This will, of course, be a complete shock to neoliberal economists. The whole logic of their approach is that without the differential of inequality then there is no incentive for growth. This study shows that is not just not true, but that the reverse is true.
Actually, to anyone with an understanding of both human nature and economic reality (neither apparently possessed by neoliberal economists and so absent from the assumptions which automatically lead to the conclusions of their work) this finding is glaringly obvious.
Wondrous. He takes a paper that says that modest action to remove glaring inequality is a pretty good idea and then uses it to insist that therefore we should reduce all inequality.
It’s worth noting that the database used in the paper does not include the Soviet block, either the USSR in the 1920s or Eastern Europe post WWII. You know, when very strong efforts were made to reduce inequality and these had something of an impact upon growth?
It gets better though:
Let’s deal with the economics first. Reduced inequality inevitably means a broader base of ownership for capital. That means more people have access to opportunity to create businesses and unsurprisingly increased growth will follow.
The IMF paper is a study of income inequality, not wealth inequality. Thus access to capital has nothing to do with it at all.