Margins/Berlin

MPPA-DL 452Session 5

Course Themes

• Dynamics: Globalization, Urbanization• Circuits: Transnationals, Diasporas• Centers: Agglomeration, Sprawl• Margins: New Inequalities• Ecologies: Sustainability• Architectures: A Sense of Place• Crises: Globalization in Reverse• Frontiers: Looking Ahead

Berlin, Germany

Berlin 1945

• November 2009 marked the 20th anniversary of the fall of the Berlin Wall and the beginning of German reunification.

• Begun in August 1961, the Berliner Mauer separated East Berlin from West Berlin for over twenty-eight years until November 9, 1989.

• “During this period the Wall stood as an ugly symbol of human isolation and cruelty, as about one hundred persons were killed by East German security forces while trying to cross the Wall into West Berlin.”

Source: George Mason University Libraries Special Collections and Archives

Source: Accessed at www.urban-age.net on 10/19/09

Source: Accessed at www.urban-age.net on 10/19/09

Source: Accessed at www.urban-age.net on 10/19/09

Source: Accessed at www.urban-age.net on 10/19/09

Source: Accessed at www.urban-age.net on 10/19/09

unemployment

Source: Statistisches Landesamt Berlin, accessed 10/19/09 at berlin.group.shef.ac.uk/berlin.html

Most of us make at least three important decisions in our lives: where to live, what to do, and with whom to do it.

Daniel Gilbert, Stumbling on Happiness

Civility means that the diversity of urban life becomes asource of mutual strength rather than a source ofestrangement and civic bitterness. In the past this issuehas been framed in terms of ethnicity or culture and in the current period of inequality I think it needs to beincreasingly framed in terms of economics.

Richard Sennett, Professor of Sociology, London School of Economics and Political Science and MIT

Margins: poverty and inequality

poverty is:

• lack of income• lack of drinking water• lack of access to health care• lack of protection against adverse shocks

• higher infant mortality• lower life expectancy

Country(in order of increasing GNP per capita)

% of Population below $1 a day

Bangladesh 29.1

Kenya 26.5

Sri Lanka 6.6

Indonesia 7.7

Philippines 14.6

Jamaica 3.2

Paraguay 19.5

Costa Rica 6.9

Malaysia <2

Brazil 9.0

poverty across countries

less and more poverty in the world

inequality across countriesCountry(in order of increasing GNP per capita)

Income share of lowest 40% of households

Ratio of highest 20% to lowest 20%

Bangladesh 22.9 4.0

Kenya 10.1 18.3

Sri Lanka 22.0 4.4

Indonesia 20.4 5.1

Philippines 15.5 8.4

Jamaica 16.0 8.2

Paraguay 8.2 27.1

Costa Rica 12.8 12.9

Malaysia 12.9 11.7

Brazil 8.2 25.7

United States 16.1 8.5

the more equal vs. less equal

Today there are more part-time and temporary jobs and generally fewer protections and fringe benefits for growing portions of the workforce. These changes in the employment relation have contributed to reshaping the sphere of social reproduction and consumption, which in turn has a feedback effect on economic organization and earnings…it reproduces growing income disparity, labor market casualization, and consumption restructuring along high- and low-end markets.

Saskia Sassen, Cities in a World Economy, p. 173

does inequality matter?

• poverty is a more pressing imperative than inequality– if we can improve living standards of the poor at the

cost of some inequality, it’s worth it• inequality reflects a “natural” distribution of

talents and capabilities, as well as effort• inequality is good because it creates incentives

for effort– efforts to overcome it (by taxes and redistribution) stifle

effort

skeptical view:

• extreme income inequality leads to inefficiency

• lack of access to credit leads to under-financing of good productive opportunities

• since the middle class has the highest average and marginal saving rates, income inequality leads to lower saving and investment

economic view:

does inequality matter?

• inequality in income and assets are associated with inequality in political power, which influences patterns of government spending and services

• extreme income inequality leads to political and social instability

• “the poor try revolution while the rich try corruption and rent-seeking to retain power”

• violates notions of fairness and justice

political and moral views:

does inequality matter?

the Lorenz curve

income distribution

Gini coefficient

Gini coefficient

total poverty gap

TPG = the amount relative to the poverty line that has to be transferred to poor households to bring their incomes up to the poverty threshold

income distribution

the Kuznets curve

time

the “Kuznets process”

• the economy comprises a low-inequality and poor (low-mean) rural sector, and a richer urban sector with higher inequality

• the migration process is such that a representative slice of the rural distribution is transformed into a representative slice of the urban distribution

absolute poverty will fall with urbanization; income inequality will rise up to some point then fall (inverted U)

Inequality

Urban population share

Total poverty

Rural poverty rate

Urban poverty rate

poverty and inequality under the Kuznets process

growth leads to less poverty

% poor has declined

drivers of economic growth

• investment• education• population• inflation• inequality• foreign aid• redistribution

+denotes a positive effect in the direction shown

?

–

+

+

–

–

–

Source: Gylfason and Zoega (2000)

Does urbanization reduce poverty?

rural poorer than urban

migration to cities

• jobs/income – more (agriculture diverse)• health care - better• education - available

• risks: – inequality– crime– political instability