Size, Efficiency and Equality: Successful Cases in the Global Economy

Jul 31 2017

The growth of inequality in OECD countries has a long history, and the recent economic crisis has only confirmed this trend. The high level of economic inequality occupies a central place in the political agenda of governments and in the concerns of ordinary citizens, who see it as a potential threat to social peace, political stability and economic security and progress. Relatively unequal countries (such as the USA and the UK) coexist alongside societies where income is distributed far more equally, such as Norway and Denmark.

In this work, we focused specifically on analyzing countries which enjoy the highest levels of equality and high levels of prosperity. Whether by coincidence or not, nine of the ten of these countries (all of them European) are small countries (less than 20 million inhabitants), Germany being the exception in our sample of countries. The results of our study clearly contradict the claim that small states are doomed to irrelevance in the global economy. In fact, some of these small states are among the best at managing their economy, which means they can offer their citizens better deals in terms of economic welfare.

Our analysis shows that all ten countries have equal distribution of income, however, they follow different paths to attain this goal. Some countries like Switzerland choose to promote equality through market income creation with high employment rates and few incidences of low wages. Other countries such as Belgium and Germany use systems of redistribution, which allows them to correct market incomes that are relatively unequal. Finally, the most egalitarian countries in terms of disposable income (Denmark and Norway), combine powerful redistribution mechanisms with an efficient labour market.

Growth of inequality is not inevitable. It is a complex phenomenon, which is largely attributable to the major restructuring and austerity that has taken place in the global economy over the last forty years. Many experts point to technological change and economic globalization as two of the main factors responsible for the changes in income distribution.

Economic policy makers face the enormous challenge of ensuring that economic growth and wealth generation are inclusive. They need to pay particular attention to measures that can foster a fairer distribution of income and one which ensures high levels of equal opportunities for all members of society.


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