Thanks to Jack Reynolds, I noticed the following interesting post by Duncan Green based on this paper by the IMF. The paper basically argues that income inequality may have contributed to the recent crisis. The idea is that workers compensated their low wage growth through loans, which generated assets held by the rich. Excessive leverage triggered the crisis. This is an important argument and one that links the obvious process of financialization with the expansion of wealth at the top.
Yet we need more research on the evolution of the asset pricing as a generator of inequality. Who has benefited from growing asset prices in both the stock market and the real state market? Who was investing there? And how was it connected to lending by the poor?
A striking difference with developing countries also emerged: there inequality is high but there is little access to credit and thus little compensation for the poor and middle class. This is a difference between developed and developing countries worth analysing.
Update: An interesting documentary in the subject has just been produced. I have not watched it but are trying to find out how to show it in St Antony´s. It would be a great opportunity to discuss some of these issues.
Monday, January 31, 2011
Wednesday, January 19, 2011
The value of GDP
I am committed to re-launch this blog again, mainly because I am now teaching a new course on Economic Foundations (Macroeconomics) for the MPhil in Development Studies at Oxford and there are many issues that we cannot cover in the class but are worth discussing.
Today one issue was the extent to which GDP is a good measure of welfare and whether economic growth per se is good or it all depends on what things are being produced. My view is that expanding the amount of goods and services in developing countries is extremely important to: (a) Expand livelihood opportunities for people. (b) Create the resources that can contribute to produce social services and meet social demands for the whole population.
Does that mean that it does not matter what we produce? Absolutely not. We need to be aware that different activities generate different spillovers, contribute to meeting different demands and generate different levels of wages and profits. We should promote sectors that can lead to improvements in welfare for a majority of the population in the long run... but we should also recognize that trade can be useful to exchange goods and services that are not useful to meet social demands for others that may be useful.
For two different positions about the usefulness of GDP, it may be useful to go here (a positive view from OECD here) and here (a critical view, although not from anthropology).
Much to discuss!
Today one issue was the extent to which GDP is a good measure of welfare and whether economic growth per se is good or it all depends on what things are being produced. My view is that expanding the amount of goods and services in developing countries is extremely important to: (a) Expand livelihood opportunities for people. (b) Create the resources that can contribute to produce social services and meet social demands for the whole population.
Does that mean that it does not matter what we produce? Absolutely not. We need to be aware that different activities generate different spillovers, contribute to meeting different demands and generate different levels of wages and profits. We should promote sectors that can lead to improvements in welfare for a majority of the population in the long run... but we should also recognize that trade can be useful to exchange goods and services that are not useful to meet social demands for others that may be useful.
For two different positions about the usefulness of GDP, it may be useful to go here (a positive view from OECD here) and here (a critical view, although not from anthropology).
Much to discuss!
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