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Looking at the ranking of countries by Gini index there appears to be a  correlation between high inequality and low economic performance which confirms your basic thesis.  However rapid increases in average GDP/Capita also seems to correlate with increasing Gini within a nation.  Whether this is a temporary phenomenon which occurs during a growth spurt and which stabilises as an economy stabilises (and the increased income is gradually re-distributed) is an interesting question, and one which I do not have the data to answer.

However the clearest correlation appears to be between a high degree of correlation between democratic political development and lower inequality as it takes strong governance answerable to the greatest number for income redistribution to be enforced through the state.

As capital is a lot more mobile than people it is natural for capital to gravitate to areas of lowest re-distribution - e.g. tax shelters and trading hubs such as Singapore - thus giving the appearance of a correlation between aggregate wealth and low regulation/re-distribution.

Only a system of global re-distribution/governance can prevent capital flows from systematically reinforcing inequality.

notes from no w here

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Jan 11th, 2009 at 10:14:37 AM EST
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