Equality and Prosperity go hand in hand

A reply to the common argument for inequality:

Much better to focus on growing the economy than on increasing equality.

This is the old trickle down theory. Homeless people in the US could tell you that growing the economy without increasing equality does not help the poor. The reality is:

Increasing equality increases longterm growth of the economy.

The trickle-down theory goes against research results. Even the IMF has accepted that equality and prosperity aren’t opposites but rather go hand in hand: The higher the equality, the more sustained growth a country experiences (PDF).

"Against this background, the question is whether a systematic look at the data supports the notion that societies with more equal income distributions have more durable growth."

"a 10 percentile decrease in inequality (represented by a change in the Gini coefficient from 40 to 37) increases the expected length of a growth spell by 50 percent."

They show that the income distribution is the largest single governing factor for the length of a growth period.

Also the Soviet Union had a higher Gini coefficient than the US.

The Gini coefficient measures inequality: The higher it is, the higher the inequality. So the Soviet Union had higher inequality than the US at the time.

That’s a nice way to counter the cry of the ghost of evil communists which is brought up most times someone talks about increasing equality. The Soviet Union had less equality than the US at that time; consequently its growth was weaker.

We do not threaten our prosperity with higher equality. The opposite is true. And we also don’t follow the path of the Soviet Union. The opposite is true.

If all else is equal, higher equality and higher prosperity go hand in hand. Higher equality helped the west to win the economic competition against the Soviet Union.

Therefore the reality is:

To focus on growing the economy we must increase equality.

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