News :: International Relations

Inequality - Harmful For The Economy

Author

inequality

Date Created

16 Jun 2002

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Lately, we have experienced increased economic gaps within many countries as well as between countries. There is reason to claim this: increasing economic inequality means stealing from the poor and giving to the rich. There are also indications suggesting that it means throwing part of the loot into the river, before giving the rest away to those who need it the least. For those in doubt, check out inequality.cjb.net

inequality.cjb.net

Lately, we have experienced increased economic gaps within many countries as well as between countries. There is reason to claim this: increasing economic inequality means stealing from the poor and giving to the rich.

There are also indications suggesting that it means throwing part of the loot into the river, before giving the rest away to those who need it the least.

The following should not be seen as supportive to the World Bank's practical policies. As we all know, action speaks louder than words.

The World Bank: "There is a renewed interest in inequality for a number of reasons. First, recent empirical work re-examines the link between inequality and growth. If at all, it tends to find a negative relationship, especially when looking at the impact of asset distribution and growth. They assert that the more equal the distribution of assets such as land, the higher growth rates tend to be.

Second, with poverty reduction in many countries being slow at best, the scope for public policies to have a poverty-reducing impact through redistributive effects - from safety nets to social expenditures - needs to be examined.

Third, several empirical studies also examine the impact of inequality - independent of the poverty level - on health outcomes, such as morbidity or mortality rates, or as a cause for violence."

World Bank Economist Klaus Deininger: "In addition to evidence for a comparatively large negative impact of asset but not income inequality on subsequent growth, we also find that highly unequal distribution of assets reduces the effectiveness of educational interventions."

Deininger again: "...fire-sales of assets without an adequate regulatory framework can, as in a number of Eastern European countries, lead to huge jumps in inequality in a relatively short period of time. Experience suggests that high levels of inequality are very difficult and costly to reverse. Special care to prevent that implementation of privatization policies will lead to possibly permanent shifts in the distribution of assets may therefore be warranted."

Former World Bank Economist William Easterly: "Structural adjustment, as measured by the number of adjustment loans from the IMF and World Bank, reduces the effect of growth on poverty reduction. Growth does reduce poverty, but I find no evidence for a direct effect of structural adjustment on growth."

Harvard Economy professors Alberto Alesina and Dani Rodrik: "The greater the inequality of wealth and income, the higher the rate of taxation and the lower growth. The authors present empirical results that show that inequality in land and income ownership is negatively correlated with subsequent economic growth."

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inequality.cjb.net