Books to Get You Thinking

Economic history and analysis can provide us with fascinating insights into the process of economic development and progress in people’s overall well-being. Over the last few centuries, while the world witnessed dramatic increases in levels of income and production, improvements in health, and declining rates of mortality, a closer look reveals growth in the concentration of wealth and income inequality. The root cause of these disparities and the ramifications for future growth and development has been the subject of intense debate and many studies. This month’s column highlights some outstanding books in the Mercer County Library System that explore facets of economic growth in different countries. They enhance our understanding of the historical factors contributing to the global trend towards inequality, and how these have been pivotal in determining the patterns and rates of growth both within countries and between different nations.

The Great Escape: Health, Wealth and the Origins of Inequality by Angus Deaton
The Great Escape: Health, Wealth and the Origins of Inequality by Angus Deaton
Angus Deaton, the Dwight D. Eisenhower Professor of Economics at Princeton University, provides an in-depth historical perspective on economic growth and development, specifically on the driving forces and determinants of the spectacular growth the world has witnessed since the Industrial Revolution. In his analysis, Angus Deaton identifies education and steady advancements in science, medicine and technology as instrumental in lifting populations out of poverty. Rising levels of income have simultaneously been accompanied by better health and increasing life expectancy rates. However, the process of economic growth has happened alongside wide disparities in the distribution of the income generated, mortality rates and the spread of education among the rich and the poor, as well as between the more prosperous countries and developing nations. Recent years have also witnessed a visible slowdown in rates of economic growth. To break the cycle of stagnation, Deaton reiterates the importance of finding ways to counteract the growing inequalities in income and health, as well as of finding real solutions to looming problems such as global warming that could become serious impediments to the future growth of economies.

Capital in the Twenty First Century by Thomas Piketty
Capital in the Twenty First Century by Thomas Piketty
French economist Thomas Piketty’s book on economic growth and distribution of income and wealth has won wide acclaim, and at the same time sparked a lively debate amongst economists and policy makers. The study is empirical in nature and is based on the statistical analysis of tax records combined with other data sources to bring new insights into the historical process of economic growth and income distribution throughout the last century. The central premise of the book is that unequal ownership of capital assets has been the driving force of inequality. The six decades prior to 1973 saw declining rates of inequality due to the two World Wars and the Great Depression. This is because rising prices coupled with high taxes to finance the two World Wars cut into wealth and capital, and the rates of return on capital fell to levels lower than the rates of economic growth. However, since 1973 this trend has been reversed as rates of economic growth have slowed down while the returns on capital have soared. Piketty suggests imposing a global tax on wealth that would help check the widening disparities in income and wealth.

The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph StiglitzThe Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph Stiglitz
Nobel Laureate and Professor of Economics at Columbia University Joseph Stiglitz analyzes in depth the issue of inequality in incomes and economic opportunities including their origins, consequences for future economic growth and a blueprint of measures that can be taken to resolve this problem. In the US, statistics reveal widening disparities over the last three decades. Inequalities in income translate into lack of education, health resources, and housing for many at the lower spectrum of the income curve. At the same time, the concentration of wealth and economic power at the top is used as leverage over political processes affecting monetary and fiscal policies as well as budgetary allocations to infrastructure, health, education, research and technology – the most critical engines of growth. Stiglitz highlights the importance of strategic economic regulators as critical in helping to ensure the efficient working of a free market economy. In the absence of such regulators, the wide disparities in income would in the long run lead to economic stagnation and a stifling of economic growth and productivity, and ultimately to an undermining of basic democratic traditions.

The Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It by Timothy Noah
The Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It by Timothy Noah
This is a compelling and lucid analysis of the factors behind the trend of growing inequality in the US over the past three decades by journalist Timothy Noah, who also gives a fascinating account of the evolving thinking amongst economists, social scientists and public policy makers on this subject. Earlier it was thought that levels of inequality would change with different stages of industrialization and economic development. However, now there is a growing consensus that several complex factors are at work that affect the relative share of income going to the wealthy as compared to the rest of the population. These factors include the failure to allocate educational resources to provide adequate skills and training to the labor force, an immigration policy that favors unskilled manpower rather than skilled labor, and minimum wages that fail to keep pace with rising inflation. Noah reiterates how income inequalities could arrest future growth and the democratic underpinnings of the American economy, and offers concrete policy prescriptions that could help reverse this trend. He advocates a more active role for public policy, including fiscal measures such as value-added taxes and a carbon tax that could replace the current system of payroll taxes.

Nita Mathur

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