Extreme Income Inequality In Banana Republics

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Article: Timothy Noah of Slate Magazine, The Great Divergence Dated: Sept., 3rd 2010 The term "banana republic" may bring Nicaragua, Guyana, and Venezuela to mind. A banana republic is characterized as a nation reliant on one cash crop, where there is great income inequality and uneven economic development. Extreme income inequality is one of the more notable characteristics of banana republics and the best example I can think of is Rio de Janeiro and the multi-million dollar high-rise buildings that look onto the favelas, or slums, that house the rest of the city. Americans pride themselves on being a land where social mobility is possible, where people are not set in their class but can elevate social status and income through…show more content…
Chapter 13 discusses labor markets and the basic models of labor supply and demand but the labor market for unskilled workers is changing. For businesses, the labor supply curve has dramatically shifted to the right especially with the implementation of NAFTA (North American Free Trade Agreement) and the rise of China. There is a surplus of labor supply so the business is able to go along the demand curve to the cheaper wage available, usually in another country. (See attached graph) This loss of jobs for the unskilled workers and increasingly for higher-educated workers is widening the income gap. This shifting of the labor market has other effects too, outside of the labor market. Chapter 15 brings up externalities and there are negative externalities associated with the globalization of trade. The exporting of jobs for cheaper wages creates cheaper products. These products may be sold at a cheap price. The higher transportation costs are involved with outsourcing, shipping products across the world is subsidized by cheap oil, and the business is not responsible for the cost of their increase in…show more content…
Our education system has not improved with the times. The world has caught up and the US has yet to realize that long-term investment in schools and teachers is the best pay off for a worker and the country. Now the jobs are left with are the upper class people who are "symbolic analysts" using "mathematical algorithms, legal arguments, financial gimmicks, scientific principals, psychological insights," and other tools that usually come with a college or graduate degree. Then we have our lower-class comprised of low-level service jobs like waitressing, house-cleaning, security guards etc. Decreased social mobility is hard on the lower class because without being able to move forward, they are stuck in a cycle of poverty. Quality public education is their best ticket out of the lower class and rebuilding a middle class. The government has to realize that education is such an important tool and the US has been a leader in this since the 1930s, but they didn't stay leaders because their commitment is waning. Higher education is increasingly more necessary, and the costs and competition for spots in these schools are becoming more difficult for people stuck in a sub-par high school or who simply can't afford
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