Income inequality hurts countries

2 minute read

With the #occupy movements still going strong around the world, I’ve found a lot of the arguments have become dogma and philosophy and split people along the lines of their beliefs about work and reward versus society. It’s gotten so bad I’ve actually heard some Gordon Gecko-esque “Greed is good” comments and had one person forward me an old Milton Friedman TV interview by Donahue </a> spruiking greed and power.

There is now a wide body of literature, however, that states unequivocally that large income inequalities hurt societies. Great TEDTalk on the subject.

And it doesn’t matter how you get your income inequality, it is the degree of difference that causes the societal issues. For example, Japan and Sweden, both scoring well in terms of income equality and low rates of social problems, actually get there in different ways: Sweden starts with very varied incomes and taxes the rich and transfers to the poorer while Japan simply has a lower range of inequality to start with across the board.

I think the interesting thing for me is that I’d love to dig down on more of these results; is it simple averaging here or the extreme outliers that point to the level of inequality? Are their tiers of inequality one can define which are healthy but shouldn’t have a certain number of societal members above since scientific study also seems to indicate some level of inequality between people is good at the personal level.

It is fascinating though, that once we’ve reached a certain level of average GNP per head that it is the big differences between us that may be killing our societies and a definite question for national debate. One could argue the US optimizes for growth and profit (and, in a sense, income inequality itself) while a country like Sweden emphasizes standard of living for everyone. In some cases, like the US, a question more of national psyche than actual policy. For a country like mine, Canada, a broad swath of middle class and universality has always been one of the pillars of Canadianism (at least as I was taught in school) but I’ve felt that’s something being eroded by successive “business friendly” governments and influence from our neighbours south of the border.

The suggestions on what can be down about it are pretty clear and unequivocal (and hell, even echo Warren Buffet.). End tax avoidance and havens for those who would prefer to not pay their fair share, regardless of their position on redistributing income. I’d also add that making corporations pay their fair share as well probably looms large here as well.

Definitely some food for thought on a sunny Guy Fawkes’ Day.

econ