Inequality Seriously Damages Growth, IMF Seminar Hears

Growing consensus creates unprecedented opportunity to act on inequality

Macroeconomic policies can mitigate inequality

Remedies include targeted health, education spending, more progressive taxes

Income inequality has risen throughout the world. According to Oxfam, the top 85 richest people now own half the world’s wealth, the audience at the IMF seminar on “The Macroeconomics of Income Inequality,” was told.

Guy Ryder, Director General of the International Labor Organization, said a growing consensus about its damaging effects was creating an unprecedented opportunity to act on reducing inequality.

Previously, inequality was thought to be the price for a functioning global economy, “but now the IMF and other organizations say there is an alignment of getting the global economy working better, creating jobs that we need, and dealing with inequality,” said Ryder.

“If this is a problem, if we all agree this is a problem, what are we going to do about it?” he said.

Inequality “morally wrong”

Inequality is not only bad for growth, and a threat to democracy, but it is also “morally wrong” suggested Winnie Byanyima, Executive Director of the charity, Oxfam.

“It just cannot be right that millions are living in abject poverty while others—these 85 we’ve heard about—if they had one thousand life times, could not spend it [their wealth] all,” she said.

Jeffrey Sachs, head of the Earth Institute at Columbia University, identified many different types of inequality including inequality of income, wealth, power, and well being. He was scathing about the significant growth in inequality in the United States which, he said, had allowed the richest to hijack the political process for their own gain.

IMF publishes on inequality

Over the last year, the IMF has published two major papers on inequality which explain its effect on growth, and how tax and spending policies can be designed to help achieve redistribution at a minimal cost to economic efficiency.

A number of participants welcomed the publication of the IMF research which have contributed to the growing consensus on the need to address inequality.

The Deputy Managing Director of the IMF, Min Zhu, said inequality could be addressed through government policies. “Macroeconomic policies matter,” he said. It was a recognition which was now routinely integrated into the Fund’s work.

“When we advise authorities in our country work, we always put jobs, and growth, and employment into...