Yes, even the staunchly “neo-liberal” Economist has detected income inequality as a topic for special discussion (“The rich and the rest, The Economist Jan 22-28, 2011). The authors agree that there is much discussion about income inequality, the agree that in many countries in the world inequality has risen, but conclude (quoting Sala-i-Martin) that – at least up to the crisis – inequality between countries has fallen, especially due to the fast growth of China, India and some Latin American countries.
The Economist also quotes the concerns of some economists that increasing inequality may have contributed to the financial crisis, since falling incomes of the less affluent might have been compensated by a credit boom which increased households’ indebtedness. There is also a brief discussion of whether income inequality, i.e. the increasing spread between high and lower incomes matters, or whether it is the number of poor that matters. For the latter view, which the authors favour, they also quote the (now infamous) Tony Blair as saying he was “intensely relaxed” about the exorbitant salaries of footballers and entertainment persons as long as child poverty fell.
Correctly, the Economist also quotes some of the worries in the minds of some analysts that increasing inequality (or poverty) might lessen social cohesion and lead to political instability. But the journal maintains that many of the ills ascribed to unequal societies are rather due to a few statistical outliers than general trends.
And this is where the Economist’s “sympathy” for the inequality topic ends. They relish in some positive developments in some countries, notably China, India and the Latin American countries, which had been long the paragons of income inequality. For the authors, GDP growth forms the overriding goal of economic policy and globalization, since they see it as “trickling down” to the poor, thus lifting them (or at least some of them) over the poverty line. Thus, economic growth automatically would solve the inequality problem, or at least, the poverty problem.
The authors come out strongly against “redistribution”, because they can detect only negative effects (presumably on growth and on the incomes of the rich) as a result of such policies. In true neo-liberal, unreconstructed vain, anything that might impede “efficiency”, and be it for the sake of “equality” or, as the Brits would say, “fairness” is to be condemned. Social cohesion and its purported effect on the wellbeing of citizens, is unmasked as a myth, or at least, as of no concern, if it impedes growth (= efficiency). Consequently, the Economist argues for efficiency-enhancing breaking down of mobility barriers, of breaking up monopolies, of combating protectionism, in short, of unleashing the forces of globalisation to the benefit of the masses. They acknowledge that the increased opportunities via globalisation favour the skilled, thus they argue for better education, but not by spending more money on it, but rather by breaking up the power of teachers unions which “have stopped poorer Americans from getting a good education”.
So we are back at the old debate of efficiency versus equality. One might have thought that the perennially falling wage shares, the increasing inequality in rich, emerging and developing countries, the shifting of the burden of cleaning up the financial mess on the average taxpayers, the continued payment of obscene salaries to financial engineers and CEOs and the ensuing fragility of modern societies with weaker and weaker governments might have given rise also to the Economist to rethink its priorities. But this probably would be asking too much. Let them eat their hope that promoting growth will trickle down to the poor and get on with the work to stop the most egregious excesses that the prioritization of efficiency over equity or fairness has caused. The path towards better-off societies does not lie in pursuing maximum growth (=efficiency), but in a socially and environmentally sustainable development which serves people, not only businesses. To me, this is at the root of the distinction between a preference for efficiency, or equity: efficiency is concerned with the way businesses are run, equity concerns the fate of the people. It would have been surprising if the Economist, for all its merits, would have been more concerned with how people and societies progress.