SoylentNews is people
SoylentNews
A new study (abstract and free PDF available) authored by several economists at the IMF (International Monetary Fund) reveal an inverse relation between increases in inequality and GDP growth. In what could also be considered a heavy blow to trickle-down economic theory, data analyses show (page 7) that increases of income share on the fifth quintile actually hurt growth, while increases in any other quintile favours growth with the lowest quintile showing the strongest push.
From the abstract:
We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down. This suggests that policies need to be country specific but should focus on raising the income share of the poor, and ensuring there is no hollowing out of the middle class.
Original Submission
(Score: 2) by schad on Friday June 19 2015, @12:18PM
I wonder if income inequality causes slow growth, or if slow growth causes inequality. The rich are going to get richer no matter what the economy is doing. But if the economy is growing, everyone else will get richer too.
(Score: 3, Informative) by MichaelDavidCrawford on Friday June 19 2015, @12:28PM
Look at Uber, a small company with a $40B valuation. When it goes public only its employees and investors will get a share of that pie.
The vast majority of the actual labor behind Uber is done by its drivers, who do not get stock options, paid vacation nor health insurance.
Yes I Have No Bananas. [gofundme.com]
(Score: 3, Insightful) by tibman on Friday June 19 2015, @02:22PM
That is extremely normal. Tech companies hire contractors who get nothing but a paycheck and a headache. Even full-time employees for startups get the bare minimum. When the tech company sells only the initial owner(s) and VC get a cut of that big money. All the little people who worked nights to help make the company a success get to visit their boss' new mansion for the next christmas party : )
SN won't survive on lurkers alone. Write comments.
(Score: 3, Informative) by M. Baranczak on Friday June 19 2015, @01:55PM
(Score: 1) by khallow on Friday June 19 2015, @07:37PM
The economy was booming in the 90s, and inequality was growing like never before.
Which is an odd thing to say since global wage and wealth inequality declined over the period of time in question. I find this sort of discussion a bit like deciding to stop breathing because it's uncomfortable to breathe, rather than wondering if maybe the out of control fire in your room may be the source of the problem. There is a huge transfer of economic power from the developed world to the rest of the world, due in large part to increasingly poor policies and attitudes in the developed world. Crippling your economy in order to make income inequality worse doesn't strike me as a productive way to go about these things.
Instead, we should be looking at how to make the developed world more competitive with respect to the rest of the world.
(Score: 0) by Anonymous Coward on Friday June 19 2015, @08:44PM
You are addressing the global situation when the comment was about the US. The global average for inequality has gotten better, but there is actually worse inequality happening in most countries. You are mixing the situations to fit your view. There is no way the developed economies could become "competitive" with those still developing, that is simple accounting. Well, unless regulatory action evens the currency field... Without the crippling of developed economies through outsourcing there would not have been the global increase you speak of, at least not to the same degree. Also, the crippling you speak of was done by the financial elite to benefit themselves.
(Score: 1) by khallow on Saturday June 20 2015, @01:50PM
You are addressing the global situation when the comment was about the US.
Yes, I ignored a provincial viewpoint. What of it?
(Score: 3, Interesting) by jcross on Friday June 19 2015, @02:35PM
I haven't finished the book yet, but this is covered in Thomas Piketty's "Capital in the 21st Century". For a long time prior to the industrial revolution, growth was almost non-existent, rates of return remained fixed, and essentially the only people who got much richer were the people who already had a lot of money to invest. I think one reason periods of high growth feel more prosperous is that there's an opportunity for people lower down the chain to accumulate some of the new capital coming into the system. Whereas with no or low growth there's also not much scope for change in the distribution of wealth.