Is inequality the enemy of growth? (BBC)

Robert Pearson
Economics editor

Some 15 years ago, even after Labour won office in 1997, there was a consensus in the Treasury - which was shared by Tony Blair and other New Labour ministers - that promoting equality meant sacrificing economic growth.

So the thrust of government policy was to stimulate the economy, and never mind if the gap between rich and poor widened - so long as the poor became richer too.

But do we have to choose between equality and expanding the cake? Are more equal societies inevitably societies with proportionately smaller national incomes than less equal societies, all other things being equal?

Strikingly, the new orthodoxy at that most establishment and conservative of financial institutions, the International Monetary Fund, is that the reverse is true - namely that inequality is not the friend of faster growth, of a bigger cake, but can be its nemesis.

What is more, another binned view is that of Thatcher/Reagan - for years taken as a truth of Mosaic status - to the effect that government efforts to reduce the gap between rich and poor end up impoverishing us all.
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more: http://www.bbc.com/news/business-29501233