Wednesday, August 03, 2011

Thinking about the distribution of income and foreign policy

Real Median Household Income by 
Quintiles of the Household Income Distribution
Source: Russell Sage Foundation
Growth of average per capita income seems actually harmful when it occurs in the pattern shown above, where the poor don't benefit at all, and indeed even get poorer for long periods of time, while the rich get much richer. Societies with gross inequalities in income have all sorts of problems that those with more equitable distributions don't suffer from.

On the other hand, economic growth that "lifts all ships" at least equally, and preferably that promotes convergence in incomes seems to me to be very desirable. Why would one begrudge the wealthy even more wealth if the poor are living better lives and the income inequality is not worsening? That would be the growth with pro-poor policies that is the goal of international development programs.

Economic Production, Equity and Power

The soft power of the United States in international relations depends on GDP, and I believe on the equity of distribution of income. If the United States is seen as a country giving opportunity to all, fostering a better life for rich and poor alike, it is more likely to win friends and allies abroad.

Of course, the hard power of the United States also depends on our productive capacity. In World Wars I and II, the ability of the United States to produce the goods needed by our allies was critical to victory. In more recent wars, the quantity and quality of weapons produced by the United States was of great advantage. Note, however, that that hard power has not been sufficient to win the hearts and minds of many of the people of Viet Nam nor Afghanistan.

So where does the security of the United States reside? Surely in both soft power and hard power, and I wonder whether the expenditures on the wars in Iraq and Afghanistan have indeed increased our security. Surely not only have many more innocent people been killed in those wars than Americans would have been killed by terrorists had we not invaded those countries, and indeed more Americans may well have been killed in those wars than would have died from terrorist attacks had we not gone to war.

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