Wednesday, December 31, 2014

Links, December 31, 2014

Nancy Birdsall on Thomas Piketty and the Developing World:
"Recall that Piketty argues that the dynamic of ever-increasing inequality in capitalist systems is due neither to textbook imperfections and failures of markets nor to failures of economic and political institutions, but is inherent in capitalism’s process of growth itself. The way to control the resulting spiral of inequality is to implement a potent progressive tax policy.......In short, the rich democracies have built a capable and responsive state on the basis of a social contract forged over many decades of social confrontation and political compromise. That they are mature democracies matters. Economic growth has been accompanied by political growth over several hundred years, creating a virtuous political and economic cycle. In the fast-growing emerging markets— including Brazil, China, and India—economic growth over the last two decades has fortified the potential for that virtuous cycle to kick in. Still, in these and the poorer countries of the developing world, the challenge is not, at least not yet, the one Piketty outlines—that an inherent tendency of capitalism is to generate dangerous inequality that if left unchecked will undermine the democratic social state itself. The challenge is the other way around: to build a capable state in the first place, on the foundation of effective institutions that are democratically accountable to their citizens."
This is not clear. The same tendency outlined in the beginning seems to work between countries too: $2 lost for every $1 gained and Poorer countries loose more from profit shifting and this from IMF.

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