Economic Growth

Opinion: It's the Technology, Stupid

  • By
  • Parag Khanna,
  • New America Foundation
  • and Ayesha Khanna
June 21, 2012 |
After Tip O'Neill's "All politics is local," Bill Clinton's quip "It's the economy, stupid," is perhaps the most oft-quoted truism of modern American politics. But as times change, we should update our aphorisms accordingly.
 
Just four years ago during America's presidential election, outsourcing to India and China's currency manipulation were the bogeymen, the former blamed for the loss of jobs and the latter for the weakness of exports.
 
But increasingly the culprit is the robot.

Asset Building News Week, June 17 - June 22

June 22, 2012
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The Asset Building News Week is a weekly Friday feature on The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include the monetary policy, economic inequality, and financial services.

 

Monetary Policy

The New Inequality Story is Wealth, Not Income

June 20, 2012
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Inequality has been receiving a fair amount of attention in recent years. Even before the Great Recession hit, a number of researchers and academics were sharing observations on the divergent paths of those in the middle and on the bottom compared to those at the top and very top. Median wages have been relatively stagnant, and, more importantly, had become divorced from productivity gains. And while poverty has persisted for large segments of the population, the share of income controlled by those at the top has continued to climb. These have been long-term trends which began to take shape in the early 1980s. Two questions have been on my mind. First, what about wealth? Second, what’s the connection between the Great Recession and inequality in America?

I’ve posed these questions to Tim Noah, whose recent book, The Great Divergence, has helped elevate the discussion of inequality in America. Tim recently posted a response on his informative and insightful blog. But I didn’t like his answers.

In his book, Tim limits his discussion of inequality to the distribution of income. I think this fails to capture the full extent of the phenomenon. In some ways, I understand the choice. We have much better data for income than we do for wealth and traditionally that is where the research on inequality has focused. Still, income is only part to the story, and I fear Tim has needlessly limited his inquiry. It reminds me of looking for something where the light is brightest even though it was lost somewhere else.

New data from the Federal Reserve make it clear that wealth has assumed a leading role in the inequality story. Their Survey of Consumer Finances offers one of the fullest accounts of the family balance sheet. Unfortunately, it is conducted only every three years. The good news is that the last two surveys (2007 and 2010) offer a means to examine the impact of the Great Recession.

Here is what the Fed reported about the changes in wealth holdings. Between 2007 and 2010, the average family saw their wealth decline 39 percent. That is a sentence that deserves to be bolded. This far outpaced the 8% drop of income the average family experienced.  The 39% drop in wealth speaks to the severity of the recession and it did get front page treatment on a number of news outlets. But the impact was not experienced equally. Families in the top ten percent by income actually saw their net worth increase almost two percent.

Those at the top had their wealth holdings increase and almost everybody else experienced a drastic decline. That’s inequality by definition. Check out the visual (rollover to see the absolute figures).

Here’s another perspective on the same phenomenon. This time the families are ranked by their net worth holdings rather than income. Those in the bottom 25% had their (admittedly small) wealth holdings completely wiped out. Families in the next three groups experienced big drops but at increasingly declining rates. The top 10% were relatively immune from the impact of the Great Recession, experiencing a wealth loss of 6.4%.

These charts offer new and illuminating information. While we have known for years that median incomes have stagnated even as there were income gains at the very top, the re-concentration of wealth is an emerging phenomenon. And it appears that the Great Recession has changed the dynamics at play.

Tim writes on his excellent blog that he can’t get too worked up about this for a number of reasons, almost all of which I find surprising.

From Protection to Inclusion: Making the Shift to Cashless Payments Meaningful

June 18, 2012
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By Jamie M. Zimmerman and Sarah Rotman 

Originally posted on CGAP's Technology Blog

In Colombia, Luisa used to arrive before dawn to collect her monthly Familias en Accion payment in person. Now, she can go to any of over 700 Banco Agrario branches and 350 ATMs across 800 municipalities to withdraw whatever portion of her payment she desires whenever she likes. Maria in Brazil uses her MasterCard debit card, linked to her CAIXA Conta Facil account where she receives her monthly Bolsa Familia stipend, to pay bills and buy groceries, but she can keep a small amount stored for next month’s expenses.  Yaneth, a beneficiary of the social protection program Juntos in Peru, saved enough of her payment in her Banco de Peru account that she purchased a sewing machine for her microenterprise.

Europocalypse Explained

June 15, 2012

Europe's fiscal future is looking bleaker by the day. This weekend, the G-20 will convene in Mexico to determine how to avoid a possible global market meltdown spurred by European bank debt and default. In this podcast, two members of New America's World Economic Roundtable --Jonathan Carmel, the portfolio manager at Carmel Asset Management, and Peter Tchir, the founder of T. F. Market Advisers -- talk about the implications of the impending Spanish bank bailout, the possible consequences of this weekend's Greek election, and how the U.S.

IMF to the U.S. and Europe: Help Not Wanted

  • By
  • Charles Kenny,
  • New America Foundation
June 15, 2012 |

As the Great Recession rumbles on, hitting the old, very rich countries of Europe and North America far harder than the new, somewhat rich economies of Asia and Latin America, the traditional order of global financial governance is looking increasingly frayed. At the Group of 20 summit in Los Cabos, Mexico, on June 18-19, world leaders are expected to issue bold statements about their commitment to reshaping institutions such as the World Bank and the International Monetary Fund to reflect shifts in the economic balance of power.

The Case for Wage-Led Growth

  • By Jeff Madrick, Roosevelt Institute and Schwartz Center for Economic Policy Analysis
June 15, 2012

The share of wages and salaries in Gross Domestic Product (GDP) has declined in most rich nations over the past 20 to 30 years. Over the same period, income inequality has grown in most of these nations, and rapidly in some of the largest of them, resulting in slow wage growth for most consumers. 

Asset Building News Week, June 11 – June 15

June 15, 2012
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The Asset Building News Week is a weekly Friday feature on The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include the Fed’s Survey of Consumer Finances for 2010, homeownership, and income inequality.

12 Signs of the Europocalypse

  • By
  • Douglas Rediker,
  • New America Foundation
  • and David Gordon
June 12, 2012 |
Two short years ago, if anyone had suggested that we would be considering pan-European bank regulation, cross-border deposit guarantees, joint and several Eurobonds, and the very survival of the common currency, they would have been dismissed as nothing short of crazy. But what was unthinkable then appears to be verging on the inevitable now.

Is Your Job Robot-Proof?

  • By
  • Parag Khanna,
  • New America Foundation
  • and Ayesha Khanna
June 8, 2012 |

Back in 2004, America’s leading humor magazine the Onion ran a story titled “American Robot’s Job Outsourced to Overseas Robot.” The lawnmower assembling 11-year old robot named QT2D-7 bitterly complained of not receiving any notice or severance. For about a decade, outsourcing has been the Democratic Party’s hatchet to attack free-trade Republicans.

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