January 21, 2011
January 21, 2011
January 21, 2011
APART from being famous and influential, Hu Jintao, David Cameron, Warren Buffett and Dominique Strauss-Kahn do not obviously have a lot in common. So it tells you something about the breadth of global concerns about inequality that China’s president, Britain’s prime minister, America’s second-richest man and the head of the International Monetary Fund have all worried, loudly and publicly, about the dangers of a rising gap between the rich and the rest.
Mr Hu puts the reduction of income disparities, particularly between China’s urban elites and its rural poor, at the centre of his pledge to create a “harmonious society”. Mr Cameron has said that more unequal societies do worse “according to almost every quality-of-life indicator”. Mr Buffett has become a crusader for a higher inheritance tax, arguing that America risks an entrenched plutocracy without it. And Mr Strauss-Kahn argues for a new global growth model, claiming that gaping income gaps threaten social and economic stability. Many others seem to share their concerns. A new survey by the World Economic Forum, whose annual gathering of bigwigs in Davos begins on January 26th, says its members see widening economic disparities as one of the two main global risks over the next decade (alongside failings in global governance).
The debate about inequality is an old one. But in the wake of a financial crisis that is widely blamed on Wall Street fat cats, from which the richest have rebounded fastest, and ahead of public-spending cuts that will hit the poor hardest, its tone has changed. For much of the past two decades the prevailing view among the world’s policy elite—call it the Davos consensus—was that inequality itself was less important than ensuring that those at the bottom were becoming better-off. Tony Blair, a Labour predecessor of Mr Cameron’s, embodied that attitude. His New Labour party was famously said to be “intensely relaxed” about the millions earned by David Beckham (a footballer) provided that child poverty fell.
Now the focus is on inequality itself, and its supposedly pernicious consequences. One strand of argument, epitomised by “The Spirit Level”, a book that caused a stir in Britain, suggests that countries with greater disparities of income fare worse on all manner of social indicators, from higher murder rates to lower life expectancy. A second thread revisits the macroeconomic consequences of income disparities. Several prominent economists now reckon that inequality was a root cause of the financial crisis: politicians tried to counter the growing gap between rich and poor by encouraging poorer folk to take on more credit (see article). A third argument is that inequality perverts politics, with Wall Street’s influence in Washington often cited as exhibit A of the unhealthy clout of a plutocratic elite.
If these arguments are right, there might be a case for some fairly radical responses, especially a greater focus on redistribution. In fact, much of the recent hand-wringing about widening inequality is based on sloppy thinking. The old Davos consensus of boosting growth and combating poverty is still a better guide to good policy. Rather than a sweeping assault on inequality itself, policymakers would do better to take on the market distortions that often lie behind the most galling income gaps, and which also impede economic growth.
Begin with the facts about inequality. Globally, the gap between the rich and the poor has actually been narrowing, as poorer countries are growing faster. Nor is there a monolithic trend within countries (see article). In Latin America, long home to the world’s most unequal societies, many countries—including the biggest, Brazil—have become a bit more equal, as governments have boosted the incomes of the poor with fast growth and an overhaul of public spending to improve the social safety-net (but not by raising tax rates for the rich)…
January 21, 2011
In the heart of the Great Depression, millions of American workers did something they’d never done before: they joined a union. Emboldened by the passage of the Wagner Act, which made collective bargaining easier, unions organized industries across the country, remaking the economy. Businesses, of course, saw this as grim news. But the general public applauded labor’s new power, even in the face of union tactics that many Americans frowned on, like sit-down strikes. More than seventy per cent of those surveyed in a 1937 Gallup poll said they favored unions.
Seventy-five years later, in the wake of another economic crisis, things couldn’t be more different. The bailouts of General Motors and Chrysler saved the jobs of tens of thousands of U.A.W. workers, but were enormously unpopular. In the recent midterm elections, voters in several states passed initiatives making it harder for unions to organize. Across the country, governors and mayors wrestling with budget shortfalls are blaming public-sector unions for the problems. And in polls public support for labor has fallen to historic lows.
The hostility to labor is most obvious in the attacks on public-sector workers as what Tim Pawlenty, Minnesota’s former governor, calls “exploiters”—cosseted, overpaid bureaucrats whose gold-plated pension and health plans are busting state budgets. But there’s also been a backlash against labor generally. In 2009, for the first time ever, support for unions in the Gallup poll dipped below fifty per cent. A 2010 Pew Research poll offered even worse numbers, with just forty-one per cent of respondents saying they had a favorable view of unions, the lowest level of support in the history of that poll.
In part, this is a simple function of the weak economy. The statistician Nate Silver has found a historical correlation between the unemployment rate and the popularity of unions. Furthermore, an analysis of polling data by David Madland and Karla Walter, of the Center for American Progress, shows that, when times are bad, the approval ratings of government, business, and labor tend to drop in sync; voters, it seems, blame all powerful institutions equally. And although organized labor is much less powerful than it once was, voters don’t seem to see it that way: more than sixty per cent of respondents in the 2010 Pew poll said that unions had too much power.
The recession has also magnified the gap between unionized and non-unionized workers. Union workers, on average, get paid more than their non-unionized counterparts—most estimates put the difference at around fifteen per cent—and that wage premium widens during recessions. Similarly, union workers often still have defined-benefit pensions, which sets them apart from all those Americans who watched their retirement accounts get ravaged by the financial crisis. That’s given rise to what Olivia Mitchell, an economics professor at Wharton, calls “pension envy.” This resentment is most evident in the backlash against public-sector workers (who now make up a majority of union members). A recent study by the economics professors Keith Bender and John Heywood found that, when you control for a host of variables, public employees are not actually paid more than their private-sector counterparts. But they do often enjoy good retirement schemes, and in states like Illinois and California politicians have agreed to hefty contracts with state employees and then underfunded the pension plans, leaving future taxpayers to pick up the bill. It’s no wonder that people are annoyed…
January 21, 2011
Last year, I attended the Dutch trial of the century: that of Geert Wilders, leader of the third-largest party in the Dutch parliament. Sparking the charges against Wilders were about 50 statements that he had made about Islam. Three of the most widely circulated, from newspaper columns that Wilders wrote, will give an idea of the rest: “The heart of the problem is the fascist nature of Islam, the sick ideology of Allah and Mohammed as laid down in the Islamic Mein Kampf: the Koran”; “We have a huge problem with Muslims which crosses boundaries in every field, and we come up with solutions that wouldn’t make a mouse go back into its cage”; and “Islam is a violent religion. If Mohammed were living here today, Parliament would instantly agree to chase him out of the country in disgrace.”
Wilders was charged under articles 137c and 137d of the Dutch penal code, which forbid group insult, hate speech, and incitement to discrimination. The trial was hugely controversial, partly because the articles—which were passed in the 1930s as an attempt to halt rising anti-Semitism—have rarely been invoked. Further, the fact that the leader of a powerful anti-establishment party was standing trial for his opinions inevitably cast a political shadow over the affair.
The trial dominated public debate in the Netherlands for months and captivated Europe as well. It will probably continue to do so for at least another year, because Wilders’s lawyers successfully appealed for a declaration that the judges in the Amsterdam District Court had appeared biased. The trial will now have to start all over again. What follows is an account based on my firsthand observations of this tawdry episode.
Wilders’s prosecution came about in a most unusual way. The public prosecutor, Paul Velleman, initially refused to prosecute him because, in his view, Wilders’s statements did not break the law. In refusing to press charges, Velleman acknowledged that Wilders’s statements “may have been insulting for Muslims,” but concluded that Wilders was not guilty of lawbreaking, since the statements were made “in the context of public debate.” Velleman added that Wilders didn’t incite hatred or call for discrimination, as his comments “concerned Islam the religion and not Muslims as human beings.” The relevant laws did not forbid merely criticizing a religion, he maintained.
But Gerard Spong, a prominent defense lawyer and critic of Wilders’s, appealed Velleman’s decision to the Court of Appeal, which, according to Dutch law, can order the prosecutor to prosecute anyway. On January 21, 2009, that’s just what it did. After stating that they “disagreed with the public prosecutor,” the court’s three judges concluded that Wilders’s statements were “punishable under Dutch law” and added that “in the past, others, including politicians, have been convicted for less.” (In an accompanying footnote, the court referred to only one case.) By ruling that Wilders “abuses the liberty of expression” and “incites discrimination and hatred against a group of people or a community of believers,” the Court of Appeal scandalously exceeded its authority. The presumption of innocence is, after all, one of the central principles of a fair trial. It is not up to the Court of Appeal to decide whether the accused is guilty, only to decide whether a prosecution is warranted. If Wilders is ever found guilty and chooses to appeal the verdict, he would have to appeal to a court that had pronounced his guilt before trial.
After the Court of Appeal’s ruling, the only sensible decision for the District Court in Amsterdam, where the trial would take place, was to declare the public prosecutor unreceptive from the start and dismiss the case. This, however, did not happen. So in January 2010, almost a year after the Court of Appeal’s ruling, a preliminary session to decide the course of the trial commenced in the District Court.
During this preliminary session, Wilders’s main defense lawyer, Bram Moszkowicz, requested that a number of witnesses be allowed to testify about Islam. The court rejected most of these. Some were unlikely to appear in court anyway, such as Ahmed Jannati, chairman of the Guardian Council of Iran; Yusuf al-Qaradawi, ideologue of the Muslim Brotherhood in Egypt; and Ayatollah Yazdi, a former student of Ayatollah Khomeini and currently a spiritual leader of Islamic fundamentalists in Iran. But others might have appeared and rendered fascinating testimony backing up Wilders’s assertion that Islam was “fascist”: Mohamed Bouyeri, the Islamist murderer of filmmaker Theo van Gogh; and Fawaz Jneid, imam at the radical As-Soenah mosque in The Hague, who had cursed van Gogh and his colleague Ayaan Hirsi Ali shortly before the former was killed and the latter had to flee the country for safety…