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Rethinking Robin Hood and Taming Swarms

In his publication “Rethinking Robin Hood” Angus Deaton asks attention for the rising inequality in the west. He refers to a report by Kathryn Edin and Luke Shaefer, who found that “several million Americans – black, white, and Hispanic – now live in households with per capita income of less than $2 a day, essentially the same standard that the World Bank uses to define destitution-level poverty in India or Africa. Finding shelter in the United States on that income is so difficult that $2-a-day poverty is almost certainly much worse in the US than $2-a-day poverty in India or Africa."

The cause of this new poverty is globalization. Western firms have closed down their factories and transferred the labor to Asia, Africa, South America and the east of Europe, profiting from low wages, highly motivated workforces and welcoming subsidies. Now, western countries are confronted with a social divide between those who profit from globalization and those “who are left behind [and] become angry and disillusioned with a politics that no longer serves them. We may not agree with the remedies that they seek, but we ignore their real grievances at their peril and ours."

This analysis is becoming quite common. Many economists think that western governments should do something to compensate the losers in the process of globalization, for instance by offering them free education and health care. In a more recent response to Angus Deaton, Joseph Stiglitz suggests that the rules of the game need to be changed – “and this must include measures to tame globalization. The two new large agreements that President Barack Obama has been pushing – the Trans-Pacific Partnership between the US and 11 Pacific Rim countries, and the Transatlantic Trade and Investment Partnership between the EU and the US – are moves in the wrong direction.”

I would say: too little, too late.

Transaction cost economists say that the growing joblessness must be seen as “transaction costs” (negative externalities) related to the global transactions between the employers who migrate jobs to another country and their new foreign production partners, and also that at least a part of the extra profits made in these transactions should be used to compensate those who lost their income due to the transaction. So, there is not so much “Robin Hood” to rethink. International taxation could have done the work, but now it's too late, even if Obama's new agreements would be stopped.

In the Red Queen economics perspective, globalization is an unstoppable and hardly tameable process. It will continue its surge because billions of people all over the world participate in it. Moreover, it is swarming behavior, like the process of digitization. There is no one person, firm, or state behind it or leading it, and its effects are principally unpredictable. They are negative for some and positive for others, but only within a limited time frame. It can - and will - quickly change. More and more people will somehow be touched by it, and when it gets to you, “it takes all the running you can do” to survive. And if you want to get ahead of it, you need to run twice as fast.

So, the cause of modern joblessness and destitution is that many people all over the world take part in the digitization and globalization processes, and profit from it, without having the intention to hurt others. But others do not take part. They do not or cannot "run". If we want to help these people, we will have to teach them. Training and education are more important than ever. And also more successful than "taming globalization. No one has ever managed to get swarming birds back to their tree.


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