Inequality: It is even more destructive than we thought
An important article in the October 17, 2012, New York Times examines the impact of income inequality on the nation’s economic performance.
Inequality is a moral concern. It is bad for those on the bottom of the ladder and, increasingly, for those in the middle as well. Now experts are suggesting that our high level of income inequality is also bad for the economy.
Evidence is building that inequality slows economic growth and causes less stable economic expansions, that is, we can expect slow growth of the economic pie and more recessions and economic crises like the one we are still trying to recover from. Experts even suggest that narrowing the inequality gap may be more economically beneficial than other factors – like boosting trade and foreign investment – that feature prominently on the political agenda.
It is important to note that income inequality is not an inevitable outcome of our economic system. It is the result of policy choices about taxes, deregulation, trade, labor unions, and other matters. According to two prominent political scientists, inequality has been politically engineered.
The New York Times article quotes Nobel laureate Joseph Stiglitz who suggests the concentration of money drives the concentration of political power: “Economic inequality feeds into political economy, so the ability to stabilize the economy gets weaker.” In other words, when money is concentrated in the hands of the rich who make political contributions and sway elections in myriad ways, then politicians are less willing and able to make the policy changes needed to reverse inequality.
Stiglitz, a professor at Columbia University and former chief economist and senior vice-president of the World Bank, has written extensively on inequality. He recently published The Price of Inequality describing the causes and impact of inequality as well as what to do about it. Many of the main points in the book are summarized in his recent articles in Vanity Fair:
- Of the 1%, by the 1%, for the 1% in the May 2011 issue
- The 1 Percent’s Problem a web exclusive from May 31, 2012
Also see A Fair Balance: Reducing Inequality in the United States and Around the World, a JWM resource about inequality.