U of C: China reduces U.S. income inequality

[MarkWarner08]

William Jennings Bryan's intellectual brethren aren't likely to celebrate a recent University of Chicago Business School study about income inequality. Contrary to a popular belief accepted by many Americans and their representatives in Washington D.C., income inequality is not a sign of the worsening conditions of the poor. As the wealth density of the top quintile has rising to record levels, so have the living conditions of the Americans living below the poverty line.

The Economist cites data showing the poor spend on average 12% more of the income on non-durable goods. The typical inflation rate in this range of goods has been kept at an artificially low level due to the purported bogeyman of the American poor, China. Yes, China, the nation many Americans flippantly blame for the loss of manufacturing jobs, is saving low-end consumers money. “The poor tend to shop in the aisles of the supermarket where the presence of Chinese goods has increased most,” writes of one the study's authors. Moreover, China's exports have cut the expected inflation rate by up to 25%, saving consumers quarter for every dollar they spend on essential goods.

While the poor are benefiting from China's lower production costs, the bourgeois and the wealthy are paying progressively higher prices for luxury goods and services. The study focuses on the example of organic milk prices, which have soared in recent years. This food is out of reach for low-income workers, put their more affluent colleagues who place a premium on healthy foods are willing to pay more, which drives up costs.

This long-term trend has been interrupted by the rising cost of goods classified under the inelastic demand category. Since 2007, food and gas prices across the nation have soared. This has strained the budgets of those who now think of  buying discretionary items like movie tickets are a foreign concepts. As consumers search for ways to cut back on their expenditures, they'll become even more dependent on low-cost Chinese imports. To those planning to wave signs outside the White House demanding a return to the "halcyon" days of massive tariffs, remember this: without China, those poster boards could cost the same as a one-way ticket to Beijing.

http://www.economist.com/finance/displaystory.cfm?story_id=11791427

[dead0man]

I want to vote no, but not for the reason you give after the "no".  I vote no because of China's horrible environmental and social practices.  Just like every good liberal should.  Trade is good, but not when our producers start the game hand cuffed and we let the other side use steroids.

[NDN]

I'm more concerned about the safety and quality of Chinese goods than lost jobs. Presently, the FDA inspects only 1% of food exports and our government doesn't do much better for other foreign products either. However, considering that China basically owns us by virtue of being our biggest creditor I don't see any real change ever happening (short of them imploding).

[dead0man]

Well, we can always tell them to go suck eggs.  What are they going to do, come reposes our sh**t?  Good luck!

(obviously doing that would have HUGE negative repercussions for us ever borrowing money from other countries again and that would suck balls so this really isn't an option...but maybe....eventually)

[Verily]

The article's opening claim, "income inequality is not a sign of the worsening conditions of the poor." does not to appear to be supported by the rest of the article, which makes the argument that rising income inequality is simply mitigated by low import prices, not eliminated or reversed. In that sense, it is a fairly obvious statement. But, unless the balance of rising price differences at the top and bottom of the scale is actually greater than the rising income differences, highly unlikely, the latter is still "a sign of the worsening condition of the poor."

I'm not an anti-globalist by any means, but the article really needs to scale back on its grandiose claims that are unsupported by the facts.

[DanielX]

No. It wouldn't matter if trade with China was the ultimate cure-all for poverty - any sort of trade with a nation whose government has no respect for human rights, and is unlikely to be swayed into doing so, is like making a bargain with the devil. One should look at the whole US/Saudi Arabia dynamic to see the problems this leads to....

I suppose my position is "Free Trade with Free Nations" - I think the US is being stupid by not complying with free trade agreements with Canada, but I don't even think the US should be trading with China, period.

[Хahar 🤔]

No, because China is evil.

[2952-0-0]

For the past 20 years or so the US has been living way beyond its means, and this manifests itself in a soaring Current Account Deficit.

The only reason this is continuing (which flies in the face of Econ 101) is because the Asian countries are helping to plug this hole to finance their expansion. So unless Joe Sixpack is willing to take a 40% loss of purchasing power, China is beneficial to him. But whether the US Dollar can continue its status as the Gold Standard will be questioned.

I suspect if cheap Made In China goods were restricted, the same people who pushed for this measure would cry about the soaring inflation this would cause.

Ultimately if the current leadership there is unwilling to allow greater social freedoms, then the alternative is to bring over a billion people into the global economy. If thousands of students were to converge of Tiananmen Square tomorrow, then they can't economically or socially or politically afford to send tanks and cover everything up.

In the meantime everyone this side of the Pacific should know "ni hao".

[Ban my account ffs!]

I always did think the University of Chicago was just a Republican mouthpiece.  Now it's been confirmed. [/mockery]

[Dan the Roman]

I approve of an economic relationship between the US and China, or at least on involving trade and economic exchange. I am less happy with a system in which China pays US debts and the collapsing dollar ensures that the poor and middle class pay for capital gains tax cuts.