Author: Yan

The 2018 World Inequality Report classifies India as part of the ‘extreme inequality frontier’. James Crabtree, former Mumbai Bureau Chief for the Financial Times, and currently holding a professorial position at the National  University of Singapore, has revisited the theme of India’s extreme inequality by offering a riveting account of the ‘Billionaire Raj’.

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In the latest issue of the British Medical Journal, Jessica Ho and Arun Hendi chart recent trends in life expectancy in 18 rich countries. The authors rightly note that ‘life expectancy is a key summary measure of the health and wellbeing of a population’. Not surprisingly, the UNDP’s iconic ‘human development index’ (HDI) incorporates life expectancy as one of its core components alongside per capita income and education.

While ‘monumental improvements in life expectancy have been the predominant trend for high income, developed countries over the course of the 20^th and 21^st centuries’, recent changes have been mixed and in some cases, most notably the United States, the evidence on the evolution of life expectancy has been quite disturbing. Ho and Hendi show that in 12 out of 18 countries, life expectancy declined moderately in 2014-2015, although this has been offset by robust gains. The exceptions have been the United Kingdom and the United States which appear to be ‘experiencing stagnating or continuing declines in life expectancy, raising questions about future trends in these countries.’  As far as the US is concerned, these trends reinforce its poor position in an international ranking of life expectancy among high-income countries (see table 1 below).

Table 1

Source: Ho and Hendi (op.cit)

The recent mixed trends in life expectancy can be linked to deaths due to diseases associated with old age, such as respiratory and cardiovascular disease. In the US, a much-noted study by Nobel laureate Angus Deaton and his co-author Anne Case draws attention to the hitherto unknown case of white non-Hispanic Americans with limited education (no more than a high school degree) experiencing significant ‘increases in mortality and morbidity in mid-life since the turn of the century’. Proximate causes that could explain these negative trends include drug overdoses (often known as the ‘opioid crisis’), suicides and alcohol-related liver mortality – the so-called ‘deaths of despair’. Deeper structural factors include various types of social and economic dysfunction, such as the decline of marriage, social isolation and limited labour market opportunities. Case and Deaton lament that the story that they unearth is a tragic one ‘about the collapse of the white, high school educated, working class, after its heyday in the early 1970s…’ which continues unabated.

Is the US economy poised to enter a new era of shared prosperity? Is the American dream becoming a real prospect again for the average worker? And that too at a time when the US administration is conspicuously dysfunctional under a Trump Presidency?

Some indicators suggest considerable grounds for optimism about future economic prospects in the United States. The unemployment rate (at 4 per cent) is at its lowest level in decades. Growth has surged to more than 4 per cent in the most recent quarter.

Critics are not convinced. Nobel Laureate Paul Krugman dismissed the growth data as a temporary blip. He argues that one would need at least a decade of 4 per cent plus growth before an era of sustainable economic boom can be proclaimed.

Robert Reich, former Labour Secretary under the Clinton Administration and a distinguished Professor at Berkeley, draws on a survey reported in CNBC to highlight the fact that almost 80 per cent of Americans live from paycheck to paycheck. The same survey shows that the majority of Americans battle with the unsustainable burden of personal debt. These grim statistics can be combined with protracted wage stagnation, especially for low skilled workers, and what some leading analysts have called US-style ‘extreme inequality’. Reich makes the point that while jobs are plentiful, ‘good jobs’ entailing decent wages and secure working conditions, are scarce.

How can one explain these stylized facts that seem to be stubbornly persistent even as the labour market tightens in the context of an incipient boom? Reich highlights two aspects of the American labour market that are germane to our understanding of what is happening to the living standards of the average American worker. To start with, there has been a substantial erosion of the bargaining power of workers. In 1954, unionization rates were 35 per cent of the work-force. In 2015, it stood at a paltry 11 per cent. Reinforcing this loss of bargaining power is the rise of oligopolistic market power across a broad spectrum of American industries.

Reich is not the only one concerned about these stark structural realities of the American labour market. Other scholars have enunciated a similar narrative. Such scholarship suggests that reviving the American dream will require much more than a temporary surge in growth and low unemployment rates.

Once derided as an ‘international basket case’ following its emergence as an
independent nation in 1971 after a bitter war of liberation with Pakistan,
Bangladesh is now lauded as a development success story. How can one explain this unanticipated transformation?

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India is justifiably proud of acquiring the mantle of the ‘fastest growing economy in the world’. There is the risk, however, of succumbing to ‘growth fetishism’. ‘Official India’ seems to subscribe to the view that the country can – and must – continue to grow at 7 to 8 percent per annum for decades and even aspire to double-digit growth. This uncritical acceptance of a growth target belies the dissident views of formidable critics who argue the case for a secular growth slow-down as extrapolated from well-known empirical regularities. There are sound reasons to temper the case of endless and rapid growth.

Read more at Griffith Asia Insights….