This post was written by Hatchet reporter Pragati Walia.
Audience members gathered at the Jack Morton Auditorium Friday to hear a panel of economic experts analyze globalization’s and technology’s impacts on inequality, as part of the International Monetary Fund’s Annual Meetings.
Martin Wolf, the chief economics commentator at the Financial Times in London, moderated the panel, which was made up of IMF officials and economists.
The panelists discussed how economic inequality has become part of global political debates.
Here are some highlights from the panel:
1. Social immobility makes inequality toxic
Thomas Shanmugaratnam, the deputy prime minister in the Singapore Cabinet, focused on absolute income and absolute standards, which he said have been impacted by wage inequality.
“A combination of wage stagnation and absolute income is the outcome of this continuously growing issue of wage inequality,” he said.
Shanmugaratnam said that in Sweden, where the government intervened to preserve jobs during a global economic downturn, market incomes fell or were flat in only 20 percent of households, and everyone’s disposable incomes advanced.
2. Using redistribution to address inequality
Mauricio Cardenas, Colombia’s minister of finance and public credit, said that inclusive labor market policies help to reduce income inequality. Although the U.S. government doesn’t usually intervene, Colombia’s government often does.
“In Colombia, growth has allowed low income groups to improve standards of living,” Cardenas said. “Effective government intervention in the form of taxation and allocation of expenditure is required. And most importantly, countries need programs targeted to early childhood problems to improve the future of upcoming generations.”
Tao Zhang, the deputy managing director of the IMF, said the organization is focusing on policy changes to help “macroeconomic leakages.”
“There is an inherent problem as countries do not have liquidity of financial resources,” Zhang said.
3. Technology enables globalization
Zhang said that there is a trade-off between efficiency and equity for governments.
“Minimising inefficiencies from resource misallocation may allow us to fully capture the benefit of globalization,” Zhang said.
The panel members also discussed how harnessing existing skills in developed countries could “crowd-in” technological skills to develop other countries’ economies – like in China or India.
4. Smart policies for smart machines
Laura Tyson, a professor in the Haas School of Business at the University of California, Berkeley, said she fears that the deep divisions in anti-trade and anti-immigration laws will hurt developing countries.
“Structural reforms that facilitate technology diffusion and job creation can reduce inequality. Countries need economic and social mobility,” Tyson said.
Shanmugaratnam said that technology can trigger inequality between between skilled and unskilled workers if it is not properly regulated.
“Countries need reinvest in labor, help persons who have been displaced from their jobs because of the advancement of technology,” Shanmugaratnam said. “Investments in education and health care could enhance the quality of human capital worldwide for inclusive globalization.”
