Back when I was a kid, the country where kids-who-weren’t-me were starving was India, and my parents regularly told me to finish what was served to me at supper because somehow that would help those needy children. (I confess my smart-aleck answer to my parents was to tell them to send the uneaten food to India or wherever for the hungry kids. Problem solved.)
That was pretty much Tim Worstall’s response to the latest OECD report on inequality, In It Together: Why Less Inequality Benefits All. Poverty is the only thing that matters, and the poor in the United States aren’t really poor—not in comparison to the “really poor” elsewhere in the world. So, clean your plates and be thankful you’re not like “them.”
they’re worried that rich Americans have ten times the incomes of poor Americans, not that any and every American has an income many multiples of that of someone who is truly poor. For example, if you’re on the average amount of governmental help to aid you in beating poverty in the US (that’s around $9,400 a year) then your income, from that source alone, is some 25 to 30 times that of someone living in real, absolute, poverty.
Myself, I think that’s the only inequality that we should be worrying about: and absolute poverty the only sort of poverty we should be worrying about. As I then go on to insist that the absolute poverty is being beaten by globalisation, and the relative inequality in the OECD countries is also being caused by globalisation, then I say that this is all a very good idea indeed. Let rip with yet more globalisation and trade, the absolutely poor will continue to get richer and the in-country inequality can rise for all I care. And given the link between the two I even tend to applaud the rising in-country inequality as evidence that that absolute poverty continues to be beaten.
But it’s not just Worstall: that’s pretty much the usual response from conservatives these days (from a recent commentator on this blog through Bruce D. Meyer and James X. Sullivan to Deirdre McCloskey) when the issue of inequality comes up. Don’t worry about inequality and keep hoping that—someday, somehow—poverty in the world will be eliminated.
Except it hasn’t, and it isn’t. What the OECD report shows is:
1. Poverty within the OECD nations (no matter how measured) increased during the most recent economic crisis.
2. Inequality (in the distribution of both income and wealth) has also increased—and not just in terms of those at the very bottom, but especially with respect to the bottom 40 percent of the population.
3. The growth in poverty and inequality has negative effects on overall economic growth.
4. And, finally, redistributive measures do not have a negative effect on growth.
There is nothing in the clean-your-plate attempts to ignore the existence of already-grotesque and still-rising levels of poverty and inequality that can effectively counter or overturn those findings—much less respond to what I consider to be the key finding in the report:
The most efficient policy package will address inequalities at the point where they originate rather than trying to pick them up only at a later stage.
In other words, additional growth won’t solve or eliminate those inequalities. We need to tackle the point where they originate: by radically transforming the existing set of economic institutions.