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IMF: Lowering Income Inequality Doesn’t Hamper Growth

Redistribution, please:

So does reducing inequality through redistribution hurt economic growth? Not according to two landmark studies by economists at the International Monetary Fund, which is hardly a leftist organization. The first study looked at the historical relationship between inequality and growth, and found that nations with relatively low income inequality do better at achieving sustained economic growth as opposed to occasional “spurts.” The second, released last month, looked directly at the effect of income redistribution, and found that “redistribution appears generally benign in terms of its impact on growth.”

In short, [Arthur] Okun’s big trade-off doesn’t seem to be a trade-off at all. Nobody is proposing that we try to be Cuba, but moving American policies part of the way toward European norms would probably increase, not reduce, economic efficiency [Paul Krugman, "Liberty, Equality, Efficiency," New York Times, 2014.030.9].

Don't let conservative ideology persuade you against empirical evidence: Busting up the concentration of wealth and helping more people access public services and affordable health care so they can get on with school and work and dreams does good for society without hampering economic growth.


  1. John Tsitrian 2014.03.11

    Ya know, Cory, on the one hand we complain about income inequality, on the other we celebrate Obama's presidency as being responsible for sky high stock markets, which have only added to the immense personal wealth of the plutocratic class even as real middle- and lower-class incomes have barely budged since Obama was elected. Looks to me like after nearly 6 years, the administration has presided over the perpetuation of a trend that he railed against as a candidate. I agree that a wider distribution of income can only be a good thing, especially in an economy whose growth is driven by consumer spending. I'm just kinda dismayed that O (whom I voted for in '08) hasn't been forceful in developing policies and legislation that're designed to spread the wealth a little better.

  2. mike from iowa 2014.03.11

    OTOH,I'm thoroughly miffed that Obie hasn't actually stolen from the rich and given to the poor,since he gets accused of this nearly every day. Not only is Obama not gonna take your guns or your women,he is not redistributing wealth. At least not from top to bottom.

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