I just want to share a very interesting article by The
Economist*:
http://www.economist.com/node/21564556
It is not just the article but also the heated debate it generated
(you can read up to 810 comments!
Some of these are very good comments by top economists).
The central issue is inequality and its effect
of economic growth. An issue that has recently become very popular and focus of
attention for many, including Nobel prizes like Joseph Stiglitz and Paul
Krugman (and which is also my current topic of research, although not Nobel
prize yet!). An issue of high relevance worldwide, but especially in countries
like Spain, characterized by economic stagnation, dramatic rising inequalities
and social degradation.
Without wanting to agree or disagree with the
proposals of the article, what is totally right is that we have come to a point
where we have to successfully tackle inequality at the same time that we recover
economic growth. It is indeed right that some degree of inequality is good for economic
growth (inequality of outcomes that create the right incentives for work,
innovation, risk and entrepreneurship). But is also right, as the article
notes, that too much inequality becomes
inefficient (for many reasons from deprived consumption, lower human and
social capital accumulation, social unrest, etc.) In fact, deeply tested
empirical evidence confirms that we need to tackle inequality no just for moral
issues but also as it make sense in terms of efficiency.
What the article is not clear enough about, and
I want to emphasize, is the role of raising inequality as key driver of the
current economic crisis. Quickly raising inequalities have are now seen not
just as a dramatic consequence of the current crisis, but also as a clear root
cause of it and its persistence. The problem today is twofold: on one hand,
economic growth has been let and encouraged to exacerbate income inequalities,
on the other hand, the costs of the crisis have been forced to be born by the
least favored. Thoughtful redistribution
of wealth and income, but also thoughtful redistribution of the costs of the
crisis is an urgent element of recovery. In first place, the costs of the
crisis have to be responsible assumed by the wealthier. In second place, a
refocus in higher equality of opportunities appears as a cornerstone of long-term
sustainable prosperity.
*Thanking Jaques Pestieau, a well-informed and great
economist, who shared the article with me in first place and whose insightful
analysis and comments are of always of great value for me.
