There have been many complaints going around that huge inequality exists between the rich and the poor.
Case in point - executive CEO pays - if you listen to all 3 American presidential candidates, they all agree that CEO's are getting paid too much. Also, Obama and Hilary are bashing free trade like there is no tomorrow, saying that if China doesn't readjust their currency, America will impose a hefty tariff.
That's not all, it seems to us that the rich are becoming more richer and the poor are becoming more poor and on absolute dollar amount, this seems to be true.
But, as researchers Christian Broda and John Romails argue, this may not be true. And as James Surowiecki writes, going for NAFTA's ass might not be the best thing after all.
The main argument here, is that prices for rich peoples stuff rose much faster than poor peoples stuff. Poor people need to spend more money on essential goods (shoes, clothes etc), whereas rich people spend a lot more money on luxury goods (education leisure etc)
Rich crap are ususally in-country produced. Essential stuff are usually outsourced.
So, with globalization, Wal-Mart and NAFTA going on, what happens? Essential stuff has massive decreasing pressure in price. Rich shit, on the other hand, don't see much of the benefit.
So, naturally, purchasing power of rich people go down, relative the purchasing power of poor people.
That's not saying that inequality does NOT exist - just saying that its a lot less than what people believe it to be.
BTW, this is looking at things long term and looking at it RELATIVELY. yes, increase in food prices affect the poor much more, but you have to 1) weight the effect over long time and 2) weight it on relative basis to other things. People don't talk about rising cost of education, rising cost of Ferraris because they are not interesting to talk about.
Coupled with the fact that the middle income people are working less than ever, therefore having more time on their hands to rest, I think the argument may have huge merit.
And as for NAFTA? Well, putting it in short terms, the reason why shoes and clothes are getting cheaper is because of NAFTA - guess who will be affected the most if that gets nullified and China, the main producer of these things, starts paying tariff.
Add on the rising cost of labour because of expansion of China's Economy - we are done here.
Sources:
Actual Paper: http://faculty.chicagogsb.edu/christian.broda/website/research/unrestricted/Broda_TradeInequality.pdf
About CEO pay (slightly unrelated)
http://www.economist.com/business/displaystory.cfm?story_id=11397928&fsrc=RSS
New Yorker Article on Free Trade
http://www.newyorker.com/talk/financial/2008/05/26/080526ta_talk_surowiecki
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