In the Wall St. Journal this week there was an opinion article describing the decline of manufacturing in the U.S. over the past several decades. While the WSJ article is an opinion piece, I would like you to consider the facts that the author discusses. Are there productivity gains to be had in fields like education? In another article economist Joseph Stiglitz discusses the roles of inequality in the shaping of the economy over the last few decades. The U.S. economy has become more unequal by many measures such as income and wealth. Does the distribution of the pie matter? Or is it just the size of the pie. You can compare our measure of inequality with those of countries that have recently experienced political upheaval in the Middle East and elsewhere. Caixin, a Chinese business oriented news outlet, recently described the global economic situation and mentions how our rising inequality contributed to our growing need for credit. In the U.S., we have used a “loose monetary policy” of low nominal interest rates in recent years to help stimulate our economy. However, by keeping interest rates low here, we might be helping to contribute to global inflation. Al Jazeera collected a number of quotes from different media outlets discussing the role that inflation played in the recent uprising in Egypt.
Questions to discuss
- Does the U.S. need to focus more on domestic inequality going forward? How should we focus on inequality here, and what might the direct and indirect impacts be?
- How can China fight off the role of rising inequality, rising inflation, and slowing growth? Should they or do they need to?
- Do you believe U.S. monetary policy is responsible for the global rise in food and energy price inflation? What can the U.S. Federal Reserve do about this?
Like always, please don’t try to answer all these questions. Just discuss one of the ideas above in some detail.