At the risk of my posts on this blog turning into Dani Rodrik comments exclusively, I have a comment on a short post he did on globalization and income inequality. He refers to a Wall Street Journal article called "Globalization's Gains Come with a Price," and notes that "it's all about how the wage distribution has gotten wider in developing countries, contrary to what a lot of people were expecting." He says that when he read it, his first reaction was, "this is news?" The article is available here.
Now, it is true that the article says that the wage gap has gotten wider in developing countries. But it also suggests that all groups have seen their incomes rise; it's just that the income of poor people has not increased as quickly as the income or rich people. In this regard, the article gives the following examples:
- "From 2000 to 2005, per-capita income of the bottom 10% of urban households in China rose 26% while those at the top saw gains of 133%."
- "While Mexico hasn't experienced the spectacular growth of China, wages of those at the bottom 10th percentile of urban full-time workers increased 12% between 1987, when the country first took steps toward opening its economy, and 2004. Since 2000, the percentage of Mexicans living in extreme poverty also has fallen below 20% for the first time ever in the nation's history."
In essence, the article explains, "Incomes of low-skilled workers may rise, but incomes of skilled workers rise a lot faster."
My question is this. Assuming that this rise in incomes is due, in some part, to "globalization," are people suggesting that we should adopt trade policies that make people poorer but more equal? It doesn't surprise me that, all else equal, people would favor policies that promote equality. But to me, criticisms of globalization for making everyone better off, but helping the rich more than the poor, miss a very important point: poor people are now less poor.
