My chart shows the point. It shows the year annualized rate of growth in GDP per worker-hour. This might, of course, be coincidence: maybe WWII caused both a backlog of investment and innovation which allowed a subsequent growth spurt and a desire for greater equality.
Or it might not. This is not the only evidence for the possibility that inequality is bad for growth. Roland Benabou gave the example pdf of how egalitarian South Korea has done much better than the unequal Philippines. Correlations, of course, are only suggestive. They pose the question: what is the mechanism whereby inequality might reduce growth? Here are eight possibilities:. This encouraged over-expansion of the banking system and the subsequent crisis, which has had a massively adverse effect upon economic growth.
Unequal corporate hierarchies — what Jeffrey Nielsen calls rank-based organizations — can demotivate junior employees.
Inequality can prevent productivity-enhancing changes, as Sam Bowles has described. We have good evidence that coops can be more efficient than hierarchical ones, but the spread of them is prevented by credit constraints.
Poverty reduces education levels by making it impossible to afford books, or encouraging bright but poor students to leave earlier than they should, and women and BAME people might avoid careers for which they are otherwise well-suited because of a lack of role models. Inequality can cause the rich to be fearful of future redistribution or nationalization, which will make them loath to invest. But it should instead ask: why is Labour proposing such a thing, and why is it popular?
That has disincentivized investments in labour-saving technologies. But why should we think this? What are the strongest reasons for trying to bring about greater equality of income and wealth? One obvious reason for redistributing resources from the rich to the poor is simply that this is a way of making the poor better off. A justification for reducing inequality through non-voluntary means, such as taxation, needs to explain why redistribution of this kind is not just robbery.
These reasons for redistribution are strongest when the poor are very badly off, as in the cases Singer describes. But there will always be some reason of this kind as long as redistributing assets increases the well-being of the poor more than it decreases that of the rich.
Many people in the United States seem to believe that our high and rising level of inequality is objectionable in itself, and it is worth inquiring into why this might be so. This inquiry is important for two reasons. The first is because a justification for redistribution needs to include some response to the claims of the rich that they are entitled to keep what they have earned.
What Peter Singer argues for powerfully is voluntary redistribution. A justification for reducing inequality through non-voluntary means, such as taxation, needs to explain why redistribution of this kind is not just robbery, like the activities of Willie Sutton and Robin Hood.
Second, if inequality, in itself, is something to be concerned about, we need to explain why this is so. It is easy to understand why people want to be better off than they are, especially if their current condition is very bad. But why, apart from this, should anyone be concerned with the difference between what they have and what others have? I will mention four reasons for objecting to inequality, and consider the responses they provide to the charge of mere envy and to the claims of entitlement.
The first three:. Economic inequality can give wealthier people an unacceptable degree of control over the lives of others. If wealth is very unevenly distributed in a society, wealthy people often end up in control of many aspects of the lives of poorer citizens: over where and how they can work, what they can buy, and in general what their lives will be like.
As an example, ownership of a public media outlet, such as a newspaper or a television channel, can give control over how others in the society view themselves and their lives, and how they understand their society.
If those who hold political offices must depend on large contributions for their campaigns, they will be more responsive to the interests and demands of wealthy contributors, and those who are not rich will not be fairly represented. Economic inequality makes it difficult, if not impossible, to create equality of opportunity. Income inequality means that some children will enter the workforce much better prepared than others.
And people with few assets find it harder to access the first small steps to larger opportunities, such as a loan to start a business or pay for an advanced degree. None of these objections is an expression of mere envy. They are objections to inequality based on the effects of some being much better off than others.
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