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Seeing Inequality

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University of Toronto St. George
Political Science

POL101 Feb. 28 , 2011 Seeing Inequality Looked at how economies grow in past lectures, today’s lecture will look at the distributive consequences of growth how the benefits of growth are distributed & why, the economic & political forces behind this 1) Bearing Witness 2) Counting Inequality By disaggregating data differently, we see different outcomes For ex. More children of immigrant families go to university, but gap between wages is growing 3) $1/day versus $2/day global poverty line How you see inequality or the data will tell you a different story 4 Cases: Global inequality (why are rich countries getting richer, while others poorer?) The “work & welfare” state (success & limitations of the welfare state as it pertains to the idea of work & welfare) Gendering social protection (inequality of the welfare state through the lens of gender) Local Solutions (solutions beyond the nation-state) (I) Global Inequality Keynesian Compromise and Embedded Liberalism (global economic system to be primarily a free system, however one in which governments had some latitude to establish policies to stabilize economies) Bretton Woods (American backed system, the US dollar effectively to be the currency of economics) GATT (General Agreement on Trade and Tariffs multilateral agreement to reduce tariffs to establish a freer international economic system) European Reconstruction (installation of democracy in Germany, the EU, the Marshall plan a foreign aid plan backed by the US to help European economies) Most rapid economic growth was in the immediate postwar period & was global in scale However, even in the Golden Age, there was unequal growth South/SE Asian, African, & Latin American regions not growing as rapidly (disaggregation of data, in the 1990’s we see some economies regressing) 1970s & 1980s Decline of the Keynesian Compromise OPEC price spikes (nations need energy for growth, inflation on energy meant it became more expensive, it was acute for countries that were already poor couldn’t grow) Breakdown of Bretton Woods (US economy vulnerable do the world economy being backed by the US dollar, the stability of Woods was beginning to unravel, foreign exchange rates were allowed to fluctuate) Globalization (rapid increase in the flow of cash in uncontrollable ways in the world economy, 3/4s of world’s money flowing without government regulation) Debt Crises (harder to sell goods, uncontrollable capital lead to mass debt crises in the developing world which set their economies back 10-15 years; told to accept SAPs) Structural Adjustment Programs (SAPs) in order to get out of debt crises, taxes & tariffs had to be lowered, spending cut, basically had to adopt Smith’s model, move away from embedded Liberalism because it doesn’t work What does this mean? Gap between rich and poor countries is growing The Relative Gap, 1960-93: over time, rich countries are becoming richer, & poor countries are becoming poorer (II) Domestic Re-distribution As countries become richer, in the middle stage inequality increases When countries are poor, the levels of inequality are about the same The Welfare State Economies are spending more on social welfare over time, as they become richer they spend more on the welfare state Healthcare, education (particularly public), pensions, unemployment (ensure social safety nets), housing Political economy of the welfare state: Industrial Capitalism as countries become richer they become capitalist industrialist economies, & the size of the working class grows Unionization of labour work & welfare Social democratic political parties Social citizenship & re-distribution (what makes a democracy is not just the right to vote, but caring for those in less fortunate circumstances) Reducing Inequality in Advanced Industrial Democracies: Gini index statistical measure of inequality (0=equality, 1=inequality) Welfare state has been relatively successful in reducing levels of inequality in rich countries Inequality in China 2009: top 10% to bottom 10% 23 X 199
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