Oxfam agrees with IMF on 'Redistribution, Inequality, and Growth'

The IMF has released a discussion note, authorized for distribution by chief economist Olivier Blanchard, on the damaging effect of income inequality on economic growth and supporting redistributive efforts.

Titled “Redistribution, Inequality and Growth”, the paper finds extreme income inequality harmful for the pace and sustainability of economic growth. It also makes the case that redistribution efforts – including progressive taxation tax and spending on health and education – are pro-growth.

The IMF report says:

• “It would still be a mistake to focus on growth and let inequality take care of itself, not only because inequality may be ethically undesirable but also because the resulting growth may be low and unsustainable.” (page 25).
• “The combined effects of redistribution are on average pro-growth” (page 4).

A recent report by Oxfam found that almost half the world’s wealth is owned by one percent of the population and that the bottom half of the world’s population owns the same wealth as the richest 85 people in the world.

Head of Oxfam’s Washington office Nicolas Mombrial said:

“Oxfam agrees with the IMF – extreme inequality is damaging not only because it is morally unacceptable, but it’s bad economics.”

"The IMF has debunked the old myth that redistribution is bad for growth and demolished the case for austerity. That redistribution efforts -essential to fight inequality- are good for growth is a welcome finding. Low tax and low public spending are clearly not the route to prosperity.”

“This is a green light for governments to use fair tax systems and investments in health and education to reduce damaging income inequality.”

“In the bad old days, the IMF asked governments to cut public spending and taxes. We hope this research and Christine Lagarde’s recent statements are a sign that they are changing their tune.”