People all but worship them for it too.

Well, actors and athletes entertain us, we pay big money to watch them. It makes it a bit easier to get through the day. But they aren't the ones to be as concerned about, they're just employees, it's the people who pay them we should pay more attention to. By the way, welcome to the boards! :D

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Money is power. The richest people hold onto their wealth in part because that is how they maintain power over the companies or institutions that they are members of. I think there is a certain way in which they can be compared to the Assad's and Mugabe's of this world: they are the primary benefactors of a system that has unjustly rewarded them with wealth far beyond what their own innovation could have produced and they refuse to give it up because they love the power, no matter how many people are worse off for their hoarding. People say Bill & Melinda Gates are oh-so charitable, but if you are among the very richest people in the world with fortunes measured in the tens of billions the fact is that you are not really that charitable. A truly charitable person could not hoard so much for themselves to begin with.

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Its not about equality its about breaking up large concentrations of wealth. Concentrated wealth is disasterous for an economy. Its the very worst thing that can happen. We have had to tackle it quite a few times. We imposed property taxes on the british lords to end the aristocracy, we broke the robber barons stranglehold on the economy with taxation, and we did the same with the railroad tycoons. The modern aristocracy is no different.

The only trick is figuring out how to do it without without compromising peoples faith in private property rights.

Are you serious, or exaggerating?

-worse than hyperinflation

-worse than high long-term unemployment

-prolonged stagflation

-a run on the banks

-a 2008 style credit crisis

-worse than poverty

-even in your own post you acknowledge that a lack of "faith in property rights" is worse than concentration of wealth

No, IMO concentration of wealth is not even close to a serious problem. It's relatively easy to with taxation, especially inheritance taxes.

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Inheritance taxes are a virtually useless way to deal with the sort of people this thread is referring to in the short to medium term. Bill Gates will be 60 next year. With his wealth, he could quite reasonably live to be 90. That is roughly the same amount of time between the beginning of WWI and the end of WWII.

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Inheritance taxes are a virtually useless way to deal with the sort of people this thread is referring to in the short to medium term.

And in the long term people plan around them through the use of corporations to hold assets.

Inheritance taxes are also an extremely odious form of taxation because they create huge cash flow problems if the money in locked up in non-liquid asset like a business.

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I agree about trade is the best "aid". But just because a handful of Asian countries have done well doesn't mean international trade laws/regulations and bi-lateral relations between rich & poor countries aren't rigged in favour of rich countries, and makes it quite a bit harder for developing countries to catch up to developed economies. Examine the rules and functioning of the WTO, examine international IP laws that make technology transfer extremely difficult & expensive for countries. There's no democracy in international trade, it's cut-throat power politics, and the only rule of law is rigged so it often doesn't apply to rich countries when they want anyways, the rich dominate the poor even if a few countries are fortunate enough to claw their way out of the bottom. It's not called "The East Asian Miracle" for nothing.

International agreements and WTO rules may not be perfect but surely you would agree that existing system, of international trade is the fairest (least unfair) system of trade that we have ever had, right?

The biggest factors, by far, that determine the odds of success for a developing country are 1. luck of geography and 2. the countries own domestic policies. A theme that I see come up often in papers I've read is:

-When a country has strong institutions and domestic policies, globalization (trade liberalization) will likely leverage the benefits and lead to faster, more equal development

-When a country has weak institutions and domestic policies, globalization can amplify problems such as gross inequality.

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Are you serious, or exaggerating?

-worse than hyperinflation

-worse than high long-term unemployment

-prolonged stagflation

-a run on the banks

-a 2008 style credit crisis

-worse than poverty

-even in your own post you acknowledge that a lack of "faith in property rights" is worse than concentration of wealth

No, IMO concentration of wealth is not even close to a serious problem. It's relatively easy to with taxation, especially inheritance taxes.

Are you saying the Top 1% needs to hoard wealth so those things don't happen?

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Inheritance taxes are a virtually useless way to deal with the sort of people this thread is referring to in the short to medium term. Bill Gates will be 60 next year. With his wealth, he could quite reasonably live to be 90. That is roughly the same amount of time between the beginning of WWI and the end of WWII.

You can also give your money away not long before you die, or have your children "hold" your assets for you throughout your senior years.

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