Growth with equality of opportunity

Prime Minister Imran Khan has termed creation of wealth imperative for alleviating poverty from the country, saying businesses must prosper to achieve this objective.
"We are taking measures to ensure atmosphere conducive for the business community," the premier said while addressing the Pakistan Economic Forum in Islamabad on Thursday last. "If businesses prosper, poverty will be alleviated."
PM Imran added, "We need to dispel the notion that creation of wealth is inappropriate; it can, in fact, help eliminate the scourge of poverty."
One would not like to disagree with the PM as long as his proposed policy does not promote laissez- faire economy, a free-for-all, underpinned by deregulated markets based on the motto: "greed is good'.
Also, one would ardently hope that when he says creation of wealth would help eliminate the scourge of poverty he does not mean he wants to reduce poverty through what is called the trickle-down economy. According to this theory, when you allow the rich to become richer, there would be more jobs.
There is no reason to believe that giving more money to the wealthy would lead to more investment. Nobel laureate Joseph E. Stiglitz in his book The Price of Inequality says 'The same old 'myth' that we should celebrate the wealth of those at the top because we all benefit from it has been used to justify the maintenance of low taxes on capital gains. But most capital gains accrue not from job creation but from one form of speculation or another. Some of this speculation is destabilizing, and played a role in the economic crisis that has cost so many jobs.'(Page XVII).
Here are some relevant quotes from a column (Why inequality matters?) by one of the world's leading economists, Branko Milanovic (Senior Scholar at the Luxembourg Income Study Center, and Visiting Presidential Professor, Graduate Center, City University of New York) published in World Economic Forum's The Agenda Weekly dated December 14, 2018:
"The relationship between inequality and economic growth is one of the oldest relationships studied by economists. A very strong presumption was that without high profits there will be no growth, and high profits imply substantial inequality. To invest you have to have profits (that is, surplus above subsistence); in a privately-owned economy it means that some people have to be wealthy enough to save and invest, and in a state-directed economy, it means that the state should take all the surplus.
"The argument here is about a seemingly paradoxical behavior of the wealthy: they should be sufficiently rich but should not use that money to live well and consume but to invest. For us, it is sufficient to note that this is an argument in favor of inequality provided wealth is not used for private pleasure.
"More recently, with much better data on income distribution, the argument that inequality and growth are negatively correlated has gained ground. Inequality may be good for future incomes of the rich (that is, they become even richer) but it may be bad for future incomes of the poor (that is, they fall further behind). In this dynamic framework, growth rate itself is no longer something homogeneous as indeed it is not in the real life.
"Why would inequality have a bad effect on the growth of the lower deciles of the distribution? Because it leads to low educational (and even health) achievements among the poor who become excluded from meaningful jobs and from meaningful contributions they could make to their own and society's improvement. Excluding a certain group of people from good education, be it because of their insufficient income or gender or race, can never be good for the economy, or at least it can never be preferable to their inclusion.
"High inequality which effectively debars some people from full participation translates into an issue of fairness or justice. It does so because it affects inter-generational mobility. People who are relatively poor (which is what high inequality means) are not able, even if they are not poor in an absolute sense, to provide for their children a fraction of benefits, from education and inheritance to social capital, that the rich provide to their offspring. This implies that inequality tends to persist across generations which in turn means that opportunities are vastly different for those at the top of the pyramid and those on the bottom. We have the two factors joining forces here: on the one hand, the negative effect of exclusion on growth that carries over generations and on the other, lack of equality of opportunity (which is an issue of justice).
"High inequality has also political effects. The rich have more political power and they use that political power to promote own interests and to entrench their relative position in the society. This means that all the negative effects due to exclusion and lack of equality of opportunity are reinforced and made permanent (at least, until a big social earthquake destroys them). In order to fight off the advent of such an earthquake, the rich must make themselves safe and unassailable from "conquest".
"This leads to adversarial politics and destroys social cohesion. Ironically, social instability which then results discourages investments of the rich that is it undermines the very action that was at the beginning adduced as the key reason why high wealth and inequality may be socially desirable.
"We therefore reach the end point where the unfolding of actions that were at first supposed to produce beneficent outcome destroys by its own logic the original rationale. We have to go back to the beginning and instead of seeing high inequality as promoting investments and growth; we begin to see it, over time, as producing exactly the opposite effects: reducing investments and growth."
Global Inequality, a book authored by Branko Milanovic shows that even as inequality has soared within nations, it has fallen dramatically among nations, as middle-class incomes in China and India have drawn closer to the stagnating incomes of the middle classes in the developed world.
For those who want to understand how we got where we are, where we may be heading, and what policies might help reverse that course, Milanovic's compelling explanation is said to be the ideal place to start.
And put the matter in its proper context here is another relevant quote from The Price of Inequality: "Government investments - in infrastructure, education and technology - underpinned growth in this century. These investments will expand the economy and make private investment even more attractive. As the economic historian Alex Fields has pointed out, the decades of 1930s, '40s, '50s and '60s were periods of high productivity increases - higher than the decades before and after - and much of this success had to do with public investment" (Page 354).