NCPA - National Center for Policy Analysis


July 24, 2007

Several recent surveys show that globalization is widely viewed as unfair to the middle class and the poor, and that higher taxes on the rich are needed to even things out.  It's a bad idea, if ever there was one, says Investor's Business Daily (IBD).

U.S. economic inequality has virtually nothing to do with globalization or free trade, per se.  It has everything to do with education and skills:

  • A recent study for the National Bureau of Economic Research found that those with a bachelor's degree can expect to earn $51,000 or so a year; those with just a high school diploma earn $28,000.
  • So the "income gap" is really an education and skills gap; and it's quantifiable: $23,000 a year, or nearly $1 million over a career spanning 40 years.

Globalization has still been a boon to all Americans, says IBD:

  • From 1980 to 2006, our total trade in goods and services soared 543 percent, from a mere $575 billion, or 20.6 percent of gross domestic product to $3.69 trillion, or 28 percent of GDP.
  • We've created 46 million new jobs over that time and average personal disposable income after inflation has surged 64 percent to $27,770 from $16,938.

By the way, countries that raise taxes to punish the rich end up punishing only themselves, explains IBD.  At least that's the growing economic consensus, says IBD.  The largest recent study, by economists at the 26-nation Organization for Economic Co-operation and Development found "tax rates negatively correlated with economic growth."

Source: Editorial, "The Backlash Against Globalization," Investor's Business Daily, July 24, 2007.


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