The conclusion that emerges from the historical macroeconomic data used in this paper is that, on average across countries and over time, the things that governments have typically done to redistribute do not seem to have led to bad growth outcomes. And quite apart from ethical, political, or broader social considerations, the resulting equality seems to have helped support faster and more durable growth.”
Is this significant? Well yes. The IMF has been shuffling toward this conclusion for a few years, but given the association that the organisation previously had with policy prescriptions that are normally thought to increase inequality – privatisation, rapid trade and capital market liberalisation, tight fiscal policy and a focus on growth above equity concerns – this is a substantial shift.
But is this enough? Its certainly a start. It legitimates a policy focus on distributional issues and hopefully the very timid political forces of the international left can take inspiration from this and focus their attentions again on who gets what share of the national economic pie, as opposed to just worrying about increasing its size and hoping that this will be enough to satisfy those at the bottom of the income distribution.
However, the message is still about what facilitates growth. Growth is the social good, that lower inequality – treated as a politically neutral variable – might be able to promote or sustain. In place of this two rather different considerations are needed. The first is to see greater equality as the social good to be aimed for, in and of its own right.
Second, the dangerous preoccupation with growth needs to be set against other considerations, such as the impact on relations between states and in particular our relation with nature. Lowering inequality might make growth more sustainable in social terms, but it doesn’t necessarily deal with environmental concerns or the bigger question about the type of society that we might want to live in.
More to come on this, but for now I need to run to class!