Inequality Inefficient

States with more unequal income distributions devote large shares of their economic resources to "guard labor" (i.e. keeping other people in line) that could otherwise be used to produce goods and services. The lassiez-faire idea that income inequality is necessary for growth isn't supported by the empirical evidence.

Scandinavians and the Japanese, for example, have far less income inequality than the United States during their periods of rapid economic growth.

I suspect that the apology for inequality as a necessary component of growth was a response to communist economic stagnation during the Cold War. But, excessive centralization of decision making may, in hindsight, have been the greater problem in the Soviet bloc.