In a comment on the previous post, Bruno notes that The Commision for Growth,
'“strongly believes that growth strategies cannot succeed without a commitment to equality of opportunity, giving everyone a fair chance to enjoy the fruits of growth”; essentially arguing that if there is too much inequality, political support for the chosen growth path will erode, even if proven to be successful. Hence, the commissioners do not believe in the automaticity of the so-called trickle-down effect.'
I actually read a lot of what the Commission says about inequality and equality of opportunity as political rhetoric. This sounds disparaging but what I mean is that a commitment to equality of opportunity does not map one-to-one onto policies. A commitment to equality of opportunity does not tell you much that is specific about policy.
How do you measure whether or not a country is providing equality of opportunity? Political philosophers know that it is impossible to neatly define and hence very difficult to measure equality of opportunity. The language of the commission is very fluffy from this perspective - words like 'a fair chance to enjoy the fruits of growth' sound nice but they don't mean they much as no-one knows exactly what 'fair' means in this context.
Certainly we do know that equality of opportunity is not the same as equality of income. As economic growth takes place, measured inequality of incomes may increase but this may in fact be accompanied by an increase in the equality of opportunity. In a recent working paper Branko Milanovic, Peter Lindert and Jeffrey Williamson distinguish between actual inequality in society as measured by the gini coefficient and potential inequality in society. Many pre-industrial societies were no more unequal in gini terms than is say Brazil today. But they were as unequal as it was possible to be given the actual amount of income in the economy. Elites in these societies extracted as much surplus as possible. As economic growth took place - measured inequality did not fall that much or in some cases it actually increased - but actual inequality and a proportion of potential inequality fell very significantly. This is what is happening in China today.
Going back to the Growth Commission, Bruno is right to draw attention to the connection between politics, inequality and growth. Growth has to be perceived to be benefiting society as a whole rather than a narrow subset of society if it to command widespread political support. But I don't see this as a statement about income inequality per se (and hence don't find it useful to relate this to the trickle down effect). I think this is a statement about political inequalities. In South America economic inequality is a serious impediment to growth because it is linked to ethnic inequality.
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