POLICY BRIEFS

The fierce urgency of now: Toward a new multilateralism

The fierce urgency of now: Kevin P. Gallagher and Richard Kozul-Wright describe the urgent need for a new multilateralism to tackle polarizing inequality, financial instability, and a breakdown of the climate system.

Toward a new multilateralism, by Kevin P. Gallagher and Richard Kozul-Wright

A policy formula for well-being

Today, the world faces a climate crisis, a natural resource crisis and a crisis of social fragmentation, in addition to various economic threats. Under these circumstances, the exclusive focus on economic goals is indefensible.The President of the Global Solutions Initiative, Dennis Snower, emphasizes the responsibility of the G20 in refocusing policy at all levels in alignment with human well-being as the ultimate goal.

A policy formula for well-being; by Dennis Snower

World Social Science Report 2016: Inequalities and social progress in the future

World inequalities have evolved in a complex way over the past few decades. The economic emergence of several developing countries with large populations has lowered global inequality, while the widening of inequalities within countries has served to increase it. The baseline scenario would see the world go back to a nineteenth-century pattern of large social inequalities. Less unequal scenarios could involve political intervention to reduce inequalities domestically, or quicker convergence between countries. In all scenarios, the convergence of living standards will raise serious environmental challenges.

Inequalities and social progress in the future; by Marc Fleurbaey and Stephan Klasen

World Social Science Report 2016: The decline and recent uptick of income inequality in Latin America

This contribution to the World Socal Science Report 2016 discusses the exogenous and policy factors behind the large decline in income inequality recorded in Latin America in the 2000s. In particular, it relates the adoption of progressive policies to the election of left-of-centre regimes in most of the region. Finally, it discusses whether such a policy model is sustainable in a world affected by sluggish growth, falling terms of trade, some domestic policy mistakes, and a possible vanishing of middle-class support for the policy model of the 2000s.

The decline and recent uptick of income inequality in Latin America, 2002–13; by Giovanni Andrea Cornia

The Fading American Dream: Trends in Absolute Income Mobility since 1940

In  this paper, the authors combine historical data in order to estimate rates of “absolute income mobility” – the fraction of children who earn more than their parents.  The results show that rates of absolute mobility have fallen sharply over the past half century; and that most of the decline in absolute mobility is driven by the more unequal distribution of economic growth in recent decades rather than the slowdown in GDP growth rates.

The Fading American Dream: Trends in Absolute Income Mobility since 1940, by Raj Chetty, David Grusky, Maximilian Hell, Nathaniel Hendren, Robert Manduca and Jimmy Narang

Polarization of the British Class System

Mike Savage discusses the results of the largest British class survey ever conducted. It shows that class divisions remain very powerful and are becoming more entrenched. There is a growing gulf between the elite and the lower classes, and what used to be termed the middle and working classes seem to be splintering into social classes with systematically differing amounts of cultural and social capital.

The British class system is becoming more polarised between a prosperous elite and a poor ‘precariat’; by Mike Savage

Why Is Caring About Poverty and Not About Inequality Implausible?

Branko Milanovic’s article is motivated by recent arguments made by Martin Feldstein in which the relevance of inequality is dismissed (if everybody’s income goes up, who cares if inequality is up too?), and the argument is made that only poverty alleviation should matter. This note shows that we all do care about inequality, and to hold that we should be concerned with poverty solely and not with inequality is internally inconsistent.

Why We All Care About Inequality (But Are Loath to Admit It), by Branko Milanovic

Nostalgia and the Abandonment of Progress

In this piece, Jean Pisani-Ferry discusses, what he calls, the abandonment of progress: many Western citizens have lost faith in progress: they no longer believe that the future will bring material improvement and that their children will have a better life than their own. They look backward because they are afraid to look ahead. A sentiment that is instrumentalized by current political leader across the globe.

The Abandonment of Progress, by Jean Pisani-Ferry

The New Xenophobia

Democratic governments in the West are increasingly losing their bearings. From the shift toward illiberalism in Poland and Hungary to the Brexit vote in the UK and Donald Trump’s victory in the US presidential election, a particularly toxic strain of populism is spreading through societies around the globe.

The New Xenophobia; by Ngaire Woods

Poorer than their parents? A new perspective on income inequality

The debate over rising inequality in advanced economies has focused on income and wealth gains going disproportionately to top earners. In this publication, researchers from the McKinsey Global Institute look at an aspect that has received less attention: households in developed economies whose incomes have not advanced when compared to their peers in the past.

Poorer than their parents? Flat or falling incomes in advanced economies

The Brexit Mentality Goes Global

The British vote to leave the European Union was the first major political victory of an anti-globalization backlash in an advanced industrial country. But the process is not best understood simply as popular revolt, but rather as elite failure, argues Harold James in his article on the so-called Brexit Mentality that is spreading.

The Brexit Mentality Goes Global; by Harold James

Mitigating the work-security trade-off while rebooting the economy

In getting people back to work before a vaccine is developed, policymakers will have to balance medical risks and economic risks. This column presents some calculations on the number of jobs that can be carried out without putting workers at risk of being infected by COVID-19. The findings suggest that the share of jobs that can be performed without putting workers’ health at risk is limited, and probably does not reach 50%. Importantly, this share is even lower in strategic industries that supply the health sector.

Mitigating the work-security trade-off while rebooting the economy

By Tito Boeri (INPS), Alessandro Caiumi (Bocconi University) and Marco Paccagnella (OECD)

The Military, Policing, and COVID-19

Already today, the U.S. armed forces are providing important help here at home in the struggle against the novel coronavirus. Well over 10,000 members of the Army National Guard and Air Force National Guard have been mobilized to help with things like setting up more hospital capacity, transporting supplies, and providing other logistics. Other personnel, some retired, who have “Individual Ready Reserve” status are in some cases being activated when their particular skills in medicine or other crucial fields can help. They are typically doing so under what is called Title 32 of the U.S. code, whereby they are paid by the federal government but controlled by the governors of the individual states where they operate.

The Military, Policing, and COVID-19

By John R. Allen, John Donohue, Colonel Rick Fuentes, Paul Goldenberg, and Michael E. O’Hanlon (Brookings)

COVID-19: The Price of Negligence

With the triumph of the ideology of “liberal globalization” and the rise of digital technology, the complexity of international relations burgeoned at the same time that borders became semi-porous walls. The strongest states, starting with the United States, and global companies that consider themselves to be above states, were the first beneficiaries, at least for a while. The characteristic of a complex system is that it is impossible to explain it completely, let alone control it. Complexity leads to radical uncertainty. In 2008 the spectre of another Great Depression loomed even though many Nobel Prize winners in economics considered their science to be advanced enough to preclude any return to such a scourge. Even as the damage of the financial crisis lingers, the COVID-19 pandemic reopens the prospect of a lasting economic catastrophe. Central bankers no longer put a limit on the amount of money but have no idea what their actions’ second or third consequences will be. As Laurence Boone, the OECD’s chief economist puts it, common sense suggests “we must do everything we can to ensure that the machine does not break down, but idles, so that it can start up again as quickly as possible.” If we let it break down, however many trillions of dollars are poured into it, that will be a different story.

COVID-19: The Price of Negligence

By Thierry de Montbrial (IFRI)

The COVID-19 Pandemic: Government vs. Community Action Across the United States

Using data from 40 million mobile devices across the US, this paper analyses how state and county governments’ non-pharmaceutical interventions (NPI) aimed at restricting social contact interact with individuals’ physical distancing behavior in response to the COVID-19 pandemic. We use difference-in-differences and instrumental-variable approaches to find that such NPIs lead to a significant uptake in physical distancing. Our estimates show that shelter-in-place policies can increase time spent at home by as much as 39%. Nevertheless, individuals engage in limited physical distancing even in the absence of NPIs, once the virus takes hold in their area. Moreover, we show that governments are more likely to implement lock-down policies if they face a population that does not take physical distancing measures on its own. Our analysis suggests that non-causal econometric approaches studying how the uptake in physical distancing responds to lock-down policies will yield biased results. Exploiting county-level data, we document significant socio-economic heterogeneity in individuals’ responses to the spread of COVID-19 and to lock-downs, and show how state- and county-level policies interact.

The COVID-19 Pandemic: Government vs. Community Action Across the United States

By Adam Brzezinski, Guido Deiana, Valentin Kecht and David Van Dijcke (University of Oxford – The Institute for New Economic Thinking)

Germany needs to lead push for European solidarity in crisis

Hertie School President Henrik Enderlein argues that Europe needs a strong signal of European solidarity in the face of the coronavirus pandemic, but Germany in particular fails to recognise the historic proportions of this undertaking. It has reduced itself to the role of the model student who cannot help but lecture others along the way.

Germany needs to lead push for European solidarity in crisis

By Hendrik Enderlein (Hertie School)