Political Economy

Much of the outrage over economic inequality in the United States has centered on the high compensation and lack of accountability that corporate executives supposedly enjoy -- allegedly the result of boards at public companies. The truth, however, is that American CEOs now earn less and get fired more than in the recent past.

Inequality is rising across the post-industrial capitalist world. The problem is not caused by politics and politics will never be able to eliminate it. But simply ignoring it could generate a populist backlash. Governments must accept that today as ever, inequality and insecurity are the inevitable results of market operations. Their challenge is to find ways of shielding citizens from capitalism's adverse consequences -- even as they preserve the dynamism that produces capitalism's vast economic and cultural benefits in the first place.

The Hindu-nationalist leader Narendra Modi's recent election sparked a good deal of controversy. It also sparked an open and substantive debate about economics, liberalism, and social welfare in Gujarat and across all of India -- a rarity in developing democracies and a positive thing as India gears up for nationwide elections in 2014.

If the United States avoids increasing government spending as a share of GDP, it could actually lower tax rates since, given the U.S. tax structure, revenue generated by income taxes rises faster than GDP. What the country really needs now is to broaden its tax base.