Ms. Rand, Meet Singapore. Mr. Hayek, Meet Norway.
Posted by: Mark Gimein on October 24, 2011 at 12:45 PM
Is rising inequality the price of rapid economic growth? Advocates of deregulation often argue that the increasing concentration of wealth is driven by greater rewards going to innovators and entrepreneurs who drive the economy forward.
But is this kind of trade-off really a given? Not really. Above, you can see a chart of per capita income in the United States and two countries, Norway and Singapore, that have enjoyed a long period of sustained expansion. Based on World Bank data it tracks per capita income from 1980 to the present—a period in which Norway and Singapore became two of the world’s wealthiest nations.
Below is a chart of the share of income going to the top 1% of earners, for the same three countries. This comes from the World Top Incomes Database, a goldmine of information on wealth around the world. In both Singapore and Norway, the share of income going to the top percentile has risen—but much less markedly than in the United States. In Norway it generally stays at half or less what it is in the U.S. (except for a brief jump in 2004 and 2005 that comes from a rush to take capital gains in advance of a 2006 tax change).
Certainly there’s a lot more data that could be brought to bear here. The Singapore income share data ends in 2005, and doesn’t include several years of strong growth. Oil is a major component of the Norway’s ascent. Both are small countries, and neither is really a model for the United States. Still, they are instructive. In parts of the world—China, Russia since the fall of communism—economic growth has been accompanied by stunning disparities of wealth. That doesn’t mean the two have to go together.
