Tag Archive | "World Bank"

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Income Disparity Grows, Migration Push May Come

Posted on 18 July 2013 by Jerry

Recent studies show that after a brief pause the income disparity of the U.S. has continued to grow, CEOs salaries are back up and belief in U.S. as the “land of opportunity” is faltering.  The gap is widening here and abroad with a couple of notable exceptions, China and India.

As reported in the World of Work Report of 2013 issued by the U.N.’s International Labor Organization, the average ratio of the 15 largest U.S. companies CEO compensation is back to over 500 times the average earnings of their employees or back to the same level as before the market crash of 2009.  This compares to the same measure for the Netherlands at around 60 times, China at 130 times, and the United Kingdom at 220 times.

This of course is a comparison of CEO income to the average worker’s income.  Also this year, Bloomberg reported on the pay multiple of some of the Standard and Poor’s 500 Index of companies between the CEO’s pay and that of their lowliest worker.  The most egregiously high multiple was between Ron Johnson’s compensation package at J.C. Penney’s and his least paid full time employee.  The multiple was a staggering 1,795 times.

Joseph Stiglitz, Nobel Laureate in Economics, has stated that if the income inequality were not enough he sees “increasing economic inequality leading to increasing inequality in political power.”  In his mind the spiral continues leading to increased economic inequality which will not be possible to reverse without significant changes in our economy and how we regulate and run our businesses.

Looking beyond the U.S. at global income disparities, a report from the World Bank’s Development Research Group Poverty and Inequality team draws interesting conclusions.  It’s author, Branko Milanovic, explains how income inequality has been looked at with different formulas applying to different groups.  He argues it is best to look at global inequality composed of individuals, not nations, as this shows the most accurate views of the disparities.

The three major conclusions of this report are that:

  • Researchers who wish to highlight the growing unevenness of global income focus on growing inter-country gaps.  These statistics do not consider population sizes in their respective countries.  Those who wish to show a more positive outcome adjust their numbers to account for the population densities of countries such as China and India.
  • Because of China’s economic growth, supported by India’s, the data shows they are single handedly forcing world population inequality to decline.  The report states, “Perhaps for the first time since the Industrial Revolution, there may be a decline in global inequality.”
  • Attempting to plot the cause of global inequality (using the Thiel coefficient rather than the Gini), the author looks at the reasons for inequality between 1870 and 2000 based on the two factors of “class” and “location”.  Class is defined as the inequalities between the classes of rich and poor worldwide while location is the size of the gaps between mean incomes of one country versus another.  The data shows the importance between these factors has inverted since 1870 so that location is now the dominant factor.

Further the two elements that affect future inequality are economic growth and location.  If the economic growth in the third world stagnates then pressure for migration from poor countries to wealthy ones will increase as people seek to better their circumstances.  This would take advantage of incomes that vary considerably from country to country.

It is best illustrated by the reality that the ‘poorest’ Americans are still at the 60% percentile of world income distribution.  This means our poorest have a higher annual income than 60% of the world’s population.  Absent economic growth, people will seek to migrate to locations where the lowest income is still significantly higher than the incomes of where they are.

These articles raise a few suggestions for how income inequalities should be addressed.   In the United States we must:

  • Enforce the recently enacted Dodd-Frank law that requires companies to reveal their CEO-to-worker pay ratios.  For more than three years this requirement has been bottled up in an SEC that has failed to draw up the rules to implement it.  Of the 94 rules called for in the Dodd-Frank law the SEC has drafted only 39 of the required rules or less than half.  This ratio would increase shareholder and employee pressure on rubber stamp boards of directors that owe their positions to their CEOs and on the greed of higher management to either limit CEO compensation or increase the wages of the average worker.  James Cotton was possibly the first person to propose publishing this ratio in a 1997 article in the Northern Illinois University Law Review.  The dean of the University of Toronto’s Rotman School of Management, Roger Martin, said “When CEOs switched from asking the question of ‘how much is enough’ to ‘how much can I get,’ investor capital and executive talent started scrapping like hyenas for every morsel.  It is not that either hates labor, or wants to crush their lives.  They just don’t care.”
  • Congress must pass a law reversing the Supreme Court Citizens United ruling that removed constraints on the money companies can spend to sway the electorate.  In addition we should require a company’s shareholders to approve campaign contributions.
  • Joseph Stiglitz says the U.S. needs to stop rent-seekers in the U.S. economy who “extract profit from existing industries without contributing value – in the form of innovation, entrepreneurship, and growth – to the economy.  They use their wealth to consolidate their power, by influencing regulations and government policies.  This has happened in many instances – we see it in our military and drug companies, in our banks that succeeded in stripping away regulations, which allowed them to earn huge profits at the expense of the rest of society – and it’s not a model for a competitive dynamic economy.”  Further he supports the raising of taxes on capital gains and suggests it should be taxed at the same rate as income.  He states, “And government can use those increased revenues to invest in those areas that will give a boost to the opportunities of the middle and bottom income earners – especially investments in education, health, technology, and infrastructure.”

These are just a few of the most obvious steps we should take to rebalance the economic differences between the top 1% and the rest of our citizenry.  We should support politicians that are working this agenda.  Further, we need to invest in the economic growth in the rest of the world to insure the collective economic security and fairness increases for all the world’s citizens.

Use the following links to obtain additional information:

http://www.ilo.org/global/research/global-reports/world-of-work/lang–en/index.htm .  Go to the right hand column scrolling country and region briefs until you reach your area of interest.  Select the country of interest.




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Déjà Vu – 400 PPM 2.2 Million Years Ago

Posted on 26 May 2013 by Jerry

We have achieved a 400 parts per million (PPM) concentration of carbon dioxide in the Earth’s atmosphere.  The May 9, 2013 measurement of carbon dioxide by the National Oceanic and Atmospheric Administration (NOAA) showed we passed that milestone.  This is not the first time this has happened.  Ice cores show the Earth achieved this concentration about 2,200,000 years ago in the Pliocene period.  That was a time when there was no ice in the Arctic and the average summer temperatures in the Arctic were above 60 degrees Fahrenheit.

Scientists around the world have watched with increasing dread as concentrations of carbon dioxide have climbed from 280 PPM before the industrial revolution, to 316 PPM when they started scientific monitoring in the 1960’s, to 400 PPM now.  They have sounded an alarm as the major nations in the world are failing to tangibly act to slow the climate change.

According to a new report issued by Globe International written with the Grantham Research Institute at the London School of Economics a few countries have made tangible progress, more have passed legislation as if they are going to do something and others, the greatest contributors to the problem, have not done anything.  They have stayed in place doing very little or have even reversed course.

The report entitled “The GLOBE Climate Legislation Study” (see link below) cites legislative efforts in 33 countries to support progress on climate change.  Click on a specific country on the world map to see what they have done.  While the report is positive about the collective steps being taken, critics point out the steps taken are not sufficient to prevent the world’s average temperature from rising by more than 3.6° Fahrenheit (2° Centigrade).  This has been the target the U.N. and others have set as a formal goal for approximately two decades.

In addition, critics have observed that sometimes there is a difference between legislating promises and actually meeting them.  They point to Canada’s recent withdrawal from the Kyoto Protocol when it became clear they would not achieve their legislatively defined goals.  As a counter argument, advocates point to the Climate Change Act adopted by the U.K.   This is binding legislation representing an example of enlightened leadership from one of the world’s most developed countries.

The concern is we may be passing the tipping point and headed for an average temperature rise somewhere between 7.2° and 12.6° Fahrenheit (4° and 7° Celsius).  The scientific community and the World Bank view this level as creating “cataclysmic changes” in climate that would have severe worldwide consequences.

In the press release about the World Bank’s recent report “Turn Down the Heat” (see the link below) Jim Yong Kim, the World Bank Group President, is quoted as saying  “We need a global response equal to the scale of the climate problem, a response that puts us on a new path of climate smart development and shared prosperity.  But time is very short.”

Adding support for the urgency of the task is a report on the coal power plants planned for the next few years (see link below).  The world continues to add to the global climate change problem as it experiences growth of power demand and consumption.  In addition, the April 26, 2013 issue of Nature magazine reports a recent study looking at reservoirs of fresh water internationally as documenting a startling shrinkage of fresh water.  An example is that the water levels of great lakes Huron and Michigan have dropped to their lowest level since monitoring began in 1860.

Everywhere we look we see reinforcement of the reality of climate change.  Governments at all levels are reluctant to change the status quo.  No one, especially in the developed world, wants to be an outlier proposing significant changes before everyone else does.   We are overwhelmed by the timidity of our elected officials and their fear of the political consequences they will face from the business community that wants no change.  The way to accomplish our objectives is by electing enlightened and educated representatives who appeal to the best in us as opposed to those who elicit our darkest, most ignorant emotional responses.

Use the following links for more information:

http://researchmatters.noaa.gov/news/pages/carbondioxideatmaunaloareaches400ppm.aspx (ignore the log-in pop up screen)







http://www.legislation.gov.uk/ukpga/2008/27/contents  (on the left margin select “Original Print pdf” to read the legislation)


http://www.wri.org/publication/global-coal-risk-assessment (select Downloads – Full Text)





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Doha Climate Conference: Success or Failure?

Posted on 29 December 2012 by Jerry

Conservative pundits from the Heritage Foundation declared the 2012 U.N. Climate Conference in Doha, Qatar a failure.  Supporters point to expanded commitments at a conference that was only expected to be a planning session for a “Big Deal” in 2015.  Was Doha a success or Failure?  You decide.

Detractors cited failure to hit Kyoto Protocol defined emissions objectives, lack of international support (U.S. refusing to ratify and exceptions for developing nations such as China and India) and an unworkable Kyoto structure that placed all emissions targets on a few dozen countries.  They called for the U.S. government to “more accurately determine the severity of climate change and verify U.N. claims.”  They continued saying the U.S. should work “through informal arrangements….undertaking appropriate steps toward a cost-effective reduction in warming.”

In an expansion of the definition of “beggar-thy-neighbor” which is an economics phrase describing how one country gains advantage at the expense of other countries, they said we should not try to mitigate global warming by “going it alone”.  Their suggestion was it was “Better to remove unnecessary regulations on fossil fuels and block any attempts to implement a carbon tax.”  In other words, we should act like global warming is not yet proven, slow our efforts to informal discussions with others and drill baby drill.

Advocates of climate change declared the meeting a success citing the following agreements accomplished at the Doha conference:

  • Attending countries altered the structure of future negotiations from two tracks (one each for developed and developing countries) to just one negotiating forum ostensibly limiting future exceptions for developing nations.
  • The EU and some other countries extended the Kyoto Protocol which was set to expire at the end of 2012, until 2020 and the EU, Australia, and Norway increased their carbon cutting targets. The Kyoto Protocol is the only existing treaty that requires emission cuts.
  • Developed nations gave recognition to poor countries for the “loss and damage” they face from the ravages of climate change.  This first ever concession opens the way for developed nations which have arguably caused climate change to possibly one day compensate poor countries for efforts they must take to repair the “loss and damage” incurred.
  • Attendees at the conference set out a schedule of necessary steps to be taken between now and 2015 as a work plan to prepare for negotiation of the “Big Deal” in Paris.

In the shadow of U.S. economic stresses, political gridlock, and inaction, the world owes a debt of gratitude to the EU, Australia, Norway and other nations for continuing the fight to control global warming.  We can only hope the US finally provides leadership in 2015 (the second Obama term) for the world’s efforts to limit rising temperatures.

On a related topic, scientists are afraid the world has passed the opportunity to limit the climate change temperature rise to only + 2°.  Accordingly the World Bank sponsored a report entitled “Turn Down the Heat” which was prepared by the Potsdam Institute for Climate Impact Research (PIK) and Climate Analytics. The report states the world is on a path to a + 4° temperature rise by the end of the century and predicts additional dire consequences.

Use the following links to obtain more information:




http://search.worldbank.org/all?qterm=turn%20down%20the%20heat  Select first entry “Climate Change Report Warns of Dramatically Warmer World This Century” and read.

Scroll down farther and select 5th entry, “Turn Down the Heat Executive Summary English”, and read.


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