Globalisation and the rise of inequality

According to The Economist a poisonous mix of inequality and sluggish wages threatens globalisation.

"If globalisation depends upon voters who, as workers, no longer think they gain from it, how long before democracies start to put up barriers to trade? If all the riches go to the summit of society and that summit seems beyond everybody else's reach, are the wealth-creators under threat?

The panic comes in part from a rush to lump all the blame on globalisation. Technology—an even less resistible force—is also destroying white- and blue-collar tasks in a puff of automation and may play a bigger role in explaining rising wage inequality and the sluggish growth of middling wages. The distinctions between technology and globalisation count, if only because people tend to welcome computers but condemn foreigners (whether as competitors or immigrants). That makes technology easier to defend.

For economists, the debate about whether technology or globalisation is responsible for capital's rewards outpacing those of labour is crucial, complicated and unresolved. One school, which blames globalisation, argues that the rocketing profits and sluggish middling wages of the past few years are the long-lasting results of trade, as all those new developing-country workers enter the labour market. This school says that technology helps workers by increasing their productivity and eventually their wages. The opposing school retorts that technology does not increase wages immediately, and some sorts of information technology seem to boost the returns to capital instead (think of how much more a dollar's worth of computing power can do these days). And it questions whether Western incomes will remain flat: recent wage rises in America and pay claims in Europe and Japan may start to reverse the balance back away from capital."