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Global Capitalism in Disarray. Stagnation, Asset Prices and Inequality
Andres Solimano
January 2017
Madrid-Athens-Rome
A. Uneven growth and stagnation
• More rapid recovery in USA and core Europe.
• More severe stagnation in European Periphery.
Stagnation in the European periphery
-4%
-3%
-2%
-1%
0%
1%
2%
Greece Ireland* Italy Portugal Spain
Economic Stagnation in European Periphery (GDP growth rate, percentage 2008-2015)
(Slow) Growth in the US and core Europe
-4%
-3%
-2%
-1%
0%
1%
2%
France Germany United Kingdom United States
Economic Stagnation in US and Core Europe (GDP growth rate, percentage 2008-2015)
0
5
10
15
20
25
Greece Ireland Italy Portugal Spain
Unemployment rate - Crisis and Post-Crisis Period (2008-2015): European Periphery
0
5
10
15
20
25
France Germany United Kingdom United States
Unemployment rate - Crisis and Post-Crisis Period (2008-2015): Core Europe
Cut of investment in Spain (2000-07 vs 2008-15)
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
2000-2007 2008-2015
Spain: Gross fixed capital formation, ratio to GDP (percent), 2000-2015
Gross fixed capital formation (ratio of GDP) Rate of change in investment ratio (percentage)
Cut of investment in Greece: ( 2000-07 vs 2008-15)
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
2000-2007 2008-2015
Greece: Gross fixed capital formation, ratio to GDP (percent), 2000-2015
Gross fixed capital formation (ratio of GDP) Rate of change in investment ratio (percentage)
Great recession (2008-15)vs great depression(1930s): European periphery, GDP
Great recession vs great depression: USA and Core Europe, GDP
70
75
80
85
90
95
100
105
110
115
07
/29
08
/30
09
/31
10
/32
11
/33
12
/34
13
/35
14
/36
15
/37
38
39
USA: Evolution of real GDP in periods of crisis (1929 and 2007), 1929=2007=100
USA (1929-39) USA (2007-15)
92
97
102
107
112
117
07
/29
08
/30
09
/31
10
/32
11
/33
12
/34
13
/35
14
/36
15
/37
38
39
UK: Evolution of real GDP in periods of crisis (1929 and 2007), 1929=2007=100
UK (1929-39) UK (2007-2015)
Comparisons : then and now
• The great recession was more severe than the great depression forvarious countries in the European periphery (Greece, Ireland and Portugal).
• The great depression was more severe than the great recession in theUSA, Germany and France
B. Asset Prices in the Stock Market and Housing Market
• Stock market prices have recovered faster than economic activity in the US and UK, keep depressed in Greece, Italy.
• Milder recovery in housing market.
• Are stock market prices good predictors of future growth?
Stock Market Prices in the USA, (NASDAQ)
0
1000
2000
3000
4000
5000
6000
19
71
19
72
19
73
19
74
19
76
19
77
19
78
19
79
19
81
19
82
19
83
19
84
19
86
19
87
19
88
19
89
19
91
19
92
19
93
19
94
19
96
19
97
19
98
19
99
20
01
20
02
20
03
20
04
20
06
20
07
20
08
20
09
20
11
20
12
20
13
20
14
20
16
United States Stock Market Prices: NASDAQ Real (1971-2016), 1971=100
Stock Market Prices in the USA, (Dow Jones)
0
5000
10000
15000
20000
25000
19
85
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
United States Stock Market Prices: Dow Jones Industrial Average Real
(1985-2016), 1985=100
Stock Market Prices in the UK (FTSE)
0
20
40
60
80
100
120
140
20
01
20
01
20
01
20
02
20
02
20
03
20
03
20
04
20
04
20
04
20
05
20
05
20
06
20
06
20
06
20
07
20
07
20
08
20
08
20
09
20
09
20
09
20
10
20
10
20
11
20
11
20
11
20
12
20
12
20
13
20
13
20
14
20
14
20
14
20
15
20
15
20
16
20
16
20
16
UK Stock Market Prices: FTSE 100 Real (2001-2016), 2001=100
Stock Market Prices in Greece
0
50
100
150
200
250
300
350
400
19
97
19
98
19
98
19
99
19
99
20
00
20
00
20
01
20
01
20
02
20
02
20
03
20
03
20
04
20
04
20
05
20
05
20
06
20
06
20
07
20
07
20
08
20
08
20
09
20
09
20
10
20
10
20
11
20
11
20
12
20
12
20
13
20
13
20
14
20
14
20
15
20
15
20
16
20
16
Greece Stock Market Prices: FTSE Athex 20 Real (1997-2016), 1997=100
Stock Market Prices in Italy
0
50
100
150
200
250
19
97
19
98
19
98
19
99
19
99
20
00
20
00
20
01
20
01
20
02
20
02
20
03
20
03
20
04
20
04
20
05
20
05
20
06
20
06
20
07
20
07
20
08
20
08
20
09
20
09
20
10
20
10
20
11
20
11
20
12
20
12
20
13
20
13
20
14
20
14
20
15
20
15
20
16
20
16
Italy Stock Market Prices: FTSE MIB Index Real (1997-2016), 1997=100
Housing Prices in the USA
0
20
40
60
80
100
120
140
160
180
200
19
87
19
87
19
88
19
89
19
90
19
90
19
91
19
92
19
93
19
93
19
94
19
95
19
96
19
96
19
97
19
98
19
99
19
99
20
00
20
01
20
02
20
02
20
03
20
04
20
05
20
05
20
06
20
07
20
08
20
08
20
09
20
10
20
11
20
11
20
12
20
13
20
14
20
14
20
15
United States House Prices: Standard & Poor's Case–Shiller Home Price index (Real-National), 2000=100, 1987-2016
Housing Prices in the UK
0
50
100
150
200
250
300
350
400
450
19
91
19
91
19
92
19
93
19
94
19
94
19
95
19
96
19
97
19
97
19
98
19
99
20
00
20
00
20
01
20
02
20
03
20
03
20
04
20
05
20
06
20
06
20
07
20
08
20
09
20
09
20
10
20
11
20
12
20
12
20
13
20
14
20
15
20
15
20
16
House Prices, Nationwide, United Kingdom, all properties, Real Index, 1993Q1=100, 1991-2016
C. The rise of economic inequality
• Income Gini coefficients have risen in the US, UK, Russia, China in the last to three two decades.
• Fall in labor shares in national inocme in manin economies and developing countries.
• Wealth inequality much higher than income inequality.
• Big wealth concentration at the top
Main trends in inequality
• Income Gini coefficients have risen in the US, UK, Russia, China in the last to three two decades.
• Fall in labor shares in national income in main economies and developing countries.
• Wealth inequality much higher than income inequality.
• Big wealth concentration at the top
Policies and tendencies affecting labor
• Greater globalization of capital than labor.
• Lower union density.
• Greater tolerance for inequality and larger wage differentials.
• Labor-saving technical progress.
• Labor migration to high income countries and south-south migration
Rising inequality in the US and UK (Gini coefficient, income)
25
30
35
40
45
50
1950195219541956195819601962196419661968197019721974197619781980198219841986198819901992199419961998200020022004200620082010
United Kingdom United States
Source: All the Ginis database (2013)
The rise of inequality in Russia, 1998-2012
0
5
10
15
20
25
30
35
40
45
50
Source: 1988-2009: "All the Ginis Database" (2013), 2010-2012: IBGE (2014)
The rise of inequality in China, 1985-2013
Declining labor shares in national income
Gini coefficients for Income and Wealth (OECD and World,
2008-2010, in percent)
Gross income Disposable Income Wealth
OECD 46.8 31.6 71.7
Latin America 53.0 49.0 -
World - 39.8 81.6
Source: Credit Suisse (2013), OECD Stat and WDI (World Bank)
Global Wealth pyramid 2016: World's wealth distribution
Source: James Davies, Rodrigo Lluberas and Anthony Shorrocks, Credit Suisse Global Wealth Databook 2016
Policy challenges ahead
• How to reduce global trend toward higher inequality.
• How to reverse fall in labor share.
• How to reduce big wage gaps.
• More pro-labor growth and redistributive social policies.
• Better wealth distribution.
Big Questions
• Is the world turning to economic nationalism?
• Are we approaching to the end of globalization (as we know it)?
• Role of inequality in the turn around of political preferences against globalization and neoliberal economic order?
• Are we already living in secular stagnation?
• Are asset market prices sustainable?