Is the Rise of Populism and Protectionism due to the Middle Class Losing their Privilege?
The wealth of the ‘developed’ middle class has gone down while the wealth of the rich, and middle classes in less developed countries has gone up.
Can the rise of populism and protectionism of middle class in developed countries be seen through the lens of “developed country privilege”. That is, the developed middle class’s privilege is eroding to the rich and less developed countries. Could that loss of privileged, wealth, and power be seen similarly to “white privilege”, but through an economic lens?
The middle class is losing their privilege to the poor in their own countries even! And that loss is devastating and perhaps giving rise to populism.
See Ray Buckley, chair of the New Hampshire Democratic Party, articulate on why Hillary lost in 2016.
There are winners and losers in terms of globalization and the developed middle class is losing out on their middle class privilege.
Economist’s tend to be for free trade. And what you find out in free trade, is that there are winners and losers. But what the winner’s win is greater than what the losers’s lose. And so therefore we should all be for free trade.
But the winners should do something for the losers.
I think what’s happened to explain Populism, in America today, and maybe in Europe, is that the winner’s forgot about doing something for the losers.And the losers are sitting there saying “I’m a loser, and I’m going to back somebody who’s going to straight this all out.”
There is a narrowing of the wealth gap internationally between developed and less developed countries, while at the same time there is a widening of the wealth gap internally within developed countries. (from Ray Dalio at 24:15 in video below)
Turning our back on globalization is the wrong approach according to IMF Managing Director Christine Lagarde, since that is one way in how the world can become more equitable. (see 31:00 in the video below).
How are leaders going to deal with the root causes of these issue? That is, from a realistic view how are they going to really address issues caused by globalization and technology.
Address corruption, transparency, accountability. How can we address the concerns of the developed middle class? Perhaps one that addresses 1) public investment in infrastructure and investment that also embraces technology and education, 2) a global strategy focused on making global integration work for ordinary such as the issues of capital mobility such as by addressing tax heavens and taking advantage of low regulatory regions, 3) enabling the dreams of all young Americans such issues of education, school to work, purchase a home, etc. (from Larry Summers at 40:00 and 49:30 min in video below )
redistribution of wealth towards equity
Davos 2017 — Squeezed and Angry: How to Fix the Middle-Class CrisisIMF Managing Director Christine Lagarde, Italian Economy and Finance Minister Pier Carlo Padoan, Harvard University President Emeritus Larry Summers, Bridgewater Chairman Ray Dalio, and Brazillian Finance Minister Henrique Meirelles
- Why 20th century tools cannot be used to address 21st century income inequality? — “The remarkable period of reduced income and wealth inequality in the rich countries, roughly from the end of the Second World War to the early 1980s, relied on four pillars: strong trade unions, mass education, high taxes, large government transfers. Since the increase of inequality twenty or more years ago, the failed attempts to stem its further rise have relied on trying, or at least advocating, the expansion of all or some of the four pillars. But neither of them will do the job in the 21st century.”
How can endowments be equalized? As far as capital is concerned, by deconcentration of ownership of assets. As far as labor is concerned, mostly through equalization of returns to the approximately same skill levels… The methods to reduce capital concentration are not new or unknown. They were just never used seriously and consistently. We can divide them into three groups. First, favorable tax policies (including a guaranteed minimum rate of return) to make equity ownership more attractive to small and medium shareholders (and less attractive to big shareholders, that is, a policy exactly the opposite of what exists today in the United States). Second, increased worker ownership through Employee Stock Ownership Plans or other company-level incentives. Third, use of inheritance or wealth tax as a means to even out access to capital by using the tax proceeds to give every young adult a capital grant (as recently proposed by Tony Atkinson).
What to do with labor? There, in a rich and well-educated society, the issue is not just to make education more accessible to those who did not have a chance to study (although that too is obviously important) but to equalize the returns to education between equally educated people… The way to reduce this inequality is to equalize the quality of schools.