Inequality, like water for a plant


LETTER TO THE AGE, MELBOURNE

Your readers - and indeed your leader writers - seem uniformly to believe income inequality, bad; income equality, good.
Allow me to dissent.
China of the seventies cured me of this absolutist view.
When I first went to live there (1975) it was a very equal economy. From top leaders to factory workers all earned pretty much the same - about $50 per month. This gave it a low (ie "good") Gini index 0.24.
Since then it has opened up its economy and boomed.
According to the World Bank, more than 500 million people were lifted out of extreme poverty as China's poverty rate fell from 88 percent in 1981 to 6.5 percent in 2012.
But as this happened inequality increased to give China a higher (ie "bad") Gini index of 0.46.
Someone has noted that inequality in an economy is much like water for plants. Water is needed, but too much and the plant drowns.
And so for our economy. Unless we want the stultification of communism, some inequality is needed. Just not too much. Therein is the rub. But what seems certain is that it's not an absolute all or nothing.
P F etc...

LATER: This was run the on the 26th January in The Age

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