Reshaping global capitalism

Addressing the causes of inequalityMonika Sie Dhian Ho

Frans Bieckmann

http://www.thebrokeronline.eu/en/Dossiers/Inequality

Debate at The Broker

http://www.thebrokeronline.eu/Blogs/Inequality-debate/• more than 40 opinion pieces• Rolph van der Hoeven, Stephan Klasen, Harry

Boyte, Francine Mestrum, Charles Gore, David Woodward, Andrew Berg & Jonathan Ostry, Martin Ravallion, Adam Wagstaff, Ricardo Fuentes Nieva, Andy Sumner & Alex Cobham, Amanda Lenhardt & Andrew Shepherd, Lars Engberg-Pedersen, Francisco Ferreira, Nick Galasso, … and many others

Introduction

• different forms of inequality: the numbers• explaining inequality: some common causes• broken promises of economic theory• the urgency of reshaping global financialized

capitalism• towards a more inclusive and sustainable

capitalism

different forms of inequality

Inequality: the numbers1. Unequal people:

80 percent of the world’s population now live in very unequal places. In many countries, levels of inequality have risen over the past decades

2. Unequal countries: If we count each country the same, inequality between countries continues to

rise, High growth rates in China and India exert downward pressure on population-

weighted intercountry inequality3. Unequal world:

Global inequality is extremely high Global inequality has increased steadily since the 19th century, with China and

India exerting downward pressure however on global inequality since mid-1980s

4. Unequal tails: Middle income groups (deciles 5 to 9) capture around half of GNI. Rest is shared between the richest 10 percent and the poorest 40 percent, but

the share of those two groups varies considerably across countries

Explaining inequality

Man-made forces of politics rather than ‘unavoidable and economic’ forces of nature: Historical and unique explanations (e.g. Latin

America) Our focus: common driving forces:

Political choice to apply neo-classical theory Winner-take-all-politics (Palma: ‘its the share of the

rich, stupid’)

Broken promises of economic theory

Inequality is good for growthWealth accumulation at the top will trickle-down‘Things have to get worse before they can get

better’Globalization will be accompanied by convergence

in countries’ incomesGlobalization will have a positive effect on within-

countries inequality

The urgency of reshaping global capitalism Normative reasonsInstrumental reasons

High inequality hinders growth It hinders the development of human capital It negatively affects aggregate demand It negatively affects entrepeneurship It leads to political polarization, lower social trust, excessive rent-

seeking by a rich elite High inequality correlates with financial instability High inequality correlates with social problems High inequality (high Palma values) correlates with slow

progress on MDG poverty targets

some points for debate

• how to combine the many separate discussions and more or less loose academic debates into one coherent and comprehensive narrative with real political appeal, that can seriously challenge the prevailing economic model and policies?

• What elements are lacking for such a narrative? What are the contradictions, dilemmas, obstacles, incoherencies in thinking?

• What concrete policies can we propose? At the national level and at the global level (Post 2015)?

Towards a more inclusive and sustainable capitalism

• Broadening our policy goals: inclusive and sustainable global development

• Improving our policy theory to achieve these goals

• Creating new alliances and breaking the mechanisms of winner-take-all-politics

Post 2015