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The keynote speech at the 24th IPSA World Congress of Political Science in Poznań, Poland on 28th of July 2016

Leszek Balcerowicz

The keynote speech at the 24th IPSA World Congress of Political Science in Poznań, Poland on 28th of July 2016

Institutional Systems, Policies, Inequalities

I. Introduction

1. "Inequality” refers to very important aspects of social life. But the debate on equality is full of confusion because of its many meanings, methodological and empirical errors and very strong emotions which “inequality” evokes.

2. Conceptual confusion includes the lack of precise distinction between the inequality of situation (income, wealth, power) and the inequality of opportunity. In the discussion of the former the “capitalistic” inequalities of income and wealth are emphasized while the “socialist” inequalities in political power are usually neglected. To be sure, large inequalities in wealth may contribute to the inequalities in political power. But the most extreme and extremely dangerous concentration of political power (Stalin, Mao, Pol Pot, Castro) were not linked of the concentration of wealth.

3. Reducing income inequality should not be confused with the eradication of poverty. Some persons worry that there are too many rich individuals while other persons worry that these are too many poor people. Both the motives and the policy recommendations of these two groups of persons differ very much. Trying to reduce the top incomes does not always help the poor. The most important reason for the existence of poverty in the world are anti-market regimes (socialism, oligarchic capitalism etc.). And there is no good substitute for the market-oriented reforms of those systems.

4. Some errors are due to the lack of a comparative analysis of the questions of freedom and inequality in the various institutional systems (see sec. II). Lamping together many countries with different regimes and making simple correlations is likely to lead to the misguided conclusions and wrong policy recommendations. Correlation should not be confused with causation.

5. Much of the debate on inequality is Western-centric, ignores the global issues and focuses on the losers in the developed world. This narrow perspective can lead to morally dubious conclusions, i.e. recommending protectionism to help these losers. Such an attitude ignores the basic fact that globalization in conjunction with the market reforms in China, India and some smaller counties, has accelerated their economic growth and – thus – radically reduced the cope of poverty. And the appearance of the losers in the developed world has been due not only to globalization but also to the nature of the contemporary technical change (IT technology) linked to pockets of deficient education in the developed economies, hampering the adjustment of the skills and the restructuring of the economy.

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4liberty.eu, 02.08.2016: Institutional Systems, Policies, Inequalities