Читать книгу Crisis and Inequality - Mattias Vermeiren - Страница 21

Not only should the neoclassical interpretation of the causes of rising inequality be disputed; its rather sanguine views of the consequences of inequality can be criticized as well. Remember that the rise in income inequality is believed to boost long-term growth insofar as it creates incentives for individuals to develop scarce skills and human capital, and for firms to invest in more efficient technologies, which will enhance the growth in productivity and living standards. Yet a growing number of studies have shown that, other things being equal, a rise in income inequality hampers long-term economic growth and increases financial instability.²⁵

There are two different interpretations of this observation. A ‘supply-side’ interpretation stresses the negative effects of rising inequality on educational opportunities for children in lower-income households, leading to a decline in human capital development that reduces long-term productivity growth. According to this view, higher income inequality translates into higher educational inequality, with low-income children ending up in low-quality schools and having less access to higher education. This slows the rate of economic growth relative to a counterfactual scenario where all children have equal educational opportunities, given that children of poor households accumulate less human capital and will become less efficient and productive future workers. Econometric analysis by the OECD suggests that income inequality has had a negative and statistically significant impact on economic growth, offering empirical evidence for the hypothesis that inequality hampers human capital formation: increased income disparities depress skills development among individuals with poorer parental education background, both in terms of the quantity of education attained (e.g. years of schooling) and in terms of its quality (e.g. skill proficiency).²⁶

A ‘demand-side’ interpretation, by contrast, points to the negative effects of rising income inequality on aggregate demand in the economy (box 1.3). Because individuals with higher incomes have a lower marginal propensity to consume (MPC) – that is, they consume a smaller part of their income (see also chapter 3) – than individuals with lower incomes, an upward redistribution of income from poor households to rich households reduces the level of aggregate consumption in the economy. The fall in the labour income share has the same effect, as the MPC of workers is higher than that of capital owners. The lower level of aggregate consumption, in turn, pushes firms to curtail their investment expenditures, as weaker consumer demand offers a signal to businesses that there is less need to raise their capital stock (e.g. factories, machines and equipment) to meet demand for their goods and services.²⁷ Conversely, rising income inequality since 1980 has generated a large increase in saving by the top of the income distribution, which Atif Mian and his colleagues refer to as ‘the saving glut of the rich’. Because firms have had less incentive to raise their investment and capital stock in the face of weaker consumer demand associated with rising inequality, these savings of the wealthy have been invested in financial assets that were linked to and hence contributed to the substantial dis-saving and large accumulation of household debt of the bottom 90 per cent: in the United States, the savings of the top of the income distribution increasingly financed borrowing by the rest of the population.²⁸