4/17/2023 0 Comments Rochard wolfUS president Donald Trump, a naive mercantilist, focuses on bilateral trade imbalances as a cause of job losses © Getty Images They estimated that “rents” - earnings over and above those needed to attract people into the industry - accounted for 30-50 per cent of the pay differential between finance professionals and the rest of the private sector. Thomas Philippon of the Stern School of Business and Ariell Reshef of the Paris School of Economics showed that the relative earnings of finance professionals exploded upwards in the 1980s with the deregulation of finance. This is a diversion of talented human resources in unproductive, useless directions.įinance also creates rising inequality. These then lend against property, because it generates collateral. When the financial sector grows quickly, they argue, it hires talented people. Thus, the financial sector’s ability to create credit and money finances its own activities, incomes and (often illusory) profits.Ī 2015 study by Stephen Cecchetti and Enisse Kharroubi for the Bank for International Settlements said “the level of financial development is good only up to a point, after which it becomes a drag on growth, and that a fast-growing financial sector is detrimental to aggregate productivity growth”. Liberalised finance tends to metastasise, like a cancer. Research strongly suggests that the effect of immigration on the real earnings of the native population and on receiving countries’ fiscal position has been small and frequently positive.įar more productive than this politically rewarding, but mistaken, focus on the damage done by trade and migration is an examination of contemporary rentier capitalism itself.įinance plays a key role, with several dimensions. The economic impact of immigration has also been small, however big the political and cultural “shock of the foreigner” may be. Multiple studies of different events around the world point to this conclusion.” Harvard economist Elhanan Helpman ends his overview of a huge academic literature on the topic with the conclusion that “globalisation in the form of foreign trade and offshoring has not been a large contributor to rising inequality. The outcome depended on how the institutions of the market economy behaved and on domestic policy choices. Yet increases in inequality have varied substantially. The platform giants are the dominant examples of monopoly rentiersĮvery western high-income country trades more with emerging and developing countries today than it did four decades ago. But the notion that rising inequality and slow productivity growth are due to foreigners is simply false.Īn Amazon warehouse in the UK. If one listens to the political debates in many countries, notably the US and UK, one would conclude that the disappointment is mainly the fault of imports from China or low-wage immigrants, or both. This was not mainly the result of such skill-biased technological change. ![]() But the share of the top 1 per cent of US earners in pre-tax income jumped from 11 per cent in 1980 to 20 per cent in 2014. Technology has also created greater reliance on graduates and raised their relative wages, explaining part of the rise of inequality. ![]() ![]() As Robert Gordon, professor of social sciences at Northwestern University, argues, fundamental innovation slowed after the mid-20th century. ![]() That does not explain every disappointment. So why is the economy not delivering? The answer lies, in large part, with the rise of rentier capitalism. In this case “rent” means rewards over and above those required to induce the desired supply of goods, services, land or labour. “Rentier capitalism” means an economy in which market and political power allows privileged individuals and businesses to extract a great deal of such rent from everybody else.
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