Inequality Hazardous to Growth – IMF study
It is now well-known that income inequality is hazardous to human health and a host of other social outcomes, asÂ demonstrated by Richard Wilkinson and Kate Pickett’s bookÂ Â The SpiritÂ Level and Equality TrustÂ organization (some great resources and slides there, too).Â
Now a new study by the International Monetary Fund has found that higher rates of income inequalityÂ are strongly associated with shorter periods of economic growth: e.g., that greater equality is associated with more sustainable and longer-lasting economic growth.Â
The research paper, Inequality and Unsustainable growth: Two Sides of the Same Coin? is relatively short (20 pages) , provides robust quantitive evidence with qualitative analysis, examines reasons for this relationship and suggests some tentative policy implications.
The IMF is quite amazing, really. They and the World Bank are always coming out with these really quite useful, relevant and positive studies or papers . . . which at an operational level they then proceed to studiously ignore, enforcing policies completely at odds with their scholarly wing. It’s impressive in a bizarre sort of way.
Yes, under Dominique Strauss-Kahn, the IMF has produced some excellent analysis and research, including some really excellent analysis going into and during the crisis. However, and unfortunately, most of the IMF operational footsoldiers appear to continue to march zombie-like to their narrow and damaging doctrines. I agree: it often appears bizarre.
Meanwhile, I’ve seen little of interest or use coming out of the World Bank ever since the eras of Wolfowitz and Zoellick.
Hmm, yeah, come to think of it I haven’t run across any of these useful backgrounders from the World Bank lately. I’m sure Wolfowitz would have been eager to shut them up.
From the cover page of the paper:
DISCLAIMER: This Staff Discussion Note represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management. Staff Discussion Notes are published to elicit comments and to further debate.
Perhaps that’s why the research and the operations at these large organizations don’t align — the research is the opinion of individual economists working in the research department, the operations are organizational policy, that is, it’s explicitly directed by whatever governance structure they have (director, board, etc). Now, the direction should be evidence-based and all, but there’s obviously a disconnect between the evidence presented by their research department and the decisions the operational managers make.
Globe and Mail or CCPA Monitor?
Despite Canadaâ€™s reputation for a strong social safety net, the country is becoming economically polarized: As the incomes of the country’s top earners have risen, low- and middle-income wages have stagnated over the past two decades. The recession widened the chasm, and a subsequent recovery hasnâ€™t closed it.
The decades-old dominant economic dogma that growing wealth among societyâ€™s highest earners would trickle down to those less fortunate is being challenged by an alternative approach: Eliminate crushing poverty among the lowest earners, and wealth will trickle up.
Civil society enthusiasts of such commissions should have been warned by well-meaning insiders who also failed to move the reform agenda forward. From a vantage point in the chief economistâ€™s office during the late 1990s and early 2000s, David Ellerman saw more than his share of reform gambits. Finally, Ellerman threw up his hands:
“Agencies such as the World Bank and the IMF are now almost entirely motivated by big power politics and their own internal organisational imperatives. All their energies are consumed in doing whatever is necessary to perpetuate their global status. Intellectual and political energies spent trying to â€˜reformâ€™ these agencies are largely a waste of time and a misdirection of energies.”
Persuasion by reformists within the chief economistâ€™s office did not affect the institution, agreed William Easterly, a former senior staffer:
“Thereâ€™s a big disconnect between World Bank operations and World Bank research. Thereâ€™s almost an organisational feud between the research wing and the rest of the bank. The rest of the bank thinks research people are just talking about irrelevant things and donâ€™t know the reality of whatâ€™s going on.”