Why Developed Countries are Heading for Increasing Inequality and Centrists Might Not be as Balanced as They Think

From time to time I listen to RadioEconomics. It’s not quite as interesting to me as EconTalk, partly because it doesn’t have the same focus on liberty, but an interesting discussion the other day with Dr. Diane Coyle from Manchester University brought me to two conclusions:

  1. Developed countries will suffer from increasing inequality if the current trend of outsourcing increases. Creative ‘knowledge’ work is becoming the province of a large proportion of the population in places such as the US and the UK. However, there are still fundamental limitations on transport and technology that mean that labour-intensive jobs, from train driving to fruit stacking in Tesco, aren’t going away any time soon. A gap in the middle will begin to form, where the medium-skill jobs once were, that are now being increasingly fulfilled by folks in India and other places. This is probably inevitable. Maybe this seems like an obvious point to some people, but I think it is crucially important to keep this in mind to evaluate the promises of those who would like to be in the position to form public policy (in short, election candidates). Whether income inequality is a problem is a question for another time.

  2. Dr. Coyle asserted that she was a centrist, and was suspicious of those with ‘extreme’ political views (I suspect that by her definition, that includes me). This was because, apparently, we tend to ignore evidence that disagrees with our views. I would agree with her that it is human nature to do this (as I’ve briefly discussed before). I’m not convinced that being centrist and moderate means that one is immune to such problems, though, and it brings a host of problems itself (in particular, the danger of compromising on important points). However, there is a more fundamental problem - many ‘extreme’ people, like libertarians such as myself, hold our views for moral reasons, not just practical ones. I, like other libertarians, believe that taxes are essentially theft. For myself, this normally overrides practical concerns such as whether they are spent well and have the desired effect (although, for the record, I also believe taxes and large government suffer from practical problems too). Some people don’t believe morality should override practicality in this way, but this is an arbitrary judgement, and in some way is also a manifestation of one’s moral beliefs. Dr. Coyle didn’t seem to acknowledge this fact.

Comments

Well, of course, there are degrees to these things, and I didn't acknowledge that originally. If you want to take a purely economic perspective, we (the UK) really are more developed than China - we're richer, for one thing. And China does have a much higher percentage of labour-intensive jobs than we do, so I think my argument applies to it less. However, I would agree that China is a very innovative place, and is catching up quick. They certainly deserve a different phrase to undeveloped, and I think you're right with the 'emerging markets'. I'm fully chastened, and I'll try to use that in future :) Anyway, I plan to visit China in 2008, so hopefully that will enable me to speak with more authority on it afterward - relying on second-hand information always leaves the suspicion that you don't quite know how things are on the ground - I'm enjoying reading about your experiences on your blog.
You know, "Developed Countries" implies that China, India etc are not Developed. You know what I'm about to say :) How long has China been around for? I've lost track of how many hundreds of years they've been building, producing, creating, innovating, designing. So anyway, from now on, let's just use "Emerging markets" :)