Wednesday, April 26, 2006

Income Inequality - France v. US.

Here's an interesting article from the Financial Times - a paper not particularly know for its anti-American views. They mention a study by the National Bureau of Economic Research showing that income inequality in the US is returning to where it was almost a century ago (after a steep decline in the mid-20th century), contrary to other countries like France or Japan.

Here's a fascinating chart:


















The FT article says that this evolution is important for 3 reasons:
  • income mobility does not offset the rising inequality.
  • the failure of an economy to generate rising incomes for a majority over decades causes frustration.
  • politics inevitably become more populist (the US “right” has become “pluto-populist” – an alliance of free-marketeers, nationalists and social conservatives – and the “left” is increasingly “protecto-populist” – an alliance of protectionists, dirigistes, social liberals and anti-nationalists. This endangers both intellectual coherence and sensible policymaking.)
  • They also point out that while US individualism may contain the frustration caused by growing income inequality, most cultures cannot. I think that's a very good comment and it is definitely the case of France where l'égalité is seen as an intricate part of the French national identity.
The last point regarding 'populist politics' is, on the other hand, something that both France and the US have in common. The French read politics through a “protecto-populist” paradigm whereas the Americans tend to see politics from a “pluto-populist” perspective. Those are major cultural differences for sure.
But the commonality - and here I agree again with the conclusions of this article - both are a threat to "intellectual coherence and sensible policymaking" and I think the news in this matter speaks for itself.

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