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Paul Krugman: How Soaring Inequality May Lead the World Down the Path of Fascism

January 2, 2015 in Blogs

By Janet Allon, AlterNet

The esteemed columnists sees disturbing parallels to 1930s Europe.

We live in scary times, Paul Krugman writes in his Friday New York Times column. So scary that they put the esteemed economist in mind of 1930s Europe.

The rising inequality problem, well established by Thomas Piketty’s “Capital in the Twenty-First Century”, has concentrated so much wealth in the hands of so few, while millions of other live in what Krugman poetically calls the “Valley of the despond.” 

The only other group that is doing well, besides the global elite, says Krugman, is “what we might call the global middle — largely consisting of the rising middle classes of China and India.” For a crystal clear view if what is going on he suggests consulting a remarkable chart of income gains around the world produced by Branko Milanovic of the City University of New York Graduate Center.

Of course, there is a huge plus side to rising incomes for those living in those developing nations where hundreds of millions of people have been lifted out of terrible poverty. But in advanced countries, there are also worrisome signs on the horizon:

Between these twin peaks — the ever-richer global elite and the rising Chinese middle class — lies what we might call the valley of despond: Incomes have grown slowly, if at all, for people around the 20th percentile of the world income distribution. Who are these people? Basically, the advanced-country working classes. And although Mr. Milanovic’s data only go up through 2008, we can be sure that this group has done even worse since then, wracked by the effects of high unemployment, stagnating wages, and austerity policies.

Furthermore, the travails of workers in rich countries are, in important ways, the flip side of the gains above and below them. Competition from emerging-economy exports has surely been a factor depressing wages in wealthier nations, although probably not the dominant force. More important, soaring incomes at the top were achieved, in large part, by squeezing those below: by cutting wages, slashing benefits, crushing unions, and diverting a rising share of national resources to financial wheeling …read more


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