Monthly Archives: March 2014

More Equality, More Growth?

More equal societies almost always do better. This was the sub-title of Richard Wilkinson and Kate Pickett’s important 2009 book, The Spirit Level, in which they demonstrate the correlation between lower income inequality and better societal outcomes across eleven different dimensions both among US states and across a wide range of advanced economies.

More equal societies, they found, tend to have better physical and mental health, more trust and social mobility, less obesity and violence, and lower incidence of incarceration and teenage pregnancy. Echoing JK Galbraith’s famous contrast between ‘private affluence and public squalor’, the first part of Wilkinson and Pickett’s book is titled ‘material success, social failure’.

The implication, that there is a necessary trade-off between more equality and lower economic growth, is one that has long held sway with mainstream economists and right-wing politicians. Increasingly, however, the economics profession – if not yet the right-wing politicians! – are coming around to the idea that while a certain amount of inequality may be necessary to underpin economic dynamism – so there are incentives for hard work and innovation – too much inequality actually undermines economic growth.
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