Split By Decision

Of course, the idea behind labor reform in historically inflexible economies like Japan or Germany or France is to bolster growth and create more and better jobs over the longer term. But in the short term, pinched benefits and poor wages, coupled with exhibitionist displays of wealth, inevitably bring back memories of earlier, less equitable periods in economic history. "We are in fact in the second Gilded Age," says economist and New York Timescolumnist Paul Krugman. "Pretax and pre-transfer income inequality in 2005 was exactly the same as it was in the 1920s. And a lot of behavior is the same: the giant private philanthropies, which is one of the giant mitigating factors, the exhibitionist display of wealth and, of course, the malefactors of great wealth all insisting that they're doing great things for us all."

The often grotesque proportions of income inequality are giving pause to even some of the most ardent believers in the international trading system. "The issue of the presumed justice of the rewards of capitalism has created an angst in all people involved in market economies," former Federal Reserve chairman Alan Greenspan told NEWSWEEK earlier this fall. "It's the reason why, despite this extraordinary set of gains, capitalism has not yet gotten closure." He expressed concern that people would turn against free markets if they find the markets can't meet their material needs.

At least some of them already are. In Latin America, voters in Venezuela, Ecuador, Bolivia, Chile, Brazil and Argentina have all elected populist ideologues in recent years. In the United States, opposition to free trade is growing—even among Republican voters. China experiences thousands of large demonstrations a year, the bulk of them over economic issues ranging from questionable land seizures and nonpayment of wages to egregious industrial pollution. In Nepal, which has the highest Gini coefficient in Asia, inequality has fueled a bloody Maoist insurrection that has raged since the mid-1990s. In India, radical, violent groups (broadly known as Naxalites) who adhere to the Maoist ideology of class struggle, routinely now blow up road links, mine the pathways that security forces take, attack police patrols and extort money from villagers. Last year Prime Minister Manmohan Singh declared the Naxalites "the biggest internal security threat to India since independence."

In Hong Kong, the glistening financial capital of a rising Asia, there have been (as of yet) no bloody coups, or even visible protests. Yet there is a rising unease, and a sense that things can't continue on as they are. Millions who once had upward mobility are stuck in neutral, struggling not just to do as well as their parents, but to make a decent living at all. Tsang Wing-on, and many like him, are still searching for succor. Even though he pleaded guilty in the hopes of becoming a ward of the state, the judge refused to send him to jail.

With George Wehrfritz in Hong Kong, Sudip Mazumdar in New Delhi and Barrett Sheridan in New York

© 2007