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Last Updated: Sunday, 7 November, 2004, 03:16 GMT
High earners at a high price?

The US is the world's largest economy - and despite rising inequality there, many argue that following the American model is the key to global success.

So should Britain carry on down America's road of a "Superstar" Economy with high rewards for some high earners?

Panorama asked two leading economists for their views.

Paul Krugman


Renowned American economist Paul Krugman of Princeton University told Panorama that Britain should take heed of the negative consequences of the "Winner Takes All" society for American citizens.

"We're not all that prosperous and successful if you get beyond the top few percent," he said.

"Many Americans don't have health insurance or at least live in desperate fear of not having health insurance."

"Our life expectancy is at the bottom, not the top, of the advanced world," he said. "Our infant mortality is at the top, not the bottom of the advanced world, and those things seem to be getting worse."

The top one per cent of earners in both Britain and the US now take an increasingly high share of national income.

US salaries
America's top bosses now earn over 300 times more than their shop floor staff.
The highest earning US CEO pulled in US$148m last year, including stock options.

In America, the incomes of the top one per cent have doubled in real terms over 25 years - while average incomes have risen much less.

Britain's top one per cent of earners now take 13 per cent of national income - which is three per cent more than a decade ago under the Conservatives.

Professor Krugman compared the situation in both countries to the 1920s, when a small number of people controlled a large fraction of the wealth.

He has called it the "Return of the Robber Barons."

"Now we're going back to that form of society, which is the norm for capitalism," he said.

"This is ugly," he said. "This is disturbing."

DeAnne Julius


But of course not every economist thinks that the high earners getting much richer is a bad thing - many think it helps drive progress.

In Britain DeAnne Julius, who used to sit on the Bank of England's interest rate setting Monetary Policy Committee, thinks high rewards for successful people is something that should please everyone.

She said: "The particular success of the high-earning one per cent is something that in many cases we should be pleased about.

"It's a very short-sighted approach to tax people with moneyż because these are also usually the most mobile people."

And she disagreed that Britain and America have become "Winner Takes All" societies.

"The winner certainly doesn't take all, the winner doesn't really take most," she said.

"The question really then is does the winner take too much, and I think that's really a question of envy. Envy is a very destructive emotion. Individually, personally, but also for a society."

Panorama: Winner takes all Britain was broadcast on Sunday, November 7, on BBC One at 22:15 GMT.

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Britain's elite earners
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The one per cent shopping list
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The 'superstar' effect
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Your comments
07 Nov 04 |  Panorama

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