Predatory Lending

ates for a few years" but "longer growth spells are robustly associated with more
equality in the income distribution."
An OECD study in 2015, found that internationally "countries where income inequality is
decreasing grow faster than those with rising inequality", and noted that "a lack of
investment in education by the poor is the main factor behind inequality hurting growth"
A 2016 meta-analysis found that "the effect of inequality on growth is negative and more
pronounced in less developed countries than in rich countries".
A 2017 study argued that there were both positive and negative effects of inequality:
"When inequality is associated with political instability and social unrest, rent seeking
and distortive policies, lower capacities for investment in human capital, and a stagnant
domestic market, it is mostly expected to harm long-run economic performance, as
suggested by many authors. Accordingly, improving income distribution is expected to
foster long-run economic growth, especially in low-income countries where the levels of
inequality are usually very high. However, some degree of inequality can also be good,
as has been theoretically argued in the literature and as empirically suggested in this
study. A degree of inequality can play a beneficial role for economic growth when that
inequality is driven by market forces and related to hard work and growth-enhancing
incentives like risk taking, innovation, capital investment, and agglomeration economies.
The challenge for policy makers is to control structural inequality, which reduces the
country's capacities for economic development, while at the same time keeping in place
those positive incentives that are also necessary for growth."
Mechanisms
According to economist Branko Milanovic, while traditionally economists thought
inequality was good for growth
The view that income inequality harms growth – or that improved equality can help
sustain growth – has become more widely held in recent years. ... The main reason for
this shift is the increasing importance of human capital in development. When physical
capital mattered most, savings and investments were key. Then it was important to
have a large contingent of rich people who could save a greater proportion of their
income than the poor and invest it in physical capital. But now that human capital is
scarcer than machines, widespread education has become the secret to growth.
"Broadly accessible education" is both difficult to achieve when income distribution is
uneven and tends to reduce "income gaps between skilled and unskilled labor."
The sovereign-debt economic problems of the late twenty-oughts do not seem to be
correlated to redistribution policies in Europe. With the exception of Ireland, the
countries at risk of default in 2011 (Greece, Italy, Spain, Portugal) were notable for their
high Gini-measured levels of income inequality compared to other European countries.
As measured by the Gini index, Greece as of 2008 had more income inequality than the
economically healthy Germany.
Page 62 of 181