Is There a Trade-Off Between Economic Growth and Equality?
By Randall Holcombe • Tuesday June 12, 2012 12:48 PM PDT • 7 Comments
The American dream is moving out of reach for average Americans, according to this article, even as things have looked up for the top 10%. Statistics like this prompt calls for increasing government redistribution and more progressive taxation to level the playing field. We know that redistributive policies lower economic growth and ultimately make everyone poorer. So, why pursue them?
The pro-equality side of this argument has recognized that redistributive policies that promote equality do so by lowering economic growth, so assuming that economic growth is good and equality is good, there appears to be a trade-off between the good outcome of growth and the good outcome of equality. So, how much growth are we willing to sacrifice to get how much equality?
My own view is that I do not accept this trade-off. I don’t see any value in equality per se. It is the result of differences in capabilities, ambitions, and indeed, a bit of luck. I am sympathetic to the plight of the poor, but because they are poor, not because they are at the bottom of an unequal distribution of income or wealth. Because I see strong evidence that economic growth helps out people regardless of where they fall in the distribution of income, public policy should be pro-growth, and ignore equality issues.
An argument in direct opposition to my view is that we are so wealthy that economic growth brings no additional social benefit, and actually makes us worse off. This view argues that “...if our aim is to improve the quality of life while avoiding further damage to the planet, greater equality can do both whereas economic growth can do neither.” This argument says there is no policy trade-off between growth and equality because growth is bad and equality is good. Public policy should be anti-growth and pro-equality.
Rather than lamenting that the heavy hand of government, through taxation and redistribution programs, is hindering economic growth, this anti-growth response is that if that is true, it is also good.
Some American readers might find this anti-growth viewpoint too incredible to take seriously, but the sentiment is much stronger in Europe. Whereas in the United States redistribution programs tend to be viewed as designed to help the poor, in Europe the sentiment is much more that the goal is to create more income equality. Equality is much more a social goal in Europe than in the Untied States, and the anti-growth argument cuts the legs out from under the trade-off issue. The response to the question of how much growth people are willing to give up to get more equality is “all of it.” Equality is good; growth is bad.
A few decades ago an argument that economic growth is undesirable would have been rejected out of hand. Now, it is gaining some traction. For those who see the United States as moving toward the social policies of Europe, this is the ideology toward which we are headed.
Tags: Budget and Tax Policy, Economics, Europe, Free Market, Nanny State, Politics, Poverty, Progressivism, Taxation, The State, Uncategorized, Welfare 
Stagnation as national economic policy–a real winner!
This idiotic belief overlaps and works in conjunction with the idiotic beliefs of many self-proclaimed environmentalists who are actually technophobes and metathesiophobes (afraid of change). A no-growth economy will result in reduced rates of technological advancement and fewer changes during ones life (thus appealing to those -phobes). But, a no-growth economy will fail (due to reduced relative productivity) unless the nation isolates itself economically or the entire world adopts no-growth. The latter condition could not last, because the nations filled with have nots will not passively accept permanent deprivations. Global economic stagnation would lead to wars.
DoctorT | Jun 12, 2012 | Reply
If U R So Into Growth of the Economy then where U at...My arm’s R Waving...U can Sit ‘n’ write All U want...Action Speak’s Louder than Word’s...Knock on my Door...
Alfredo's Tamales | Jun 13, 2012 | Reply
Govt regulation never supports growth only constrains capital formation and private sector progress which is the driver of all “good” for the people. Ultimately the US must reject the current ethos of dabbling with socialist nonsense and once again resume the mantle of the home of free enterprise and once again act like a constitutional republic........or suffer the slow lingering death that we now see in the old eurosocialist countries.
shirazstu | Jun 15, 2012 | Reply
Economic Growth is best when the results sre spread. 1945-1980 were great groht years plus equality vioa tax code;
Studies have shown that happiest are those in socialist nations where there is equality
Social Democratic Germany is example
It is bad for majority when 10% own 73% Net Wealth–83% Fiananil wealth and get 50% of income.
Today 50% get 87% of income
70,000,000 get 13%
We had little growth under Bush II
big growth under Clinton.
Bush sent most of wealth creation to top 10%.
He smashed he class
We rank 4th on inequality inoome nations
Check growth under all of these
JOBS PER PRESIDENT
wall street journal 1-9-09
Per Year-(Rounded)
Clinton—-2,900,000
Carter—– 2,600,000
Johnson—2,300,000
Reagan—-2,000,000
Nixon—– 1,700,000
Ford——– 745,000
Ghw Bush– 625,000
Gw Bush— 375,000
DEMOCRATIC PRESIDENTS—7,800,000
REPUBLICAN PRESIDENTS—-5,445,000
clarence swinney | Jun 19, 2012 | Reply
Growth hire democrats
——————– SHOCK & AWE————————
———-DEMOCRATS CREATE WEALTH AND JOBS———–
1.From Harding In 1921 to Bush in 2003
2.Democrats held White House for 40 years and Republicans for 42.5 years.
3.Democrats created 75,820,000 net new jobs — Republicans 36,440,000.
4.Per Year Average—Democrats 1,825,200—Republicans 856,400.
5.Republicans had 9 presidents during the period and 6 had depression or recession.
6.Republicans had a recession/depression in 177 months and Democrats in 32 months.
7.DOW—1928 to 2003—Stock market gained 11% average per year under D presidents versus 2% under R presidents. Small Cap stocks gained 18% as yearly average under D and minus 3% under R.
8.GDP—grew by 43% more under Democrats.
9.Income Growth—1948-2005–each increased (percentagewise)under D presidents over R presidents by these numbers– Quintiles–(Top-10%)–(2nd-71%)-(third-127%)-(fourth-212%)-(fifth-550%) wow
source–TimothyNoah– Nov. 2010 in Slate magazine
Question—Why would a working person vote for a Republican for President?
————————————————————————————————————
Comparing Democrat’s hero-CLINTON—versus Republican’s hero–REAGAN
———————————————————————————————————–
1.JOBS—grew by 43% more under Clinton.
2.GDP—grew by 57% more under Clinton.
3.DOW—grew by 700% more under Clinton..
4.NASDAQ-grew by 18 times as much under Clinton.
4.SPENDING–grew by 28% under Clinton—80% under Reagan.
5.DEBT—grew by 43% under Clinton—187% under Reagan.
6. DEFICITS—Clinton got a large surplus–grew by 112% under Reagan.
7.NATIONAL INCOME—grew by100% more under Clinton.
8.PERSONAL INCOME—Grew by 110% more under Clinton.
SOURCES—Bureau of Labor Statistics (www.BLS.Gov)–Economic Policy Institute (EPI.org)—Global & World Almanacs from 1980 to 2003 (annual issues)
http://www.the-hamster.com (chart taken from NY Times)
National Archives History on Presidents. http://www.nara.gov
LA Times 10-11-00 on Market–www.Find articles.com
A vote for a Republican is a vote for Less Success.
A vote to reduce the Standard of Living for all Americans.
clarence swinney | Jun 19, 2012 | Reply
You might want to consider that demographics play a role in a static snapshot of wealth and income distribution. In the bulk of the years that you claim a more equal distribution, women married to men in the upper middle and upper income brackets largely did volunteer work. Despite having two college educated adults in the household, only one was working. By the 1980s this changed radically. We have made strides in eliminating the glass ceiling and we now have two incomes in one household at the top tiers too. Lower middle class and below families had tended to two income earner already and were not as significantly impacted by an increase in women in the workforce. Since the 1980s the baby boom demographic bubble has been in their highest income earning years and saving for their retirement. This has also tilted the distribution of income toward the higher end. But don’t worry as the boomers retire, the snap shot of income distribution will appear to be fairer.
You might want to consider another institutional change that has negatively impacted income distribution. The failure of our school system to actually graduate individuals with skill needed in the job market. Not only do we graduate individuals that, despite grammar and spell check, cannot write at a 12th grade level, we also fail to produce individuals trained for high paying blue collar jobs in our push to send everyone to college.
Mary
Mary Ervin | Jun 19, 2012 | Reply