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Why Inequality Harms Economic Growth

Nobody disputes the rising wealth inequality in the US. So with the nation’s political agenda centered squarely on the economy, should it be a policy goal to reduce income inequality? 

What’s the Latest Development?

In an online forum hosted by the New York Times, experts representing a range of disciplines and political ideologies answer the question: Does economic inequality hurt economic growth? Yes, says Joseph Stiglitz. Inequality is harmful to a demand-driven economy when middle and lower-class families restrict consumption to bare necessities while wealthier individuals save upwards of 15-20 percent of their income, keeping the money from reentering the economy. Stiglitz also points out that income inequality has given corporations undue influence over our political system, exacerbating political instability.  

What’s the Big Idea?

What stands beyond dispute is the fact that we are undergoing a second gilded-age of inequality. “The rich have gotten fabulously richer, while the middle class has struggled and more workers have fallen into poverty,” said Sheldon Danziger, professor of public policy at the University of Michigan. “We now have record numbers of professionals with annual compensation in the millions and record numbers of families worth billions.” Globalization, labor-saving technology and declining unionization are to blame, said Danziger.

Photo credit: Shutterstock.com


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