Apologists for the status quo have argued that inequality must be accepted in order to attain growth. Opponents of the status quo have argued that the organization of society must be fundamentally altered to make equality possible with growth. Both, it turns out, have been wrong.
In recent decades empirical work has established that there is no general connection between inequality and economic growth. Countries that grow faster are not more unequal than countries that grow slowly. It is also apparent that there is no firm connection in the other direction – that is, equality does not necessarily lead to more rapid growth. What is clear is that equality and growth can be compatible with one another. It depends on how growth is accomplished, what kinds of institutions are established and what kinds of policies are adopted.48 Once it is clear that growth and equality are both possible and that poverty reduction depends on both raising incomes and reducing inequality, the problem becomes one of which economic strategy to pursue.
Regardless of how one defines poverty – whether in terms of people’s absolute or relative condition or, as I have advocated, a combination of relative and absolute consideration – income distribution (and wealth distribution) cannot be excluded from consideration. Just as absolute poverty is abhorrent in terms of basic human values and as an issue of social justice, so too is great inequality in the distribution of income – inequality as it exists in much of the world today.
48 I have reviewed this issue in chapter 3 of MacEwan (1999).