A large body of evidence is now emerging to suggest that both assumptions should not be taken for granted.
Over the long haul, countries that have managed to limit excessive inequality are countries that enjoy both faster growth and more sustainable growth. The latter is particularly important: what enables poorer countries to close the frontier with industrialized nations is not the ability to initiate growth, but rather the ability tosustain reasonably high growth over periods of many years, or even decades. Many things can help here – openness to trade, openness to foreign direct investment, political stability, and macroeconomic stability (keeping inflation and fiscal deficits moderate, and avoiding boom-bust credit cycles) – but what we are learning is that one critical ingredient in this mix, a key part of the pantheon as it were, is keeping inequality under control.
A large body of evidence is now emerging to suggest that both assumptions should not be taken for granted.Over the long haul, countries that have managed to limit excessive inequality are countries that enjoy both faster growth and more sustainable growth. The latter is particularly important: what enables poorer countries to close the frontier with industrialized nations is not the ability to initiate growth, but rather the ability tosustain reasonably high growth over periods of many years, or even decades. Many things can help here – openness to trade, openness to foreign direct investment, political stability, and macroeconomic stability (keeping inflation and fiscal deficits moderate, and avoiding boom-bust credit cycles) – but what we are learning is that one critical ingredient in this mix, a key part of the pantheon as it were, is keeping inequality under control.
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