Why Inequality Is a Problem and Growth a Red Herring

[marmar]

from truthout:



As the recession that began in late 2007 drags through its sixth year, people are finally starting to ask if maybe inequality is to blame. After all, slow growth throughout the 2000s was associated with rising inequality, and inequality today is greater than it has ever been. Perhaps America’s falling growth rates and rising poverty rates share a single cause: inequality.

Not everyone would be surprised by this question. Marxist economists have long argued that capitalism will collapse due to rising inequality. Their argument in a nutshell is that inequality will rise to the point where workers can no longer afford to buy the products they are producing. With no customers, the economy will stagnate, leading to crisis and collapse.

Many orthodox economists also argue that inequality is bad for growth. High inequality encourages rent-seeking: it becomes more profitable to make money by moving to a higher-paid position in the economy than by increasing one’s own productivity. So for example industrial firms invest in finance, because that’s where the big rewards are. A few individuals get rich while the economy as a whole stalls.

There are many other variations on the idea that inequality is bad for growth. Of course, there also exist unreconstructed neoliberals who cling to the notion that inequality is good for growth. Despite all the evidence of the last forty years they still argue that inequality creates incentives that encourage people to work harder and be more productive. ........................(more)

The complete piece is at: http://truth-out.org/opinion/item/16469-why-inequality-is-a-problem-and-growth-a-red-herring

[Newest Reality]

1. Neoliberals

seem to be saying that inequality is the whip.

Who is holding the whip? How can working harder and being more productive just to subsist be of benefit to the whipped?

Each one of us is merely a transaction maker that yields income on investments. The more transactions we are immersed in, and the faster they occur is really one of the chief components of neoliberalism. It seems to be firmly entrenched, but the rhetoric is getting more out of sync with the reality that many of us are living and there are more at the door.

Whip it! Whip it good!

[el_bryanto]

2. Unreconstructed neo-liberals

Interesting term.

Inequality is clearly a problem; communism would be a bigger problem. We need a government that is responsive to the people adn that regulates effectively big business so that big business works effectively.

Bryant

[xchrom]

3. du rec. nt