The first talk is here (2006), the second one is here (2007).

They were given at successive years of the TED (Technology, Entertainment, Design) conference in California.

What stuck with me most after watching them was that changes in many important indicators of development – in particular child mortality – didn’t have a clear correlation to increasing economic growth or increasing wealth.  China, for example, achieved almost all its 20th century decrease in child mortality during Mao’s reign, when economic growth was stagnant.  After his death, when China opened up, overall wealth increased hugely, but child mortality has not decreased much as a result.

Apparently there is a correlation between a more open economy and lower spending on social welfare programs. This makes sense, given the observed increase in economic inequality which has flowed from increased opening of markets around the world.

Interestingly, the authors conclude that the current fragility of financial markets “does not bode well for globalisation.”

The breakdown of private financial markets excites calls for stronger redistribution. If redistribution is national (as it has to be as long as politics are national), it will only be sustainable if national borders become less permeable to economic activity.

The Guardian today passes on a similar concern from the World Trade Organisation’s director-general Pascal Lamy:

He is concerned that economic distress in the US, Europe and Asia is already prompting countries to use protectionist weapons yet to be outlawed by the WTO – raising tariffs to the maximum permitted, and introducing anti-dumping regulations.

This seems to be aimed very much at the US, where members of Congress from both parties have written to President Bush to make sure that the US continues to be a big winner from any agreement of the Doha Round of trade talks:

“Developed and advanced developing countries must commit to provide meaningful new market access opportunities [for the US] if Congress is to support a deal.”

This leaves the so-called Doha “Development” round, which was supposed to be first and foremost about securing the interests of developing countries, not looking in very good shape.  Which is probably good news, both for developing countries, but also for the poor in rich countries, which might see a bit more wealth flowing their way as “national borders become less permeable to economic activity.”

The report’s major finding is that despite record economic growth in many of the world’s countries, the wealth which is being created is failing to “trickle down” to the majority of the population, leading to widening gaps between the rich and poor.

For example, the report points out that in most countries where there is available data, wages as a share of national income has been declining:

In 51 out of 73 countries for which data are available, the share of wages in total income declined over the past two decades. The largest decline in the share of wages in GDP took place in Latin America and the Caribbean (-13 points), followed by Asia and the Pacific (-10 points) and the Advanced Economies (-9 points).

The story is the same in Australia, where since 1975 (the end of the Whitlam Government) corporations have been taking a bigger and bigger share of GDP at the expense of wages:

Australia: Corporate Profits vs Wages as a share of GDP

The report also finds that in 70% of all countries, the income gap between the top and bottom 10 per cent of wage earners increased between 1990 and 2005.  The most staggering statistic is that

in the United States in 2007, the chief executive officers (CEOs) of the 15 largest companies earned 500 times more than the average worker. This is up from 360 times more in 2003.

Five hundred times more!

So what’s responsible for this growth in inequality?  While the report identifies a number of factors, it singles out financial globalisation as a particularly powerful cause:

Financial globalization has also led to a depression of the share of wages in GDP, reinforcing the downward trend recorded in most countries, . . . over and above any trend decline in the wage share that may have resulted from sectoral shifts, rising labour demand elasticities from trade openness or changes in labour market regulations and institutions. There is empirical evidence that financial globalization has led to an increase in income inequality, owing both to a trend increase in financial assets (relative to GDP) and to a growing incidence of crises.

The report concludes that “there are widespread perceptions in many countries that globalization does not work to the advantage of the majority of the population.”