Income inequality has a statistically significant impact on economic growth, according to research by the Organisation for Economic Co-operation and Development (OECD).
In Ghana and Nigeria, the cost of rising inequality has become a muzzle on economic growth, innovation and sustainable development. Ghana has since 2001 suffered 14 percentage points in what could have been an economic growth unparalleled in the world.
Nigeria’s economy has been bridled with unchecked inequality for over three decades. In the cause of the last 15 years, Nigeria’s economy could have grown an additional 11 percentage points if not for gross inequality, now bordering on grotesque lack of government control in many industries in the country and astute corruption.
In the UK, rising inequality cost the economy almost 9 percentage points of GDP growth between 1990 and 2010, the think tank said.
The US lost almost 7 percentage points.
The OECD also found that redistribution of wealth via taxes and benefits does not hamper economic growth, says OECD’s secretary general, Angel GurrÃa:
This compelling evidence proves that addressing high and growing inequality is critical to promote strong and sustained growth and needs to be at the centre of the policy debate. Countries that promote equal opportunity for all from an early age are those that will grow and prosper.
Widening gap
In the 34 countries that are members of the OECD, the gap between rich and poor is at the highest level in 30 years, the group said.
The richest 10% in those states earn, on average, 9.5 times the poorest.
In the 1980s, they earned 7 times as much.
The only countries in which the OECD found inequality had fallen were Greece and Turkey.
Education
A lack of investment in education was the key factor behind rising inequality, the OECD said.
Fewer educational opportunities for disadvantaged individuals had the effect of “lowering social mobility and hampering skills development,” the report warned.
It also said that those whose parents have low levels of education suffer most when inequality rises, whereas family background matters less to those from a more educated social sphere.
The OECD called for policymakers to do more than just implement anti-poverty programmes.
“Policy also needs to confront the historical legacy of underinvestment by low income groups in formal education,” it said.
[quote_box_center]Strategies to foster skills development must include improved job-related training and education for the low-skilled, over the whole working life.[/quote_box_center]
Picketty has talked about this extensively. But if the US is not ready to rein in the super rich then they should stop telling the rest of the world its bad for everyone.
Wow, Ghana could have grown 14% more, atop what we grew as. Ey! This greed must stop.
Mankaa na mibua! Buey!
The beauty of the Super rich is that they give everyone hope – that you too can become super rich. Unfortunately, while you wait, you are dirt poor!
In the end, which is better? Hope or the sordid reality?
A hope that is sure to never come is the one the poor man waits for. I, on the other hand, will strive for the rich man’s hope–one that is attainable in this lifetime.
Hahaha – a fantastic conundrum. What might the alternative be?
The bitter reality is that if we rein in the super super rich, we remove hope from our social fabric, and what is there to root for? Hope is everything, the fact that something, completely unreachable as it may sound, is attainable by dint of hard work or by a stroke of luck!
My friend, by a stroke of luck. Let’s see so your son is lying on a hospital bed, better yet, lying on a home mat on the sandy floor of your village room, sick and dying of malaria. You have not money, no means to transport him to a clinic, and that clinic even doesn’t have an medicines for malaria available.
Then, my friend, let’s talk about strokes of luck? You think your son will survive?
Surely not. Inequality means the rich survive and the poor move on to the next world. I don’t think that is fair, but that is the world the cheerleaders of capitalism would like to live in. And unfortunately, they make the laws.