Professor Danny Quah, Dean of the Lee Kuan Yew School of Public Policy (LKYSPP), conducted a lecture for the Master in Public Administration and Management (MPAM) class on 25 March 2022, titled "From Leaky Buckets to Common Prosperity: The Challenge of Social Unrest".
Before presenting a new framing of issues like income inequality, he first shared a candid and brief overview of his education journey – having completed tertiary education in the United States before teaching in London, now Li Ka Shing Professor in Economics and Dean at LKYSPP. He applies his research interests in income inequality, economic growth, and international economic relations across various topics such as the rise of the east, global power shifts, and alternative models of global power relations.
He highlighted the prevalence of issues such as income inequality across all political systems and stages of development. This was evident in the Confucian thinking of “fret not poverty but the unequal distribution of wealth”, while both Pope Francis and US President Obama had spoken about reducing income inequality. The tension between equality and efficiency has always found sufficient political interest in almost all nations across all political systems.
Today, the trade-off enters the political lexicon in the form of hostility towards Big Tech multibillionaires, international tax evasion, and Wall Street's financial capitalism.
On the other hand, citizens hope to see their governments enact strict antitrust laws and reinforce supervision and regulations, enabling workers and consumers to have greater say in company operations and distribution of earnings. In fact, this has been part of mainstream policy thinking dating from 1975 with Arthur Okun's “leaky bucket”, long before the emergence of smartphones, Big Tech, and financial oligarchs, or the obsession with the wealthiest and poorest 1 per cent.
Prof Quah emphasised, contrary to popular belief, that the latest empirical research has revealed that greater equality is not a barrier to growth. In the same vein, greater inequality is not an obstacle to improving the well-being of the disadvantaged in all societies. He went on to present further data on how, apart from a small group of economic systems, greater inequality comes with improvement in incomes of the poor and vice versa.
To sum up, inequality does not prevent the poor from becoming better off. Unfortunately, the United States is a remarkable exception; it is one of the nations where greater inequality leads to the poor becoming poorer. What is even more unfortunate is how significantly the US impacts our perception and thinking, which leads us to wrongly assume that the US experience is also the reality in our own societies.
Prof Quah stressed that income inequality is a challenge across all political systems. However, are we barking up the wrong tree by perceiving income inequality to be the danger we commonly say it is?
What the disadvantaged truly need is to break away from absolute poverty by having access to sufficient resources. Overemphasis on issues such as income inequality will only obscure damage to economic growth, causing further harm to the well-being of disadvantaged groups.
In fact, impetuous attempts to reduce income inequality will destroy wealth much faster than create it. The “leaky bucket effect” will also weaken the impact of government transfer payments. Development is the solution to all problems and the cornerstone of common prosperity. This is in line with Deng Xiaoping's view that "development is the hard truth".
Responding to many eager students’ questions during the Q&A session, Prof Quah advocated the need to bring to justice those who become wealthy through illegal means and thereby worsen inequality. The law should be equally enforced; it must not be used to prosecute just those people whom you dislike. He added that there is a need to move away from a narrow, zero-sum thinking to achieve win-win situations on higher levels.
Innovation is key to creating social wealth but be careful not to dampen entrepreneurial enthusiasm in the attempt to reduce inequality with band-aid solutions. Rather than focus on income inequality, public policy should pay more attention to equal opportunities and power control to maintain social mobility and cohesion. The Trump administration's pursuit of populism will cause long-term damage to global economics, hindering low-income earners from realising poverty reduction.
Prof Quah's lecture provided a fresh, insightful and unique perspective on issues such as income inequality while exercising a subtle influence for academic rigour in scholarly research. Displaying strong academic integrity in the rigorous pursuit of truth while exuding a childlike affection for Asia, he encourages rethinking and new understandings of public policy among the students through heuristic interactive teaching, evoking ambitious and enthusiastic resolve towards research and practice of public administration.