Together the people of Canada and the United States account for around 5 percent of the world’s population. Too frequently lost in the strident debate in advanced countries over the disproportionate income share of the top 1 percent is the equally lopsided distribution of global earnings whereby that 5 percent reaps more than 25 percent of world-wide earnings.
Even as “globalization” is being socially vilified for its apparent contribution to rising national income disparities it is substantially narrowing the income spread between countries.
We often hear it bemoaned that the process is resulting in the export of “our” good-paying middle-income jobs to people in third world countries. Perhaps we should consider why we feel that those jobs are really “ours” and why we feel it appropriate that for so many years we have been entitled to a so much higher standard of living than most of the rest of the world.
Writing a decade ago Nobel Prize Winner Richard Lucus commented: “The resources of all kinds that will be at the disposal of [a] new American will be on the order of 15 times the resources available to his Indian brother. This seems to us a terrible wrong, justifying direct corrective action, and perhaps some actions of this kind can and should be taken. But of the vast increase in the well-being of hundreds of millions of people that has occurred in the 200-year course of the industrial revolution to date, virtually none of it can be attributed to the direct redistribution of resources from rich to poor.”
Before falling to the temptation of searching for a way of constraining the earning powers of the super-rich we should consider another manifestation of globalization—that more than ever before, wealth and capital have become globally footloose. The list of industrial billionaires, once heavily based in the United States is expanding sharply to include hundreds in the emerging giants. Both the individual skill-sets and the financial capital necessary to create and dominate commerce are becoming increasingly stateless.
The moral discussion around the relative justice of income distributions within the advanced economies relative to the fairness of the divide between advanced and emerging economies is becoming irrelevant. The genie has left the bottle—the horse has departed the barn. If we wish to share in the new developments in technology and healthcare that will increasingly originate in the rapidly expanding new economies we will inevitably have to accept that our stranglehold on middle class jobs has ended. It has ended, not because we have given up our position by negotiating trade pacts, but because other countries are beginning to excel in precisely the same economic strengths that generated our advantages.
As Lucus suggested, the idea that we can engineer some sort of corrective action is misplaced. It is hard to conceive of any effective system of protection that could be constructed. Capital and the super-rich will be drawn to where the rewards are greatest and those middle-class jobs will gravitate to where the physical and intellectual skills, creativity and costs are most productive. In any setting except that of our own preoccupation with natural entitlement, that would be manifestly perceived as “fair”.
Don McIver is Director of Research for the Atlantic Institute for Market Studies
Click here to read The 99% Solution: How globalization makes everyone’s income a little more equal.