I can understand Stiglitz's argument that inequality stops economic growth by lowering efficiency. But what if a country is only starting to develop? If everyone is equally impoverished, the person who takes that first leap into investment in capital will get more returns. If one person invests in a cement truck to make a village's first road, those employed by him to build the roads benefit, and those who are able to transport goods more easily after the road is built benefit from his investment as well. Though one person is now richer because he invested in infrastructure, everyone is better off in the short run and the long run.At what point does this process become those who have all the money exploiting those without it? Where is the tipping point that gives the rich enough power to influence government policy and start the spiral to inequality like that found in the US? We should identify this and stop it from happening in the developing countries.
Good questions...I am not sure that i accept the premise that their is some sort of "tipping point", rather i am inclined to recognize that human nature shows us that their will always be individuals who try to get ahead of the competition. A problem is when business learns to work together with and use the power of government monopoly of legal force to aid them in this process. In the same way that many can see the logic behind the separation of church and state, why not when applied to business and government? What Jamie Dimon doesn't worry about in the following link gives insight into the nature of the relationship; regulation used as a means for increased barrier to entry; the antithesis of what Stiglitz said in this interview (in roundabout fashion). This would seem likely to help those with an existing wealth concentration as their are less threats of entry possible. Larger businesses use the advantage of economies of scale to absorb the increased costs of compliance with new regulation that smaller business financially are not able to do. This fits in nicely as to why the "spiral to inequality" continues, since start ups in no shortage of various industries would theoretically spring up to help break the chains of this type of inequality absent redundant laws that help restrict competition. http://www.businessinsider.com/the-four-things-that-worry-jamie-dimon-2013-2#ixzz2JwOrqfGg
After reading Ms. Biehl's post...I ran into some reading on the "economic losers hypothesis" (and "political losers hypothesis").It deals mainly with technology barriers for developing countries in the form of "losing parties" should new technologies be introduced. The main form of loss for these parties would be economic rents or political power. Granted, it seems political power is the necessary condition for a technology block, as economic rent holders may not hold the power to block new introductions; nevertheless, the change in the region's economic landscape would likely have political ramifications (for the "losing parties"). There are also conditions where these parties may end up as "winning parties" by benefitting from a technology change, assuming an arrangement with the technology provider can be made.For those of you who just can't get enough game theory in economics, check out the 'technology block decision' model in this paper:http://www.econ.nyu.edu/user/debraj/Courses/Readings/AcemogluRobinsonLosers.pdfSo, can anybody think of real life examples of this situation?
http://www.aljazeera.com/news/asia-pacific/2013/01/201311853244143303.htmlAlso a more unrelated article but worthy of being up to date. http://www.guardian.co.uk/world/2013/feb/12/china-north-korea-nuclear-test