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strategic options. Some countries began industrialization long before others. Some have been more successful than others. Some are at or near the leading edge; others lag far behind. What is appropriate for one nation may not be appropriate for another. Other things being equal, one would expect a country at or near the leading edge of development to earn high incomes from differentiated products, and a less-developed country to earn much lower incomes from less specialized, labor-intensive goods. But the development and proliferation of digital technologies and global communications networks is enabling low-income nations such as China, India, and the Philippines to compete in sophisticated engineering services and software development. At the same time, the increasing mobility of capital has abetted the transfer of sophisticated manufacturing facilities to low-income countries. These developments threaten to exacerbate income inequalities in both high-and low-wage nations.

Dealing with inequalities of income will be a strategic challenge for more and more nations, but especially for those with the highest incomes. With high incomes it is tempting if not incumbent to have a safety net for the least fortunate. Is it possible to have a safety net that catches all? Is it desirable? Does this require providing incomes based on "need," regardless of skill or effort? If so, how are such safety nets to be distinguished from that well-known "vision" of Karl Marx: from each according to ability, to each according to need? Is such an axiom any more appropriate in Western Europe or North America than it was in Eastern Europe or the Soviet Union?

High-income nations seem destined for profound challenges to their economic strategies in the years ahead. These challenges are of central concern.

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