Inequality In America Has Been A Boon For The Rest Of The World
By: Kesh Anand
Tags: Economics, Innovation, Inequality, World, USA

Inequality In America Has Been A Boon For The Rest Of The World

American innovation is built on the back of inequality but trickles-down to lift everyone’s living standards

America has the most powerful economy the world has ever seen — which at ~$21 trillion is larger than the second and third largest (Chinese and Japanese) economies combined!

It is a world leader in innovation — taking the #1 spot in both patent activity and share of high tech companies.

The result of this innovation is an uplift in standards for everyone across the globe. When America births an iPhone, an Amazon, or a Netflix — we, the citizens of the world over benefit.

Not equally of course. Jeff Bezos and Steve Jobs would have a much healthier bank account than you dear reader. However — we do benefit some.

A lot of this innovation can be attributed to the American cultural attitude and bias toward entrepreneurship. Low taxes, agile labour practices, and forgiving bankruptcy laws.

There is an ugly side-effect to all this though: inequality.

America has one of the worst income inequality in the OECD || Source: oecd.org

T he Inequality Side-Effect

Low taxes mean fewer receipts for the government to use to fund social services such as universal healthcare, or cheap tertiary and vocational education to uplift society’s weakest. The corollary to this is of course that the wealthiest in society get to keep more of the money they earn thereby further widening the gap between rich and poor.

Agile labour laws (agile here is a euphemism for exploitative) such as at-will employment, low levels of unionisation, and a pitiful minimum wage means that those in possession of capital can exercise disproportionate power over the working class. This results in economic rent, with the wealthy accruing “more than their fair share” of profits from an economic endeavour.

If you combine this with other elements of American society such as the position of illegal immigrants, systematic racism against African-Americans, and those caught in the cross-hares of the criminal justice system — then you find a steady pool of workers who will bend over backwards to get and keep a job — even an exploitative one. Because, well, in a society without safety nets — the alternative is even worse.

Can Things Be Different?

So it goes — that we, the residents of the world benefit from America doing what it does. American innovation, built on the backs of the weakest members of their society, has been a boon to us all.

It doesn’t have to be that way, however.

America can evolve to make it's economy a more inclusive one.

The onus should not be completely with the US though. The impetus for change doesn’t always need to come from within their borders.

We in the rest of the world too can look at increasing innovation closer to home.

Some of this will happen organically as developing countries like China and India and Botswana grow — they will mature capabilities in technological output.

In developed nations, we too can do our share by focusing on niches that play to our comparative advantage. Just as Germany is well known for its automotive capabilities, South Korea for its electronics, and Switzerland for its pharmaceuticals — the other OECD countries can do the same.

We can move away from a unipolar world with an Innovation Superpower (being America), to a multi-polar one. One where all countries of the world play to their own strengths.