Why an economy should grow... ?

It is always more fun to explore ideas contrary to your own, if for nothing else but to reinforce the egotistical view that fools have somehow become the dominant species on this planet. On a serious note however, opening your mind to the opposition broadens your outlook on issues and perhaps even assists in strengthening your own arguments; something that our political elite has yet to grasp.
Lately, such pursuits, trying to understand contrarian views, have catalysed a realization that economics perhaps is the only subject which has theories that seemingly provide concrete arguments for both sides of a debate, for and against. For instance and undoubtedly, everyone other than the super rich agrees that income inequality is arguably the biggest issue for global economies in modern times; but suddenly you come across a publication which argues, with graphs and charts, that income inequality is actually good for the middle and poor class!
Did you know that technology is the reason for income inequality and that what Steve Jobs made from iPhones was nothing compared to the gains which accrued to the middle and poor classes therefrom; the argument that customers capture most of the gains from value created by innovation even sounds logical, until you look at the net worth of Bill Gates! There are studies which even argue that only privately financed R&D has positive returns and publicly financed R&D has returns near to zero; makes sense until you find out who invented the internet?
Did you know that if you raise taxes on capital this would result in a decrease in investment and this redistribution will hurt the middle and poor classes more, because of lesser jobs and expensive consumption due to low innovation and competition. In fact, studies by OECD have found evidence that high top marginal rates on personal income tax reduce growth and that consumption tax actually is good for GDP growth; remarkable is it not? Albeit there is this proviso that the billionaire's of the concerned country should have earned their billions and their success should not be a result of political cronyism; statements like this makes you think whether economics is a subject which came from another planet!
And guess what, lobbies are good; this one stumped me completely. Lobbies are good because they lobby the government for tax breaks and since everyone has to pay the same taxes, competition will force the businessmen to reduce prices to the benefit of the consumers. The rich influencing political decision may even be the reason for accelerating growth. In fact business funding politicians is harmless too, since all that has done is create a political backlash that seeks to redistribute income; the fact that corporate taxes keep falling is a statistical anomaly only! Seriously, if not sent by aliens, economics definitely has a mythical construct.
Everyone should appreciate that the billionaires have worked harder for their wealth and their children have a right to their inheritance; if the Government takes that away from them there will be no innovation and entrepreneurship and hence no more iPhones. The view that wages have not grown proportionate to growth in capital is pure jealousy, and even if true it is because immigrants steal jobs from nationals rather than the rich stealing from the poor; so kick the Chinese out in the case of Pakistan at least! In fact that there are studies which even prove that wages have grown in tandem with capital, if certain seemingly valid assumptions are made. Finally, Government setting minimum wage is a disaster since people hire workers, not employers!
Trade deficits are another reason for income inequality since rather than providing savings to exporters, the masses borrow and consume imported goods. And this one makes the most sense. Imports increase the risk for domestic entrepreneurs since in most cases it would be difficult for domestic businesses to compete with multinationals which have the benefit of economies of scale and access to much larger resources. It would therefore make more sense for domestic investors to gain from trading in imported goods rather than risk their capital in manufacturing goods domestically. China is an existential threat to economies across the board.
I have yet to go through the chapter which fascinatingly debunks the moral obligation to help the less fortunate since apparently such compassion eliminates the motivation to work and is likely to be prohibitively expensive. Curiously another chapter identifies the limits of education and seemingly argues that preschool is not what it is made out to be and improvements in primary schooling may not result in growth, if a cursory review is correct. Kudos to Edward Conrad for an eye opening book!
To conclude, if economics can provide cogent reasons for having and not having income inequality, why an economy should grow or why it should not, why should there be inflation and why shouldn't there be inflation and so on so forth, then for the common man, does the economy even matter?
(The writer is a chartered accountant based in Islamabad. Email: [email protected])