This article is largely about the relationship between
inequality, growth, and redistribution. Although it is not easy to define this
relationship, the author begins a discussion. As we have learned in class,
lower inequality is often linked with generally higher growth rates, such as
Sweden or Germany, for example. The author speculates the impacts of inequality
in relation to growth. High levels of inequality could “impair growth if those
with low incomes suffer poor health and low productivity as a result.” The author
cites a recent paper finding that, “governments in more unequal countries
redistribute more and rich economies do more than poor ones.” While this isn’t
necessarily true for every economy, it is powerful to understand that,
“differences in inequality across rich countries are mostly down to the
generosity of redistribution.” Additionally, households with low income are
less likely to invest in education, which further drags down such potential
growth. It will be imperative for governments to find a balance between
redistribution and inequality for future growth.
5 comments:
This article relates a lot to what we've been talking about in class and what the governments and citizens in these countries value. The US is a rich economy, but we do not value income equality in the same way the Scandinavian countries do. Therefore, our government is not nearly as generous in its redistribution as others.
While equality is important factor in many people's minds by itself, people (most often the higher class individuals) do not response well to having income they work hard to earn given away to others and this negative makes politicians shy away from promoting equality fully. I think first and foremost we have to education the population about the importance of equality and its affect on economic growth.
Income inequality is a major factor in showing how an economy is doing and gauging its growth.
Although US has a large income gap, I do not think redistribution, such as progressive income tax, is the solution to achieve economic growth. It is important that our economy puts money and effort into organizations, such as primary schools, which increase opportunities for our current and future labor force.
Would innovation really grind to a halt if there was no inequality? I do not think that is correct. Look at France and Scandinavian countries even though they have less inequality they still are producing and innovating. Maybe it would decrease but I do not think that it would ruin part of the economic system of incentives.
People are more productive when they are healthy and thus having less inequality could result in more people contributing to innovations which would be more efficient and productive. Thus a country that is more equal would be more efficient and thus successful.
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