Ed Yardeni – The World is Flat

by Marilou Moursund on May 6, 2015

in Employment,Geopolitical

  Today’s Yardeni Research Morning Briefing has a very interesting take on income inequality: In 2005, Thomas Friedman published his international best-selling book, The World Is Flat: A Brief History of the Twenty-First Century. He argued that globalization, i.e., the integration of national economies through free trade, was leveling the commercial playing field. It would lead

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to more peace and freedom. It would also increase prosperity for those who rose to the competitive challenges of globalization. American workers would have to improve their skills to benefit from globalization. I was an earlier proponent of globalization than Friedman. In my September 10, 1993 topical study titled “The End of the Cold War Is Bullish,” I started to develop my thesis that the Cold War was, in effect, the greatest trade barrier of all times. So the fall of the Berlin Wall during November 1989 marked the end of this barrier and the start of globalization, with much freer trade–which I expected would lead to the proliferation of prosperity around the world and would be very bullish for stocks. I think that worked out fairly well. However, there have been lots of critics of globalization. Most of them complain that it has worsened income inequality. The rich have gotten richer because they can sell their goods and services in global rather than just national markets. That’s a fact. However, the poor haven’t gotten poorer, on balance. Income equality has increased around the world as workers in emerging economies have seen their wages go up. In addition, all workers have more and better choices at lower prices for the goods and services they purchase. The problem is that workers in the advanced economies have seen their wages stagnate or decline. In other words, there is more equality on a global basis. But that resulted in part from weakening incomes for highly paid workers, in the US, the Eurozone, and Japan. From their perspective, income inequality has worsened.

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