Economic Growth and Equity: Complements or Opposites?

There is no automatic mechanism in a market economy to guarantee reduced inequality of income with growth. Some theories lead us to expect just the opposite. At best, there are self-limiting cyclical effects, associated with changes in unemployment. U.S. economic growth has actually been quite slow since the 1950s. Besides, there are structural barriers to reduced inequality that operate with or without growth. Historical evidence for different countries presents a mixed picture. For the U.S. economy, postwar growth has been associated with an upturn in measured inequality. Government intervention has been mildly equalizing, through transfers and expenditures but not through taxes.