As Barry Ritholz points out people mean different things when they talk about “income inequality”. Some people mean the fact that Warren Buffet earns more in a month than you do in a lifetime. But other means that even Americans below the poverty level are upper middle income by world standards:
It is noteworthy that while $10 is the lower threshold for middle-income status, it is about the median daily per capita income of U.S. households living in poverty. Pew reports that “a large share of poor people in the U.S. would also fail to meet the global middle-income standard.”
So, when the issue of income inequality or a wealth tax comes up in international circles, they don’t mean taxing Warren Buffet and giving the money to you. They mean taxing you and giving the money to Chinese and Indian farmers.
And somehow along the way a little of that money will be siphoned off into the pockets of the politicians and bureaucrats who will administer it. It’s said that hardly a drop of the Colorado River empties into the ocean these days as each state and municipality along the ways takes a little of the mighty flow for its own use.
Hmmm … there’s also this thing called Trade. Suppose we lower some tariffs so Chinese farmers find it easier to sell ginseng in the USA, and maybe they reduce some of their censorship laws so Hollywood can sell more movie tickets and DVDs. So the average American is reaching into his pocket and benefiting poorer Chinese peasants at the expense of wealthy American would-be ginsing sellers. And the average Chinese citizen is benefiting the downtrodden impoverished masses of Hollywood and Beverly Hills.
Joking, but the idea ought to be clear. We can reduce income differences through trade, without paying a penny to politicians or bureaucrats. In principle, at least.
This is NOT an endorsement of every Administration-backed “trade bill” that comes down the pike these days.
China is the barrier to that, not the U. S. The Chinese have this policy they call “food self-sufficiency”. We’d be selling them a lot more agricultural products (specifically rice and wheat) than we do if they didn’t impose limits. We buy a lot of food from China but they buy a lot less from us. And in China as in most of the world a “DVD shop” is a place where DVDs are duplicated, mostly illegally, for sale. Although formally that’s against the law the Chinese authorities do very little to protect the intellectual property rights of U. S. companies. That extends to pharmaceutical companies, chip manufacturers, movie makers, and record companies. It is estimated that Chinese theft of U. S. intellectual property goes into the tens or hundreds of billions of dollars annually.
Further, although we don’t have a free trade agreement with China we do have free trade agreements with several countries with which China has largely free trade. That means that any barrier to Chinese products coming into the U. S. are largely inoperative.
China still has the largest number of very poor people in the world largely because of the Chinese government not because of anything that we’re doing.