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Theoretical Reshaping for the Augmented Inequality Dynamics

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The Political Economy of Neo-modernisation

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Abstract

This chapter examines whether rising income inequality is the stylised fact for the process of structural transformation by revisiting classical accounts on various theories of normative inequality dynamics, modernisation, and endogenous growth. In addition, a complex interaction between transformational process and income inequality is analysed by exploring the multidimensions of inequality dynamics, including social, economic, political, and moral. This critical review allows us to conclude that rising income inequality is far from inevitable by introducing a proposal for what it calls Augmented Inequality Dynamics which attempts to systematise the endogenous process within a society, underpinned by these multidimensional aspects. Once the inequality dynamics are formed as historically driven systems of social, economic, and political relations that frame the regulation and coordination mechanism that governs a society, the dynamics can be so evolutionary in a way that they structurally transform themselves by interacting with various dimensions and institutions to shape their own pathway. This explains how income inequality is used to incentivise or restrain the process of various societal interactions by itself going Up and Down repeatedly in the context of structural transformation.

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Notes

  1. 1.

    This was based on general assumption that income growth leads to improved living standards. However, there were a number of exceptions against convergence of living standards between the two different worlds. For instance, despite income growth in India, living standards (as measured, e.g., by access to toilet or cooking fuel) have not improved much, cf. the differences between income and multidimensional measures of poverty.

  2. 2.

    Although Rawls comes down to us mainly as a philosopher rather than as a student of either economic growth or structural transformation, and his framework is not somewhat ‘developmental’, his argument by difference principle would fundamentally be applicable to and still be valid to contemporary development discourses, particularly for inequality debate.

  3. 3.

    Each person is to have an equal right to the most extensive basic liberty compatible with a similar liberty for others.

  4. 4.

    Particularly, Piketty and Saez (2003) criticised the Kuznets hypothesis, ‘Inequality reduces in mature stage of development’ by putting a compelling case of the US where the level of inequality has grown in recent decades.

  5. 5.

    For a more detailed discussion, see Chaps. 3 and 4.

  6. 6.

    What is interesting is that his re-investment argument was already identified as one of the conditions in the take-off stage of Rostow’s model. Although Rostow did not explicitly spell out the inequality problem in the take-off stage, he might have implied that continuous capital formation not only promotes re-investment activities but also causes the concentration of capital into the hands of a few capitalists, which could intensify inequality. Importantly, the problem of Rostow’s model here lies in his assumption that re-investing boosts economically focused industrial activities, and not the likes of institutional reforms or education as proposed by Joseph E. Stiglitz.

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Acknowledgements

This chapter is restructured and rewritten based on a journal article, ‘Is Rising Income Inequality Far from Inevitable During Structural Transformation? A Proposal for An Augmented Inequality Dynamics’, published in Journal of Economics and Political Economy, Vol. 4, Issue 3, pp. 22−35, 2017. Copyright for this article is retained by Seung-Jin Baek, with first publication rights granted to the journal.

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    Seung Jin Baek

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Baek, S.J. (2018). Theoretical Reshaping for the Augmented Inequality Dynamics. In: The Political Economy of Neo-modernisation. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-91394-0_5

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