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Welcome to Third
World, U.S.A.
By Arthur Donner & Doug Peters
"What we're seeing (in the U.S.) isn't the rise of a fairly
broad class of knowledge workers. Instead, we're seeing the rise
of a narrow oligarchy: Income and wealth are becoming
increasingly concentrated in the hands of a small, privileged
elite ... It's time to face up to the fact that rising
inequality is driven by the giant income gains of a tiny elite,
not the modest gains of college graduates." – Paul
Krugman, New York Times, Feb. 27, 2006.
01/01/07 "The
Star" -- -- In
the mid-1990s, the Wall Street Journal delivered the classic
insult to this nation when it called Canada an honorary Third
World country.
Indeed, at that time Canada's economy was coming out of a period
of relative difficulty.
Our balance of payments was shaky, the federal government had
posted a long string of budget deficits and the Canadian dollar
was weak.
Adding to these economic woes, as of the mid-1990s, Canada also
had a long history of posting substantially higher inflation
rates than in the United States.
Now, however, the trade and fiscal deficits situation has been
turned on its head, with the United States incurring huge fiscal
deficits and borrowing enormous amounts of foreign capital to
balance its hefty international trade deficit. In fact, in a
relatively short time span, the U.S. has become the largest
debtor nation in the world.
And as Paul Krugman and many other economists have pointed out,
U.S. income disparity is obscenely large and increasing, while
higher education is not overcoming the polarization of income
and the shrinking of the middle class.
The latter point is somewhat surprising, since most Western
democracies see the elimination or reduction of economic
inequality as a good idea. Indeed, it is a generally accepted
principle that the underlying causes of economic inequality
based on such non-economic differences as race, gender, or
geography should also be minimized or eliminated.
In other words, there is a strong predilection in most Western
countries to level the economic playing field as much as
possible. This seems not to be the case in the United States.
The United Nations publishes a Human Development Index that
ranks countries in terms of life expectancy, literacy, education
and standard of living. The latest published data were based on
2005 statistics. The U.S., despite its vast wealth and power,
placed only in the 12th position among industrial countries. The
top four countries were Iceland, Norway, Australia and Canada.
These top four countries still pay some lip service to income
distribution as an important economic and social goal.
Ironically, the U.S. today has many more features in common with
Third World status than Canada ever did back in the mid-1990s.
What is usually meant by a Third World economy? A half-century
ago, the term was associated with the economically
underdeveloped countries of Africa, Asia, South America and
Oceania. The common characteristics of these Third World
countries were high levels of poverty, income inequality, high
birth rates and an economic dependence upon the advanced
countries. Third World countries were simply not as
industrialized or technologically advanced as Western countries.
But what are some of the distinguishing characteristics of
contemporary Third World countries? They go beyond these
nations' fiscal position or undue concentration on natural
resource exports.
The glaring features today include poverty, lack of democratic
institutions, controlling oligarchies and the unequal
distribution of income and wealth. In other words, the few enjoy
a rich lifestyle while the many share subpar incomes and
poverty.
Another characteristic of Third World countries is that a major
portion of their fiscal expenditures is allocated to the
military. In many Third World countries, the military is
controlled by an elite or a small collection of the wealthy.
Finally, in many Third World countries one finds that leadership
is passed from one generation to the next, often via a close
relative.
Guess what country we are talking about now?
Arthur Donner and Doug Peters are Toronto-based economists.
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