The inequality paradox how capitalism can work for everyone

with 13 tables and 15 charts and graphs In his book Capital in the Twenty-First Century, economist Thomas Pikkety argued that the contemporary phenomenon of rising inequality across the globe is a function of the inheritance of capital, which, over generations, accrues in the hands of a concentrated patrimonial elite It was an elegant, simple idea that also posed a clear antagonist: the super rich and the policymakers, who would keep the wealth in their hands The reality is more complicated In The Inequality Paradox, the groundbreaking and timely challenge to dominant theories on global inequality, leading economist Douglas McWilliams argues that inequality is largely driven not by a conspiracy of the rich, as Thomas Piketty suggests, but by technology and globalization that have led to the paradox of rising inequality even as worldwide poverty drops But what are the implications of this seeming contradiction, and what ultimately drives the global distribution of wealth? Drawing on the latest research, McWilliams investigates how wealth is concentrated and why it remains in the hands of very few In accessible and thought-provoking prose, McWilliams poses a comprehensive theory on why capitalism has not met its match in the form of increasingly disparate income distribution, but warns of the coming wave of technological development—the fourth industrial revolution—that threatens to create a scarcity of unskilled jobs that will lead to even greater inequality From the inquisitive layperson to the professional economist or policymaker, this book is essential reading for understanding the global economy in its present state, and indispensable in preparing for the imminent economic challenges of our changing world ALSO BY DOUGLAS MCWILLIAMS The Flat White Economy Copyright This edition first published in hardcover in the United States in 2018 by The Overlook Press, an imprint of ABRAMS 195 Broadway, 9th floor New York, NY 10007 www.overlookpress.com Abrams books are available at special discounts when purchased in quantity for premiums and promotions as well as fundraising or educational use Special editions can also be created to specification For details, contact specialsales@abramsbooks.com or the address above Copyright © 2018 by Douglas McWilliams All rights reserved No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information storage and retrieval system now known or to be invented, without permission in writing from the publisher, except by a reviewer who wishes to quote brief passages in connection with a review written for inclusion in a magazine, newspaper, or broadcast ISBN 978-1-4683-1669-8 To Andrew Richardson and to all those who have helped me while I have been writing this book CONTENTS ALSO BY DOUGLAS MCWILLIAMS COPYRIGHT DEDICATION FOREWORD PROLOGUE Part I Setting the Scene Introduction How Piketty Created an Industry Three Different Types and Four Different Causes of Inequality Why Inequality Really Matters Part II Analysis and Implications Has the World Become More Unequal? The Paradox of Rising Inequality and Falling Poverty Inequality and Growth Part III The Deserving and the Underserving Rich Who Are the Super-rich? The Undeserving Rich 10 Clogs to Clogs in Five Generations – Not Three 11 12 13 14 15 16 17 18 19 Part IV Fixing the Problem Elephants, Camels and Spitting Cobras What Happens Next? Education, Education, Education – and Education Saving Capitalism from Itself Attacking the Law of Unintended Consequences Making Poorer People Richer by Cutting the Cost of Living Can a Universal Basic Income Really Work? Using Taxation for Redistribution Neither Trump nor Corbyn – Rejecting False Solutions Conclusion NOTES INDEX ABOUT THE AUTHOR FOREWORD OTHER THAN BEING BORN WHITE, MALE AND SCOTTISH AND HAVING wonderful loving parents who did everything possible to stimulate my mind as a kid and who sent me to great schools and a super university, I have had two especially lucky breaks which have done much to influence me as an economist I was fortunate enough to get a job as Chief Economist of IBM UK in the mid-1980s This gave me a chance to see how technology was changing the world at a pace that people outside the industry could hardly imagine Even now, I find those outside the tech industries and especially those outside the commercial sphere can find it hard to keep up with the pace of change in the key technological sectors and see how they alter economic relationships What I learned about this helped me immensely with my last book, The Flat White Economy This describes the cluster of companies that has resulted from the tech sector merging with the creative sector to develop a brand-new economy which now accounts for a whole tenth of UK GDP It really is important to understand this new economy which works on slightly different rules and, as often happens with emerging (and also intangible) sectors, is badly described in economic measurements in most countries But even more important than learning about tech was my good luck in being brought up as an expatriate in both pre-independence Malaya and then emerging Malaysia I can’t defend much that the British did as colonialists, though they did good as well as bad Malaysians are remarkably tolerant of the former colonials, given what happened in the pre-independence era But being brought up in a fast-developing economy meant that I was lucky enough to see how economic development takes place at firsthand When I went to university and started studying the subject, it seemed that the models most commonly taught in the West of how economic development took place were flawed These models relied on government investment and state-run industrialisation Sadly there was little evidence of this approach working well and when it did work at all it did so with great inefficiency.1 What actually worked in the Far East was a bit different The state was heavily involved in providing basic services, sanitation, law and order, health, transport infrastructure and most especially education, but the business investment was carried out by the private sector, with external investors, attracted by tax-free zones and cheap labour, providing capital, expertise and access to export markets (Chapter describes this period in more detail.) This mixed model of development worked dramatically well from the mid-1960s in Singapore, Hong Kong, Korea and Taiwan, followed by Thailand and Malaysia, and then about 15 years later in many other parts of the world, including of course China and India It is important to note, however, that the world is changing and the next phase of development for many emerging economies is likely to be based on a different model, with proportionately more internal and public consumption and less reliance on external investment and exports Some have claimed that this success in economic development in the Far East was proof of the triumph of capitalism.2 My take is more nuanced Capitalism was certainly involved but could never have succeeded on its own had governments not also helped I would call the Asian success the triumph of a mixed model, neither exclusively capitalist nor exclusively state-driven It is worth noting that there are different Asian models, though they tend (when compared with approaches in the West) to have substantial similarities Hong Kong has been the most free market, China the most interventionist and state-driven All depend on an entrepreneurialism that fortunately had not been stamped out by either colonialism or communism I also concluded that the development of the Asian economies was going to be the driving force behind the world economy in the latter part of the 20th century and much of the 21st And so it has proved to be Some of the most heated debates I have had while writing this book have been with people who still think that the world remains driven by the West alone The statistics would have supported them in 2000 when so-called ‘developing economies’ accounted for only 24% of the world economy.3 But by 2010 the share was up to 40% On my latest estimates for 2017 (published in Cebr’s World Economic League Table 20184) the share is now 46% and set to rise to 56% by 2032 Even while the share is below half, it is normally the case in any market that the most dynamic and disruptive forces tend to set the terms of trade It is the East that is driving what happens in the West today and arguably has been doing so for the better part of half a century My impression is that this is well understood in Europe but that the rise of the Asian economies is often seen as more of a threat than an opportunity in the US World economic development was essentially driven by the Western world for most of the past five centuries, whereas now the baton has been partly passed to the newly rapidly industrialising economies in the East These Eastern economies are growing in real terms at 4-8% per annum while even the most buoyant Western economies are growing no faster than 3% And much of what happens in the West is a reaction to economic changes originating in the East The one area where the West still seems to be leading is in the information- and software-driven technologies promoted by the likes of Apple, Microsoft, Alphabet (the holding company for Google and related ventures), Amazon and Facebook But even there ten of the top 25 tech companies in the world in the Forbes list are now Asian, led by Ali Baba, Tencent and Samsung.5 For me, besides learning at firsthand what drove economic development, the other major advantage of being brought up in Malaysia was seeing intimately the anomaly that some of us, simply through the accident of being of Western ethnic background, had so much higher living standards than people of local extraction This got me interested in inequality Some people with an essentially racist approach thought that it was natural that westerners should be wealthier because in some way we were ‘superior’ Fortunately I was not brought up to think that, and the economic evidence seemed to disprove it anyway It really bothered me in my youth that we westerners lived so much better than the locals As far as I could see we had few innate advantages of ability or knowledge Ok, we may have been a bit less corrupt (at least on the surface) But on the other hand we worked only a fraction of the hours that most local people did In few other areas did we seem to have any attributes that would cause us to deserve to live so much better than the Malays, Chinese and Indians who made up the bulk of the Malaysian population I have a theory that if there is no good economic reason for something to exist, eventually it will cease to exist And much of my time as an economist has been spent trying to predict how soon the gap between the Eastern and Western living standards would narrow, which it has – Singapore and Hong Kong have now overtaken most of the West in GDP per capita measures – and trying to understand the consequences of this for both sides and for the world economy My good luck in having the twin and slightly unfair advantages of having worked at the centre of a leading tech company6 and having seen economic development in the Far East at firsthand has certainly helped my ability to interpret economic developments and thus make predictions I hope these insights have illuminated this book I would like to thank various people who have helped me As ever Diane Banks, who is expanding rapidly as befits the best literary agent in London, helped me a lot with choosing the subject on which to write and negotiating with my publishers, Duckworth Diane is a person of great literary judgement and a really useful sounding board for someone like me who doesn’t understand the world of books She also has an instinctive grasp of economics, which makes her possibly unique in the literary world She was the person who suggested the title, ‘The Inequality Paradox’ Martin Redfern who works with her and handles her non-fiction clients, has been especially helpful in dealing with some of the inevitable problems that emerge when one is trying to persuade those who think rather traditionally that there is a new and better explanation of how the world works Martin also came up with the subtitle, which explains the book perfectly: ‘Can capitalism work for everyone?’ The staff at Duckworth have consistently encouraged me, helping to correct my mistakes and showing considerable patience with my slowness in completing drafts I am particularly grateful to the legendary Peter Mayer, who has helped me with his wisdom and experience I doubt if we ever saw eye to eye on much but his constant challenge to the ways in which I have made my argument has certainly led to a better book than would otherwise have been the case Sadly he passed away just after contributing to this book so I hope that wherever he is he will feel that I have benefited from his guidance I am also grateful to Matt Casbourne who has taken on the role of editor since Peter Mayer’s death and who has always tried to encourage me, and Deborah Blake who has been a kindly but firm copy editor and Adam O’Brien who has handled the publishing in New York The person to whom this book owes most is my wife Ianthe She has constantly encouraged and driven me to keep going even when I’ve been close to despair at the size of the task I’ve undertaken, has refreshed me with delicious meals while writing, and persistently acted as a sounding board As I said in the foreword to my previous book, The Flat White Economy, ‘I owe my wife a disproportionate share of whatever minor success I have had in my own field and that this book might bring She has done much more for me than any husband could possibly deserve.’ This remains true She has continued to encourage me and gently critique me As a former civil servant who worked hard to help improve the standard of teaching, particularly maths and science, in the UK’s schools, she also helped me a lot with Chapter 12 on education One can’t write a book while trying to work in an office without placing undue strain on the other staff there Graham Brough, Cebr’s Chief Executive, has borne the brunt of the burden But others in the office, particularly Oliver Hogan, Sarah Conkay, Nina Skero and Cristian Niculescu-Marcu, have also had to face an increased burden as a result of the time that I have spent on the book I am very grateful to them Shivam Talukdar was an intern at Cebr recommended by my friend Giles Keating Shivam was doing his first-year course at New York University when he came to work with Cebr He helped me develop my thinking on the analysis of the persistence of wealth which is written up in Chapter Most of the conclusions of that chapter result from his careful analysis I am especially grateful to Robert Watt, editor of the Sunday Times Rich List, for allowing me access to the Rich List data on the persistence of wealth Although the data was already in the public domain, Robert managed to find old hard copies of the publication for Shivam to analyse and was extremely helpful in discussing our conclusions Two academics may not know it, but their work and research has influenced me and made the task of completing this book considerably easier Max Roser, an Oxford academic, started OurWorldindata.org collecting data on a host of important factors, particularly in those areas affecting living standards He and his work deserve to be much better known I have used much of his data and I hope this book encourages more people to use it Branko Milanovic is a Serbian American economist who has written by far the best academic book on inequality: Global Inequality: A New Approach for the Age of Globalization Milanovic is very well known to the experts but less so to a wider world I don’t always agree with him but have no doubt that he is an important economist And he writes extremely readably for anyone, let alone an American academic, for whom English is not his first language – or possibly because English is not his first language Andrew Richardson was a City economist whom I knew before he became afflicted with multiple sclerosis and had to change career He qualified as a Human Givens psychotherapist and is now a depression-recovery specialist and anti-addiction counsellor Andrew has helped me refine this book In the last months before I submitted the manuscript he and I met a dozen times to refine and improve the text He has been particularly important in helping me understand the thinking of the Human Givens movement, which is a very useful approach to understanding how human beings work, though, like all approaches, it is important to understand when it works and when it doesn’t For his immense help with this and with other things I am extremely grateful and therefore delighted to dedicate this book to him He is a special person Service, 259; and poverty, 120, 121; and private schools, 21; and Sanders, 261; and Scotland, 56–57, 211; and ‘superbabies,’ 19, 75, 192; and technology, 17; and Tinbergen, 41 elephant graph, 47, 100, 101 (Figure 4), 199–210; and camel graph, 201 (Figure 13); and cobra graph, 205 (Figure 14); and Resolution Foundation, 102–3 emerging economies: and aid, 119; and China, 60; and cronyism, 279; and education, 18, 118; and food costs, 238; and health, 118; and India, 60; and mobile phones, 209; and next phase for, 10; and poverty, 117; and protectionism, 278; and rents, 239; and robotics, 199; and rule of law, 118; and ‘superbabies,’ 210; and super-rich, 155, 210; and tax, 23, 125; and technology, 119; and Type Inequality, 53–54 End This Depression Now! (Krugman), 45 equality, 51–52 Equality and Efficiency: The Big Tradeoff (Okun), 126 Equifax, 221 equivalisation, 93 ‘Essay on the Principle of Population, An’ (Malthus), 114 Esquire, 141 Ethernet, 208 Eurostat, 123 Evans, Richard, 60 ‘Examining an Elephant,’ 102 executives, overpaid, 163–67 exploitation, and inequality, 21; and Piketty, 16–17 See also Type Inequality Fairchild, 57–58 Far East, economic development of, 10–11 Federal Poverty Level, 244, 244 (table 12) Fianna Fail, 246 Fieder, Martin, 193 financial services sector, 167–73, 181 See also Goldman Sachs Financial Times: and Bakker, 128; on bonuses, 144; and Giles, 91; and Goldman Sachs, 174; and Wolf, 47 Finland: and income inequality, 94 (Table 3), 96; and top marginal tax rate, 252 (Table 13); and UBI, 23, 243, 246 First World War, 48–49, 59, 90, 247 Fitzgerald, Scott, 141–42 Flat White Economy, The (McWilliams), 9–10, 13; and Big Bang, 143; and economies of scale, 207; and grunge chic, 80; and housing, 68, 231; and immigration, 273–76; and Microsoft, 207; and Shoreditch, 81; and technology, 200 Folkhemmet, 227 Food and Agriculture Organisation, 112 football, and inequality, 29–30 Forbes: and billionaires, 32; and Oxfam, 49; and tech companies, 11 Forbes magazine, and genetic manipulation, 63 Forex, 168, 264 Forte, Giuseppe, 274 Foster, Richard, 200 France: and GDP, 54 (Table 2); and growth and inequality, 127; and income disparities, 30, 94 (Table 3), 95, 96; and top marginal tax rate, 252 (Table 13); and mobile phone, 241 (Table 11); and rents, 240 (Table 10); and top 1% income of, 31 (Table 1), 89; and top 1%, wealth share of, 90; and top 10%, income of, 90; and top 10%, wealth share of, 91 Fraser Institute, 131 Free To Choose (Friedman/Friedman), 52 Freeman, Richard, 102–3 Freeman, Robert, 174 Friedman, Milton, 38–39, 51–52 Friedman, Rose, 52 FTSE100, 200 Gaitskell, Hugh, 76 Galor, O., 130 Ganong, Peter, 232 Gates, Bill, 122, 207, 220 Gayle, George-Levi, 187 General Household Survey, 144 genetic manipulation, 63 Germany: and Adidas, 199; food costs in, 239 (Tables & 9); GDP of, 54 (Table 2); and global poverty, survey on, 108; income inequality in, 94 (Table 3); mobile phone costs in, 241 (Table 11); rents in, 240 (Table 10); and savings, 234; top 1%, income of 30, 31 (Table 1), 89; top 10% income, 90 Gibb, Nick, 216–17 Gilder, George, 208 Giles, Chris, and Piketty data, critique of, 90, 91–92 Gini coefficient, 93; Atkinson on, 87; and Canada, 100; and GDP, 130; global, 98–99; Great Britain, 99 (Table 4); and income inequality, by country, 94–96, 94 (Table 3); and regional differences, 97–98; and Toth, 96; UK, 97 (Figure 1); and US, 100, 101 (Figure 3); and wealth, 99–100 Glasgow Centre for Public Health, 70 Global Construction Perspectives, 162, 206 Global Inequality: A New Approach for the Ae of Globalisation (Milanovic), 13, 47, 101 globalisation, 269; and aid, 119, 125; and distribution of income, 103; and education, 121; and emerging economies, 236; and Greece, 123; and incomes, 203; and inequality, 17, 57–61, 116, 200, 210, 236, 257; and poverty, 118, 123; and trade restrictions, 269; and Western economies, 202, 236, 257 Globalisation and Its Discontents (Stiglitz), 45 Glyn, Andrew, 215 Godfather Part II, The, 159, 184 Goldin, Claudia, 41 Goldman Sachs, 173–181; after the financial crisis, 176–79; and 2008 financial crisis, 175; and A.I.G., 176; and Cahill, 178; charge sheet of, 174–75; and Commodities Futures Trading Commission, 177; and Federal Housing Finance Agency, 177; and Financial Crisis Inquiry Committee, 177; and Greek crisis, 179; and left-of-centre politicians, 180; and Public Employee’s Retirement System of Mississippi, 178; and regulation, 184; and TARP, 176 Goodison, Nicholas, 143 Gorbachev, 60 ‘Government Sachs,’ 176 Graham, Dan, 81 Great Divergence, The, 54–57 Great Escape, Health, Wealth and the Origins of Inequality, The (Deaton), 46–47 ‘Greater Post-Neolithic Wealth Disparities in Eurasia than in North America and Mesoamerica (Kohler et al.), 48 Greece: and bad economic policy, 123; and Goldman Sachs, 179–80; income inequality, 94 (Table 3); and top marginal tax rate, 252 (Table 13) green belt, 230–31 Greenspan, Alan, 233 Grimstone, Gerry, 172 growth: 127, 130–36 ‘Growth That Reaches Everyone: Facts, Factors, Tools’ (Duttagupta, Fabrizio, Furceri and Saxena), 47–48 grunge chic, 65, 80 Guardian, The: and Bill Bryson, 230–31; on immigration, 271 Gulf War, 124 Gupta, Rajat, 177 Hayek, 36, 51 health: and inequality, 66; and poverty, 120–21 Heckman, James, 217 Hemingway, Ernest, 141–42 Heritage Foundation, 136 Hershbein, 215 Hicks, John, 208 Hilton, Anthony, 200 Hincapié, Andrés, 187 Hirsch, E D., 217 Hirsch, Fred, 6667 Hobson, John A., 48 homelessness, 16, 68, 108, 115 homogamy, 63, 192, 210, 212, 280 Hong Kong: and China, 60; and Fairchild, 57–58; food costs, 239 (Tables & 9); and GDP per capita measures, 12; and life expectancy, 121; and living standards, 17; and top marginal tax rate, 252 (Table 13); and mixed model, 10; and mobile phone, 241 (Table 11); and offshore manufacturing, 57–59; and property, 192; and protectionism, 278; public sector of, 235; and rents, 240, 240 (Table 10); and ultra-rich, 151–52, 152 (Table 6) housing, 66–69, 226–29, 231–33, 238, 240, 240 (Table 10) Huber, Susanne, 193 Human Givens, 14, 216 Huntington, Samuel, 54 IMF: on cost of living, 237 (Figure16), 238; on income and growth, 127, 129; on inequality and growth, 47; and inequality in Western economies, 17; and labour share, 41, 42; and Sachs, 161; and Sweden, rent control, 228; on technology and globalisation, 62; and Venezuela, 264 immigration: and Trump, 270–72; and UK, 272–78 income: and ‘elephant graph,’ 101 (Figure 4), 201 (Figure 13), 205 (Figure 14); and annual GDP, 103 (Figure 5); and camel graph, 201 (Figure 13), 205 (Figure 14); and cobra graph, 205 (Figure 14); and global rich list, 189 (Figure 8); and inequality globaly, 99 (Figure 2); and inequality in UK, 97 (Figure 1); and inequality, 94 (Table 3); and policy, 39; share of 1%, 30, 31, 89; and UK rich list, 189 (Figure 9), 190 (Figure 10) income data, 92 Independent, and ‘superbabies,’ 192 India: food costs, 239 (Tables & 9); and GDP, future of, 200; and GDP, growth of, 54 (Table 2); and inequality, 90; and inequality, global, 102–3; and life expectancy, 121; and mixed model, 10; and mobile phones, 241 (Table 11); and offshore manufacturing, 59; and poverty line, 113; and poverty, 113, 117, 122; rents, 240 (Table 10); and software, 61; and technology, 61; and top 1% income of, 31 (Table 1), 89 Industrial revolution, first, 56–57, 195, 203, 247 industrial revolution, fourth, 202–4, 247–49 industrial revolution, second, 247 industrial revolution, third, 247 inequality: and ‘superbabies,’ 63, 192–194; and alienation, 69–70; and autocratic societies, 129; between countries, 100–7; and communist societies, 129; counteracting of, 20; and crony capitalists, 159–63; and despair, 70–72; and economic histories, 128; and education, 212–18; and emerging economies, 129; and exploitation, 52–53; future of, 199–210; and GDP growth, 129–30; global, Annual GDP Growth graph, 103(fig.5); and globalisation, 17, 53–61; and growth, 126–137; and health, 66; and homogamy, 210; and homogeneous societies, 129; and housing, 231–32; and immigration, 129; income, and data, 88–89; intergenerational, 107; and life expectancy, 70–72; measurement of, 87–89; and monopolies, 209; and overpaid chief executives, 163; and Piketty, 52; and planning controls, 229–33; and political partisanship, 75–80; and positional goods, 66–69; and poverty, 15, 65–66; and public services, 234–35; and quantitative easing, 233–34; and redistribution, 130, 136; and social cohesion, 72–75; and tax, 105–7; and tech billionaires, 183; and technology, 61–63, 207; and Toth, 95–96; and Type inequality, 41, 52–53, 157–84, 257, 260; and Type Inequality, 53–61; and Type Inequality, 61–63, 243, 247, 257; and Type Inequality, 63–64, 192–94, 212; types of, 52–64; and UBI, 247; within countries, 89–100; and zoning, 229–33 ‘Inequality and the Disappearing Large Firm Wage Premium’ (Bloom, Guvenen, Smith, Song and von Wachter), 49 ‘Inequality, Foreign Investment, and Imperialism’ (Hauner, Milanovic, Naidu), 48–49 Inequality Paradox, 108 Inequality: What Can be Done (Atkinson), 39–40, 202 inheritance tax, 194, 211, 246, 255–56, 280 Institute of Economic Affairs, on growth and public spending, 131–32 International Covenant on Civil and Political Rights, Article 14, 51 International Poverty Line See IPL International Price Comparison project, 111 investment, and profits, 136 Investopedia, 172 ‘invisible hand,’ 35, 56 IPL, 110–111, 113 Iran, and UBI, 247 Ireland, Republic of: and inequality, 96; and top marginal tax rate, 252 (Table 13); and Sunday Times Rich List, 188; and UBI, 246 Islamic State, 124 Italy: and Bank of Italy, 186–87; and GDP, 54 (Table 2); and growth and inequality, 127; and income inequality, 94 (Table 3); and income of top 1%, 31 (Table 1); and income of top 10%, 95; and inequality, 30, 96, 128; and JPMorgan, 180; and labour laws, 263; and top marginal tax rate, 252 (Table 13); and mobile phone, 241 (Table 11); and rents, 240 (Table 10); and UBI, 243 Jacques, Martin, 43 Japan, 59–60; and China, 42; GDP of, 54 (Table 2); and growth and inequality, 30, 127; and life expectancy, 120; and top marginal tax rate, 252 (Table 13); and mobile phone, 241 (Table 11); old saying in, 185; and quantitative easing, 233; and rents, 240 (Table 10); and sophisticated products, 236; and tech giants, 223 (Table 7) Jay, Peter, 55 Jelinek, Craig, 166 Johnson, Boris, 253 Johnson, Lyndon B., 60, 78 Johnson, Simon, 46 Jones, Aubrey, 39 Journal of Economic Theory, 87 Journal of Markets and Morality, 38 JPMorgan, 180 JPMorgan Chase, 175 Kakwani Index, 105 Kaplan, Steven N., 156 Katz, Lawrence F., 41, 45 Kea, 183 Kearney, Melissa S., 215 Keynes, John Maynard, 35 Khan, Sadiq, 152–53 Kharas, Homi, 117 Khodorkovski, Mikhail, 162 KIPP, 217–18 Knight Frank, 152 Knowledge is Power Program, 217 Koczan, Zsoka, 41, 62 Koester, 132, 134 Kopf, Dan, 192 Kormendi, 132, 134 Kraakman, Reinier, 162 Krugman, Paul, 45 Kuznets, Simon, 36–37, 127 Kwak, James, 46 Labour Research survey, 144–45 Laffer Curve, 131 Larsen, C., 69 Law, Legislation and Liberty (Hayek), 36 Lawson boom, 142–43 Leach, G., 133 Lederman, Daniel, 130 Lee, Frances, 78 Lee Kuan Yew, 60 Lehman Brothers, 175 Lehto, Otto, 247 Lenin, 48 Leon, 181 Li Keqiang, 16, 122 Lian, Weicheng, 41, 62 life expectancy, 16, 24, 47, 55, 70–72, 113, 120, 204, 206, 235 ‘Lights out London,’ 153 Lilley, Peter, 254 Litton Loan Servicing, 175 lobbying, 21, 43, 224, 226 locational economics, 45 London: and coffee, 80; and digital economy, 273; and entrepreneurialism, 82; and financial sector, 53, 90, 181; and food costs, 239 (Tables & 9); and green belt, 229–31; and grunge chic, 65, 80; and homeless, 16; and mid-1990s, 142–43; and migration, 276; and plumber joke, 37; and property, 66, 68, 147, 148, 152–55; and rents, 240 (Table 10); and Royal Parks, 255; and taxation, 97; and taxi drivers, 248; and ultra-rich, 32, 152 (Table 6) Lorenz curve, 93 Los Angeles Times, and Goldman, 176 Losing Ground (Murray), 137 Luddite rebellion, 57 Luxembourg, Rosa, 48 Maastricht Treaty, 179 Maduro, Victor, 263–64 Main, Dean, 153–54 Malacca, 54 malnourished, 112–13 Malthus, Thomas, 114 Manchester United, 29–30 Mansbridge, Jane, 77–80 Maritime Museum in Lisbon, 55 Marx, Karl: and alienation, 69; and assumption of false consciousness, 109; and change, 70; and monopoly, 222 Maslow’s hierarchy of needs, 215–16 Maxwell, Robert, 174 McCarthy, Kevin, 78 McCarthy, Nolan, 79 McKinsey, 200 measurement issues, 87–89 Merrill Lynch, 175, 185 Metcalfe, Robert, 208 Metcalfe’s Law, 208 Metroland, 230 Mexico: and income inequality, 94 (Table 3); and top marginal tax rate, 252 (Table 13); and mobile phone, 241 (Table 11); and rents, 240 (Table 10); and Slim, 184, 207; and top 10%, 95; and Trump, 270; and UBI, 247 Migration Observatory, 275, 276 Milanovic, Branko, 13, 47, 48; and Global Inequality: A New Approach for the Age of Globalization, 13, 47 inequality, global, 98–100 Millennium Development Goals, 119 Milnes, Barry Bracewell, 105 Minford, Patrick, 133 Mnuchkin, Steven, 173 mobile phone, 209, 241, 241 (table 11) Mocetti, Sauro, 186 money tree, 260 monopolies: monopoly, 38–39; and Bell Telephone, 208; capitalism and, 222; and crony capitalists, 159; industrialisation, and East, 236; and mobile phone, 241; and tech, 159, 183, 207, 209–10; and Type Inequality, 53; and undeserving rich, 158 Morgan Bank, 169 Morgan Stanley, 175, 178 Morrisson, Christian, 109 Moyers, Bill, 78 Murray, Charles, 137 mutual fund assets, 171 negative income tax, 38 Netherlands: and inequality, 94 (Table 3), 96, 128; and top marginal tax rate, 252 network effects, 39, 208–9, 222 New York Review of Books, 45 New York Times: on partisanship, 77; and Porter, on education, 213; and Smith, 178; and undeserving rich, 167 Nigeria, 122, 240 (Table 10) Norway: and income inequality, 94; and top marginal tax rate, 252; and voluntary taxes, 254 Obama, Barack, on inequality, 34 OBR (Office for Budge Responsibility), 245, 275 OECD: on education, 212, 213; and income distribution, 95; and income inequality, Table 3, 94–95; and inequality, forum on, 102; and redistribution, 251; on taxation and growth, 132–35, 132 (Table 5); and Wikiprogress, 211 Office for Budget Responsibility See OBR Office for National Statistics See ONS offshore manufacturing, and developing countries, 59 Okun, Arthur, 126 ONS: and Gini coefficients, definition of, 93; and Index of Services, 274; and tax data, 105–6; and UBI, 245; and UK, Gini coefficients, 97 (Figure 1), 99 (Table 4) Oregon Office of Economic Analysis, 203 Organization for Economic Cooperation and Development See OECD Ortiz-Ospina, Esteban, 104, 109 Ottoman Empire, 54–55 ‘Our Kids’ (Putnam), 218 ‘overview of growing income inequalities in OECD countries: Main findings, An,’ 94 Oxfam Annual Reports on Wealth Inequality, 49 Oxfam, 119 Panel Study of Income Dynamics, 187 Papanicolau, Spyros, 179 passive funds, 170–73 passive investing See passive funds Paulson, Hank, 175–76 Paulson, John, 176–77 Pawlo, Mikael, 82 Pemberton, Hephzi, 183 Perkins, Maxwell, 142 Personal Responsibility and Work Opportunity Act, 136 Pew Research Center, 76–77 Pidgin, 81 Piketty, Thomas, 16–17, 27, 33–34; and ‘Routinisation, Globalisation, and the Fall in Labour’s Share of Income,’ 42; and Atkinson, 39–40; and Auten and Splinter, 87; and Capital in the TwentyFirst Century (Piketty), 16, 27, 33; and exploitation, 33–34; and First World War, 49; and Giles, 91–92; on ‘Inequality, Foreign Investment, and Imperialism, 49; and inequality from 1890 to 1970, 85; and Kuznets Curve, 37; and measurement issues, 87; and Sachs, 44; and tax cuts, 53; and tax data, 87; and Type Inequality, 33–34, 52–53, 157; and WID, 89, 90; and yields, 170 Pinch: How the Baby Boomers Took Their Children’s Future—And Why They Should Give it Back, The (Willetts), 107 planning controls, 68, 229–33 Pogge, Thomas, 112, 113–14 Poland, 163, 252 political partisanship, and inequality, 75–80 Porter, Eduardo, 213–14 Portes, Jonathan, 274 positional goods, and inequality, 66–69 poverty: and civil war, 124; and Congo, 122; by continent, 122; and data, 111–13; definition of, 109–10; and developed world, 123; and education, 120, 121; and excluded groups, 206; fall of, and globalisation, 118–20; fall of, and reasons for, 116–21; further reduction of, 122–25; future of, 199–210; global, fall of, 109; and globalisation, 17, 118–20; and health, 120–21; history of, 114–16; and India, 122; and inequality, 15, 65–66; and International Poverty Line, 110; and IPL graph, 116(fig.6); and Nigeria, 122; people in, number of, 15–16; and redistribution, 136; reducing, problems with, 18; regions of, 121–22 Pragnell, Mark, 144 Price of Civilization, The (Sachs), 44 Price of Inequality: How Today’s Divided Society Endangers Our Future, The (Stiglitz), 44 Price Waterhouse Cooper, and automation, 62–63 Priceonomics, 192 private schools, 214 professional status, 222 profits, and investment, 136 ProPublica, 176 Prospect, 142, 232 Protégé Partners LLC, 172 public services, 65, 234–35 public spending, 86, 131, 132 (Table 5) ‘pupil premium,’ 215 Purchasing Power Parity (PPP), 111 ‘Purpose of Education, The’ (Gibb), 216–17 Putnam, Robert, 218 quantitative easing, 196, 226, 233–34 Race between Education and Technology, The (Goldin/Katz), 41 Rajaratnam, Raj, 177 Rauh, Joshua D., 156 Ravallion, Martin, 115 Rawls, John, 34 Razak, Najib, 160 Red Book, 141 redistribution, 18; and growth, 130; to poor, 136–37; and taxation, 251–56, 280 Reformation, 55; regulation, 21; bankers, 159; behavior, 182; Big Bang, 143; cost of living, 22, 119; financial institutions, 225; Folkhemmet, 227; land use regulation in US, 232–33; tech giants, 224–25; technology, 203; UK property prices, 191; zoning and rents, 240 Reich, Robert, 45–46 remuneration, 164, 165 (Figure 7), 184 rent controls, 196, 226–29 rental property, comparative costs of, 240 (table 10) Resolution Foundation, 102, 255 Return of Depression Economics, The (Krugman), 45 Rhodium, 153–55 ‘Rich Boy, The’ (Fitzgerald), 141 robotics, 19, 62, 199, 247 See also automation and technology Rooney, Wayne, 29 Roser, Max, 13, 104, 109, 120 Rosling, Hans, 16 ‘Routinisation, Globalisation, and the Fall in Labour’s Share of Income (Dao, Das, Koczan, and Lian), 41 Royal Parks, 255 Russia: and crony capitalism, 44, 161–63; and East Asian economic success, 60; and English courts, 81; and gangster capitalism, 219; and growth, 162–63; and life expectancy, 121; and mobile phone, 241 (Table 11); and Sachs, 44, 161–62; and wealth data, 90–91 Sachs, Jeffrey, 44, 161–62 sado-monetarism, 76 Saez, 87–90 Sanchez, Carolina, 117 Sanders, Bernie, 257, 261–2 Sardelis, Christoforos, 179 Saving Capitalism (Reich), 45 SBTP, 46 Scotland: and education, 56, 211; and life expectancy, 121; old saying of, 185 Scully Curve, 131, 135, 253 SEAL, 217 Second World War, 59–60, 76, 169, 192 segregation, 213, 227 Seides, Ted, 172 self-driving vehicles: and fourth industrial revolution, 247; and taxis, 248; and technological leap, 19, 62; and transport, 199, 249; and truckers, 199, 249 Shoag, Daniel, 232 Shoreditch, 81 Singapore: cost of living, 238; GDP and West, 12, 22; global economy, 59; Iron Curtain, 60; life expectancy, 121; living standards, 17; top marginal tax rate, 252 (Table 13); mixed model of development, 10; mobile phone, 241 (Table 11); offshore manufacturing, 59; protectionism, 278; public sector, 235; rents, 240 (Table 10); rich, 32, 151, 152 (Table 6) Singegal, Jim, 166 Sketch, 80 skills biased technical progress (SBTP), 46, 61–62, 156 Slim, Carlos, 183–84 Smith, Adam, 34–35, 56, 207, 219 Smith, David, 48, 49 Smith, Greg, 178 ‘Snows of Kilimanjaro, The’ (Hemingway), 141–42 Soccer See football social cohesion, 69, 73–75, 211–212 South Korea: and life expectancy, 120–21; and top marginal tax rate, 252 (Table 13); and tech giants, 223 (Table 7) Spain: food costs, 239 (Table 8); incomes, 95; inequality, 128; top marginal tax rate, 252 (Table 13); mobile phone, 241 (Table 11) Splinter, David, 87–89 St Louis Federal Reserve Bank, 187, 211 State of Child Health report, 66 Statistics Sweden, 227 Stigler Center, 48 Stigler, George, 207 Stiglitz, Joseph, 44–45 Summers, Larry, 127, 161, 215 Sunday Times, Rich List; 144, 187–192, 189 (fig 8), 189 (fig 9), 190 (fig 10), 190 (fig 11), 191 (fig.12); and Smith, 48 Sunday Times Rich List, 144, 187–192, 189 (fig 8), 189 (fig 9), 190 (fig 10), 190 (fig 11), 191 (fig 12) ‘superbabies,’ 192–94; and earnings, 187; and emerging economies, 210; and inequality, 19; and Type Inequality, 63; and universal education, 212 supereconomies of scale, 207–9, 220, 222 ‘superstar firm,’ 41 Sweden: grunge chic, 65, 82; inequality, 94 (Table 3), 96; top marginal tax rate, 252 (Table 13); rent control, 226–229 Swedish Financial Supervisory Authority, 228 Switzerland: inequality, 128; top marginal tax rate, 252 (Table 13); UBI, 246 Tarasova, 162 TARP, 175–76 Task Force on Negotiating Agreement in Politics, 77 taxation: corporate sector, 44, 58; cost of living, 22; country, 252 (table 13); Friedman, 38; growth, 86, 130–37, 132–33 (Table 5); high prices, 22; impact of, 105–6; inheritance tax, 255–56; negative income tax, 38; redistribution, 129, 251–56; Sachs, 44; system, 23; Type Inequality, 53; voluntary taxes, 81, 253–56; wealth, 255–56 ‘Tax and Growth’ (Minford), 133 taxi drivers, 199, 248 tech billionaires, 159, 183–84, tech giants, 43, 223 (Table 7), 224–25 technology: communications, 60–61; education, 215; financial sector pay, 200; fourth industrial revolution, 247; future of inequality, 202–4, 248; future, 257; Great Divergence, 54; Huntingdon, 54; income, 54; industrial revolution, 56; inequality, 19, 45, 207; monopolies, 207, 209, 224; ‘post scarcity,’ 22; regulation, 224; Reich, 46; remoteness of power, 73; Soviet-style communism, 219; super-rich, 155; Type Inequality, 61–63; types of, 199; UBI, 249; war, 56; work force, 247–49 See also, robotics, autonomous vehicles, and blockchain Telford, Thomas, 56 Thatcher, 53, 67, 140, 142, 143 Theory of Moral Sentiments, The (Smith), 34 ‘Tiger Economy on the Thames,’ 143 Times, The, 48, 254 Tinbergen, Jan, 41 TNK-BP, 163 “Top Incomes in the Long Run of History” (Atkinson/Piketty/Saez), 39 Toth, Istvan Gyorgy, 95–96 Tourre, Fabrice, 177 trickle-down economics, 34, 114, 123 Troubled Assets Relief Program, 175 Trump: critique of, 268–69; immigration, 270–72; manifest of, 265–68 Turnbull, Malcolm, 174 Type Inequality, 52–53, ‘Concentrating on the Fall of the Labor Share,’ 41; Corbyn/Sanders, 257; crony capitalists, 159–63; Goldman Sachs, 173–181; overpaid chief executives, 163; Piketty, 33–34 Type Inequality, 53–61 Type Inequality, 61–63; future, 257; UBI, 243, 247 Type Inequality, 63, 192–94, 212 UBI, 243–50; Brazil, 247; Finalnd, 243, 246; immigrant workers, 249; Iran, 247; Italy, 243; Mexico, 247; technology, 247–49; Type Inequality, 247; UK, 244–46; US, 244 UHNWI, 152, 153 UK: Brexit, 76; CEO pay, 172; champagne, 80; charities, 254–55; children, 66; disposable income, 96–97; education, 212, 214–17; Flat White Economy, 55; Gini coefficients, 97–100, 99 (Table 4); Great Divergence, 54 (Table 2); growth and inequality, 127; homeless, 115; housing, 68, 231; immigration, 272–78; income, 97 (Figure 1); indirect taxes, 251; industrial revolution, 56–57, 248; inequality, 92, 94 (Table 3) , 104, 107; life expectancy, 120; Nick Gibb, 216–17; SEAL, 217; partisanship, 80; private schools, 214; productivity, public and private, 235; public sector, 235; quantitative easing, 233; taxes, 106; taxi drivers, 248; top 1% 30, 31 (Table 1), 89, 90, 106; top 10%, 90, 91; UBI, 244–46 UK Economic Forecasting Model UKMOD9, 275 ultra-rich, base of, 152 (Table 6) undeserving rich, 157–85; crony capitalists, 159–63; financial service sector, 167–73; Goldman Sachs, 173–81; overpaid chief executives, 163–67; types of, 158–59 unemployment: Britain, 76, 97, 142; cost of labour, 263; debt levels, 228; incomes policy, 39, 45; Italy, 263; restrictions, 263; technology, 203, 247, 249; Thatcher, 142; UBI, 244 Unequal Democracy (Bartels, L.M.), 43 unintended consequences, law of, 21, 49, 169, 196, 226–35 universal basic income See UBI Universal Declaration of Human Rights, Article 7, 51 US: billionaires, 155–56; CEO pay, 164, 165(fig 7); cost of living, 238; education, 212–14; financial services sector, 169; Gini coefficients, 99–101, 101 (Figure 3); growth and inequality, 127; homeless, 115; housing, cost of, 231; inheritance tax, 194; KIPP, 217; lobbying, 224; old saying, 185; planning policy, 233; quantitative easing, 233; redistribution, 252; self-driving vehicles, 248–49; taxes, 106; top 1%, 89, 90–91; top 10%, 90, 91; trade, 269; UBI, 244; zoning, 233 US Constitution, and 14th Amendment, 51 Vanguard, 170 Venezuela: job market, 260; labour laws, 263–65; poverty, 123, 125; redistribution, 18 Vietnam, investment in, 57–58, 60 Vietnam War, 57–58, 60, vigintiles, 102 voluntary taxes, 23, 81, 253–56; and UBI, 246; and welfare reform, 280 Vox, 274 Waldfogel, Jane, 213, 214 Wall Street Journal, and Razak, 160 Wallace, William, 144 war: civil, and poverty, 124; economic development, 58; Japan, 59–60; technology, 56 War on Poverty, 124, 213 Washington Post, 77 wealth: shares of, 90–91; taxation, 255–56 Wealth of Nations, The (Smith), 34, 207 Westminster Council, 254 When China Rules the World (Jacques), 43 Why Globalisation Works (Wolf), 47 Why Nations Fail: The Origins of Power, Prosperity, and Poverty (Acemo lu/Robinson), 42–43 Why Nations Fail, review of (Boldrin, Levine, and Modica), 43 WID, 89–92 Wikiprogress, 211 Willetts, David, 107 Wolf, Martin, 47 Woodcock, George, 39 Work of Nations, The (Reich), 45–46 World Bank, 15, 110–17, 122 World Economic League Table 2018, 162, 200, 206 World Health Organisation, and poverty, 113 World Health Report, 113 World Inequality Database See WID Worstall, Tim, 48 Yukos, 162 Zeira, J., 130 Zheng He See Cheng Ho Zimbabwe: poverty, 112, 123: quantitative easing, 234 zoning: green belt, 229–233; law of unintended consequences, 226; rents, 239–40 DOUGLAS McWILLIAMS is Executive Deputy Chairman of Cebr, one of the UK’s leading specialist economics consultancies, now one of the most highly respected sources of business advice and research His career has focused on making economics relevant to commerce, first as chief economic adviser to the Confederation of British Industry, then as Chief Economist for IBM UK He is the author of The Flat White Economy, available from Overlook Printed in the United States of America Copyright © 2018 The Overlook Press Jacket design by Liz Driesbach Jacket images © istockphoto / dene398 Author photograph courtesy of Cebr THE OVERLOOK PRESS New York, NY www.overlookpress.com ... think rather traditionally that there is a new and better explanation of how the world works Martin also came up with the subtitle, which explains the book perfectly: Can capitalism work for everyone? ’... people like them, and they see their own position in life declining, with little hope for the future for either themselves or their children They feel that they have no control over the events... reduction in the extent of inequality between countries The subtitle Can Capitalism Work for Everyone? ’ draws attention to the fact that at a time of increasing perceived inequality, liberal capitalism