Daily Archives: May 28, 2019

Eight Reasons Why Inequality Ruins the Economy

What matters is not so much the level of inequality as the effect it has.
By Chris Dillow – Roland Benabou gave the example (pdf) of how egalitarian South Korea has done much better than the unequal Philippines. And IMF researchers have found (pdf) a “strong negative relation” between inequality and the rate and duration of subsequent growth spells across 153 countries between 1960 and 2010.

Correlations, of course, are only suggestive. They pose the question: what is the mechanism whereby inequality might reduce growth? Here are eight possibilities:

1. Inequality encourages the rich to invest not innovation but in what Sam Bowles calls “guard labor” (pdf) – means of entrenching their privilege and power. This might involve restrictive copyright laws, ways of overseeing and controlling workers, or the corporate rent-seeking and lobbying that has led to what Brink Lindsey and Steven Teles call the “captured economy.

An especially costly form of this rent-seeking was banks’ lobbying for a “too big to fail” subsidy. This encouraged over-expansion of the banking system and the subsequent crisis, which has had a massively adverse effect upon economic growth.

3. “Economic inequality leads to less trust” say (pdf) Eric Uslaner and Mitchell Brown. And we’ve good evidence that less trust means less growth.

One reason for this is simply that if people don’t trust each other they’ll not enter into transactions where there’s a risk of them being ripped off.

5. Inequality can cause the rich to be fearful of future redistribution or nationalization, which will make them loath to invest. National Grid is belly-aching, maybe rightly, that Labour’s plan to nationalize it will delay investment. But it should instead ask: why is Labour proposing such a thing, and why is it popular? more>

Updates from Chicago Booth

How to react to a colleague’s microaggression
Should you intervene when one coworker is being insensitive toward another?
By Jane L. Risen and George Wu – The fourth installment of our quarterly Business Practice feature invites you to imagine witnessing a slight in a group meeting.

Greg’s request that Becky take notes is commonly termed a microaggression, described by Columbia’s Derald Wing Sue and his coresearchers as “brief and commonplace daily verbal, behavioral, or environmental indignities, whether intentional or unintentional, that communicate hostile, derogatory, or negative . . . slights and insults.”

The term, as coined by the psychiatrist Chester Pierce, refers to an action that denigrates a racial group; but in this case, Greg’s request can be seen as disparaging Becky and women more generally.

Scholars such as Joan C. Williams of the University of California, Hastings College of the Law have observed that women get “stuck” disproportionately with administrative tasks, such as taking notes, ordering lunch, and scheduling meetings, and research by Carnegie Mellon’s Linda Babcock and Laurie Weingart, Maria P. Recalde of the International Food Policy Research Institute, and Lise Vesterlund of the University of Pittsburgh has found women are more likely to be assigned or volunteer to take on “nonpromotable work.”

Interpersonal conflict is seldom pleasant, and this scenario is especially tricky because Greg may not have meant to slight Becky. A confrontation, particularly a public one in front of other product managers, could therefore lead Greg to be defensive.

Finally, the situation is complex strategically: Should you speak to Greg now or later?

Is a subtle approach or a more direct confrontation appropriate?

Should you talk about the specific behavior or provoke a larger conversation about culture and norms? more>

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Updates from Ciena

Learn about the technology behind Ciena’s WaveLogic 5
By Kacie Levy – If you are like me your to-do lists get longer every day, so finding the time to stay up-to-date on industry trends can be a challenge. Which is why we created Ciena’s Chalk Talk Video series. These videos provide an opportunity for you to spend a few minutes with our experts and learn more about the future of networking.

We recently introduced Ciena’s WaveLogic 5 to the market, our next-gen 800G-capable coherent optical chipset, which includes two distinct solutions to address the divergent requirements network operators and Internet Content Providers are encountering:

  • WaveLogic 5 Extreme: will deliver 800G of capacity over a single wavelength with tunable capacity from 200G, supports customers who need maximum capacity and performance from their networks.
  • WaveLogic 5 Nano: will deliver the strength of Ciena’s coherent optical technology and expertise in footprint-optimized 100G-400G solutions, targeting applications where space and power are the primary considerations.

As Ciena’s Scott McFeely said during the unveiling, there was a lot to unpack in the announcement.

So, in the Chalk Talk Videos below Joe Shapiro, the product manager responsible for Ciena’s WaveLogic Coherent solutions, provides an overview of what each WaveLogic 5 solution is, key technological features, and the benefits of these important solutions. more>

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The free market is not the answer

By Jochen Steinhilber – We are discussing the digital transformation, which will profoundly change how we live, work and participate in politics and society in the decades to come.

The political and social significance of digital networking, smart factories and big data depends on how technology is used. It can deepen social inequalities and cement domination and profit maximization, or it can improve working and living conditions and facilitate participation. That is why digitalization needs political direction and should be based on social agreements.

But how can this be achieved without, for example, bringing those companies under tighter democratic control that, for many years, have been engaged in secret negotiations on international trade policy to ‘protect’ the digital and services agenda from all state intervention for years to come?

Also, those who will rightly champion the ecological transformation in the coming years and want to pursue it in a maximally inclusive way will have to ask themselves how this can be achieved under the current relations of power between the economy, politics and democracy—especially under lower growth rates that allow less space for redistribution.

Anyone who now claims that, considering the challenges of climate protection, a debate on economic democracy is a diversionary tactic and at best of theoretical rather than political interest, ignores the fact that the important strategic decisions must be taken at the economic level.

Do we really want to leave crucial questions—where can growth continue because it serves the common good? what must be dismantled because it is ecologically and socially harmful? and who pays for the change?—for the most part to the dominant market players?

And finally, the frequently-invoked crisis of democracy at least suggests that we need to rethink how the economy works. more>