Thursday, July 30, 2009

Krugman and income distribution inequality

Recently, I sat in a working group convened by the United Way that focused on income, one of the organization's priorities as it responds to community reality going forward. The emphasis is a part of the new focus to "Live United."

Our facilitator wrote on a large sheet of sticky paper this phrase:

"Root Causes of Poverty"

The group began throwing out answers and ideas. A number of our answers related to education issues and opportunities.

During our discussion, I thought of the clip below. Watch it and tell me what you think.

10 comments:

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  2. I will be civil in my comments. I simply could not agree more, especially his last point of comparison between the hedge fund managers and school teachers. My wife is a school teacher and a part of one of, if not the largest union in the country, NEA. In he almost thirty year career she has seen her salary more than keep up with inflation. I am still wandering what this guy really wants? Are we all suppose to make the same amount of money? I also question his whole interpretation of history, especially his bashing of Regan. I could say so much more, but I want to think a bit more before I comment, but you did ask what we thought.

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  3. Wow, I should have proofread. I should have said "disagree."

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  4. Yes, let's all bask in the warm glow of the man who did the most damage to our country's federal deficit. He was a Christian and he said nice things -- so that makes him the greatest President ever. (Peace be upon him.)

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  5. Ronald Reagan > Jesus

    according to some people...

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  6. rc, it has to do with where the harshest burden falls in the society and who suffers as a result; it is more than just raw wages. Income for those beneath the top 10-20% have remained flat and declining while those at the top soar and argue for even lower taxes while millions suffer. Krugman's argument about the "great compression" is true, as are his points about the quick creation of the middle class.

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  7. I actually thought there would be more discussion by now. I took some time to read a bit more about Dr. Krugman. I am not academically trained to challenge a Princeton professor and Nobel laureate, but I do know that there is another side, and I have read several books by Milton Freedman and other more supply side economists. I would really like to hear more from others with more training them myself.

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  8. rcorum, obviously the huge and growing gap between the tiny % at the top who control the vast majority of American wealth and the super majority beneath them must be explained by changes in public policy. Certainly the gap can't be accounted for on any measure based on merit. Things are the way they are due to changes in public policy, primarily in the tax codes of the nation and the states. Then, there are matters of deregulation and a failure to regulate the capital markets, as we have recently learned. We are reaping the "benefits" of supply side economic theory today, an approach that President Bush the first once called "voodoo" economics. The way out of this out of balance reality will be back and up. Public policy must value all segments of the society equally, including American labor and the weakest among us.

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  9. This clip shows us how bright Mr. Krugman is --
    http://www.youtube.com/watch?v=Fexz8Ij-OBQ

    Yeah, no agenda here.

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  10. In February 2009, the Economist magazine announced that over half the world's population now belongs to the middle class, as a result of rapid growth in emerging countries. It characterized the middle class as having a reasonable amount of discretionary income, so that they do not live from hand to mouth as the poor do, and defined it as beginning at the point where people have roughly a third of their income left for discretionary spending after paying for basic food and shelter. This allows people to buy consumer goods, improve their health care, and provide for their children’s education. Most of the emerging middle class consists of people who are middle-class by the standards of the developing world but not the rich one, since their money incomes do not match developed country levels, but the percentage of it which is discretionary does. By this definition, the number of middle class people in Asia exceeded that in the West sometime around 2007 or 2008.[17]

    The Economist article pointed out that in many emerging countries the middle class has not grown incrementally, but explosively. The rapid growth results from the fact that the majority of the people fall into the middle of a right-skewed bell-shaped curve, and when the peak of the population curve crosses the threshold into the middle class, the number of people in the middle class grows enormously. In addition, when the curve crosses the threshold, economic forces cause the bulge to become taller as incomes at that level grow faster than incomes in other ranges. The point at which the poor start entering the middle class by the millions is the time when poor countries get the maximum benefit from cheap labour through international trade, before they price themselves out of world markets for cheap goods. It is also a period of rapid urbanization, when subsistence farmers abandon marginal farms to work in factories, resulting in a several-fold increase in their economic productivity before their wages catch up to international levels. That stage was reached in China some time between 1990 and 2005, when the middle class grew from 15% to 62% of the population, and is just being reached in India now.

    The Economist predicted that surge across the poverty line should continue for a couple of decades and the global middle class will grow enormously between now and 2030.

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