Watch "Fareed Zakaria GPS," Sundays at 10 a.m. and 1 p.m. ET on CNN
Fareed Zakaria speaks with David Leonhardt, editor of the New York Times’ ‘The Upshot,’ about his latest research – and why the American middle class may no longer be the richest in the world. Watch the video for the full interview.
The most startling piece of data was this shift that has taken place in the American middle class. One way of looking at it, which you presented, was if you look at the median income...
…of an American – and that's not the richest person, not the poorest person, it’s the person smack in the middle. And I think the Census Bureau defines it at about $50,000 a year, someone earning $50,000 a year. Look at this chart. Since 1981, that's what's happened.
It's not a good story, is it? In 1981, we had, by far, the richest middle class in the world. And what has happened since then is that income growth in these other countries has been substantially faster for the middle class and the poor.
Now, this is after tax income. That's a question a lot of people have. It's after-tax income. It includes direct government benefits, things like Social Security. So this is really what people have to spend. And it's really worrisome. And it's not just a 30-year trend. You also see it if you look since 2000. In some ways, it's more pronounced in the last 15 years.
This is the stunning one. You see all these other countries had much stronger income growth at the median level. But then since 2000, I mean the United States barely grew at all. FULL POST
By Rep. Alan Lowenthal and Michael Shank, Special to CNN
Editor’s note: U.S. Rep. Alan Lowenthal (D-Calif) serves on the House Foreign Affairs and Natural Resources Committees. Michael Shank is associate director for legislative affairs at the Friends Committee on National Legislation and a senior fellow at the JustJobs Network. The views expressed are their own.
The partisan picking apart of last month’s Congressional Budget Office report on the minimum wage – and the debate over its impact on employment – was just the latest missed opportunity to find bipartisan solutions for this country’s problems. Sadly, in this case, the failure strikes at the very heart of the American Dream – economic mobility.
Despite what many Americans assume, the United States actually has some of the lowest and longest-stagnating rates of economic mobility in the rich world – significantly lower than many European countries. This fact should be of concern to both Democrats and Republicans as it hinders this country’s economy.
How has this happened? For a start, the minimum wage has lost much of its purchasing power, and hasn't kept pace with inflation. Indeed, the minimum wage, adjusted for inflation, is lower now than it was in the late 1960s, while wages at the bottom end of the scale have fallen in recent decades, even as worker productivity has grown.
"Fareed Zakaria GPS," Sundays at 10 a.m. and 1 p.m. ET on CNN
GPS Digital Producer Jason Miks speaks with Zanny Minton Beddoes, economics editor for 'The Economist,' and Canadian member of parliament Chrystia Freeland about rising inequality – and how the West should respond.
You were elected as a member of parliament in Canada last year. How do you think the big debate going on over inequality in the United States compares with how it is unfolding in Canada?
Freeland: Basically, these are global phenomenon that are driving the surge in inequality. It’s globalization. It’s technological change. And there’s a political aspect, a set of political changes – deregulation, weakening of unions, privatization, changes in taxes. So this is really something that is happening in all of the Western industrialized countries, and also in a lot of the emerging markets – you see income inequality surging in China, Russia, India. So it’s a big issue in Canada.
Interestingly, I think it’s becoming a truth universally acknowledged, which it wasn’t before the crisis. Things have changed. Income inequality is higher than it has been. So if you think back pre-2008, people were still debating that. Now, we all get that this is the new reality, and I think what you are starting to see is people focusing on what part of all this is bad, and what can we do about it. And I think the focus rightly is narrowing in on really the big problem of the hollowed out middle class, the stagnant middle class jobs and there not being enough middle class jobs.
I think what you’re going to see increasingly is people saying that this is the thing we need to focus on, and also how do we improve social mobility?
Editor’s note: Heather Gautney is an associate professor of sociology at Fordham University and the author of Protest and Organization in the Alternative Globalization Era. The views expressed are her own.
Five years ago, then-French President Nicolas Sarkozy commissioned a panel of world-renowned economists, led by Nobel Prize winners Joseph Stiglitz and Amartya Sen, to determine whether Gross Domestic Product (GDP) was a reliable measure of economic stability and social progress.
It was no surprise to Sarkozy, nor anyone hit by the financial crisis, that the panel staunchly agreed it was not.
GDP is a tally of everything produced. It is a monetary measure of all goods and services produced within a given country – and the sum of a country’s total expenditures, through consumption, investment, government purchases, and net exports. But while GDP has become the primary (albeit blunt) tool for gauging the health of national economies, and a crystal ball for policymaking, measurements like GDP often paint only a partial and often misleading picture of social and economic reality.
By Fareed Zakaria
The super-rich have grown worldwide, but the United States is at the head of the pack. This is because of factors structural (globalization and technology help superstars; large and liquid financial markets make the rich richer) and political (lower tax rates and the political influence of the financial sector). The United States has all of these factors — technological innovation, global reach and huge capital markets but also tax cuts, deregulation, a powerful financial industry — so it’s not that surprising that it has experienced the biggest rise in the super-rich. The current Journal of Economic Perspectives has an excellent set of essays on this .
Reviving the middle class is clearly the most important challenge, involving the most people. It’s also the hardest and, having begun 40 years ago, is proving to be one without an enduring solution. There is strong evidence that rising inequality is crowding out the middle class. But there is also a powerful story to be told about how technology, globalization and declining American education and skills have contributed to the stagnation of wages for the median worker.
Would higher taxes on the rich create a more dynamic middle class? Perhaps, but it’s not clear exactly how. It’s also worth noting that the U.S. tax system — which relies mostly on income taxes — is more progressive than European systems that raise a much greater percentage of their revenue from sales taxes. The top 10 percent of American earners pay about 70 percent of all federal income taxes. In New York City, the top 1 percent pay almost 45 percent of the city’s income taxes.
For more What in the World watch Sundays at 10 a.m. & 1 p.m. ET on CNN
By Global Public Square staff
If there's one country in the world that looks like a utopia, its name must be Switzerland. This is a country that has it all. The average income is $82,000 a year – 65 percent more than the average American income. Everyone has great healthcare, childcare, and education. The unemployment rate is 3 percent. There is almost no corruption. According to the OECD, of 34 developed countries surveyed, the Swiss have the greatest degree of trust in their government. And, of course, it is a spectacular country with great traditions of skiing, cheese, chocolate, and wine.
What could possibly go wrong? Well, quite a lot, actually.
The Swiss are furious about income inequality. The story is a familiar one. According to Reuters, in 1984 top earners in Swiss firms made 6 times as much as the bottom earners. Today, they make 43-times what bottom earners make. At some banks and firms, CEOs make 200-times the salary of the lowest-paid employee.
By Katie Simmons, Special to CNN
Editor’s note: Katie Simmons is a research associate with the Pew Research Center. The views expressed are her own.
Income inequality has been growing at an increasingly rapid pace. And publics around the world – and especially in Europe – are taking note.
Inequality in Organization for Economic Cooperation and Development countries increased more over the first three years of the global downturn than in the previous 12 years combined, according to a recent report by the group. And large majorities believe that their particular nation’s economic system favors the wealthy, according to a new 39-country survey by the Pew Research Center, with many in major eurozone countries expressing alarm over these trends.
The poll – which spanned the Americas, Europe, Asia/Pacific, the Middle East and Africa – found that clear majorities in 31 of the 39 nations surveyed said the wealth gap in their country has gotten worse over the past five years. Europeans are especially likely to think inequality has increased, including about nine in ten in Spain (90 percent), Germany (88 percent), Greece (88 percent) and Italy (88 percent). Latin American publics, meanwhile, are the least likely to say the income gap has worsened in their nation, with roughly half or less in most of these countries believing inequality has risen. (And they may have good reason – a 2013 World Bank report found that economic inequality actually declined in most countries in the region between 2000 and 2010).
By Stewart M. Patrick and Isabella Bennett, CFR
Stewart M. Patrick is director of the International Institutions and Global Governance Program at the Council on Foreign Relations. Isabella Bennett is program coordinator. This entry of The Internationalist originally appeared here. The views expressed are solely those of Stewart M. Patrick and Isabella Bennett.
Guor Marial, a cross-country All-American athlete at Iowa State, ran two marathons in Olympic qualifying times. But with no passport and no country — and no coach nor a sponsor — he watched the Summer Games’ opening ceremony from Flagstaff, Arizona.
After fleeing from a Sudanese refugee camp at the age of 8, Marial had eventually escaped to Egypt and then the United States, where he lives as a permanent U.S. resident but without citizenship.
The day before the competition began, the International Olympic Committee finally granted Marial permission to run as an independent athlete. Marial, who works at night and trains by day, finished 47th in London. No medal, but a rare triumph for the world’s stateless.
As many as 15 million people worldwide cannot claim a state as their own, because they lack legal citizenship or formal documentation of their status. They are, in effect, “legal ghosts,” lacking even the “right to have rights.” And unlike Marial, many are not even considered refugees — placing them in a precarious legal limbo. They may be deprived of education, employment, housing, public health and welfare benefits, the right to vote, and access to legal justice.
By Sherif Elsayed-Ali, Special to CNN
Sherif Elsayed-Ali is head of refugee and migrants’ rights at the International Secretariat of Amnesty International. The views expressed are his own.
A tense political situation deteriorates; violence rapidly escalates with dire effects on the civilian population – people are killed indiscriminately, property is destroyed and what starts as a slow trickle of refugees into neighboring countries becomes a mass displacement.
That was Iraq in 2006. In 2012 it’s Syria.
And there’s a tragic irony because Syria is not only Iraq's immediate neighbor, but also a country that was host to more than one million Iraqi refugee at the height of the displacement crisis.
By John D. Sutter, CNN
(CNN) - CNN iReport is asking people all over the world to give up driving for a day - and document it - in support of women in Saudi Arabia, who aren't allowed to drive because of religious rules in that conservative Middle Eastern kingdom.
Editor's note: Christopher Sabatini is the editor-in-chief of Americas Quarterly and senior director of policy at Americas Society/Council of the Americas. The views in this article are solely those of Christopher Sabatini.
By Christopher Sabatini - Special to CNN
Social inclusion. Nobel Prize-winning economist Amartya Sen has theorized about it. Peruvian President Ollanta Humala campaigned on it. Multilateral banks now regularly profess their commitment to it. And U.S. Secretary of State Hillary Clinton has stated that U.S. foreign policy should promote it.
But what is it? The concept of social inclusion revolves around the idea that a citizen has the right and ability to participate in the basic economic, political and social functioning of his or her society. It’s more than economic enrichment, centered on access to basic public and private goods such as health care, formal employment, education, adequate housing, political and civil rights, and economic opportunity without discrimination.
It involves more than just reducing poverty and economic inequality. And if the U.S. is going to promote it, then there must be meaningful — even measurable — differences between countries that would provide foreign policymakers with priorities or targets of opportunity.
Unfortunately, in an index of social inclusion in Latin America recently developed by the journal I publish, Americas Quarterly, the countries south of the U.S. border face a number of differences and challenges. They indicate that despite all the feel-good rhetoric about social inclusion, this is going to be difficult to tackle meaningfully as a U.S. foreign policy issue.
Editor's Note: Andrew G. Berg and Jonathan D. Ostry are, respectively, ASsistant Director and Deputy Director in the Research Department of the International Monetary Fund. The views expressed here are those of the authors and should not be attributed to the IMF.
Looking back at Irving Kristol's 1980 essay "Some Personal Reflections on Economic Well-Being and Income Distribution," as Foreign Affairsrecently did, provides a useful intellectual lens from the past to focus the economic conversation today. Kristol argued that economic inequality was "but one manifestation of how nineteenth-century ideologies - and most especially the socialist ideologies - have so decisively shaped modern social science." Moreover, he wrote, income distribution does not really change over time so it is, as a subject for study, inconsequential.
Fortunately, economists failed to take his advice; recent studies of inequality reveal the limitation of Kristol's historical perspective. Kristol narrowly focused on one long spell of stable and relatively even distribution. But a careful look at the varying levels of inequality in different countries demonstrates just how much societal divides in wealth really matter. Countries with high inequality are far more likely to fall into financial crisis and far less likely to sustain economic growth. FULL POST