Explaining growth scepticism

Larry Summers, a former US Treasury secretary, attempted to explain the widespread disillusionment with affluence in Monday’s Financial Times (“The global middle class cries out for reassurance” 30 October 2006). In his view the main explanation is the squeezing of the global middle class as a result of globalisation and technical change. Two groups have benefited from these developments: low income countries and the owners of valuable assets. The rest have suffered.

It is positive that Summers recognises the widespread disaffection with prosperity but his explanation is flawed. Even those at the top of society are anxious about economic growth. For more on this subject see my spiked essay on “Who’s afraid of economic growth”. It can be reached by clicking the link to the left.

Summer’s thesis is developed in more detail in a long in-house feature in today’s FT (“Anxious middle: why ordinary Americans have missed out on the benefits of growth”). It argues that median incomes have stagnated in America despite the booming economy.