In the Plenary Session at the top of the first day of conference, John E. Roemer criticised classical theories of economic development that focus heavily on GDP per capita as the measure of social justice. He contended that the way to measure economic development was “not through looking at GDP per capita increases but instead at the degree to which a country has equalised opportunities for the acquisition of income among its citizens.” A key indicator of economic development, therefore, is the income levels of the most disadvantaged groups.
Entitled ‘How to measure economic development‘, Roemer’s presentation critiqued existing justifications for the use of GDP per capita. Prominent amongst these was the notion that GDP per capita is not intended as a “welfare measure” but as a measure of industrial capacity. A measure that sheds little, if no, light on levels of wellbeing or economic equality inside a country.
Roemer argued that equality of opportunity should not mean that people are held responsible for the effect of circumstances beyond their control. Particularly when they affect livelihoods. He argued that social status and the wealth of one’s parents at birth were the circumstances most likely to affect one’s future income earning capacity. Examining the income distribution of wealth for children born into poor families, against that of children born into wealthy families, reveals very different income distributions.
Roemer concluded that this reflects different levels of opportunity. The Nordic countries, in particular Sweden, have shown success in equalising opportunity but developing countries in general do not have a good track record.
He denied that higher taxes for the rich discourages innovation, calling it ‘a pernicious idea’, and said that fears of capital flight and other syndromes could be prevented by greater fiscal cooperation between countries. Control of political mechanisms by the wealthy was framed as the root cause of low taxation (of the rich) in most developing countries. In such a climate there is usually little appetite for equalised income distribution and he warned that this is happening in the United States.
Roemer advocated that the task of social policy should be to decrease the gap in income distribution levels between the richest and the poorest in society. But he said such measures would most likely meet resistance from the rich and advantaged middle class. In closing, he warned that the world is in the grip of a ‘Kenynesian depression’ that requires greater stimulus to increase spending and public confidence. “Democracy will not produce justice unless it has eliminated inequality of opportunity”, he said.