Economic Growth and Inequality

Abstract

Economic growth emerged in the second half of the twentieth century as the dominant justification for economic policy and, to a great extent, for social action in general. Growth, it was claimed, would obviate, or at least mitigate, sources of conflict in society and generate the resources for doing good things such as alleviating inequality. But does economic growth, as conventionally measured, truly reflect the increased capacity of a society to pursue its desired tasks? There are good reasons to believe that it does not. True economic development is an extended process, one that is only reflected in growth statistics with a long lag, if at all. Inequality, furthermore, is not a problem that we can put off dealing with until we can afford to do so, since it impinges upon the very process of economic development that is the source of increased economic capacity. Lastly, we may ask whether we have let the tail wag the dog — growth was supposed to expand the range of societal choices, but are the exigencies of growth now being used as excuses to dictate social outcomes?