Why do we talk about growing the pie?

There are two ways of reducing poverty.  One way is to take wealth away from the wealthiest group of people and redistribute it to the least wealthy.  The other way is to generate economic growth.

Advocates for redistribution of wealth point to the pie chart above which shows that the bottom 20% of population in America shares only 3.4% of the nations wealth, while the top 20% of population in America shares more than 50% of the nations wealth.

Advocates for economic growth point to the bar graph above.  It shows that the average share of total income received by the poorest 10% of the population in the nations in the top 20% (represented by the dark green bars to the far right), was 2.8% in 2004.  For the poorest 20%, the average income share in nations in the top 20%  was 7.5%. For the bottom 20%, the poorest 10% received an average of 2.2% of their country’s total income and the poorest 20% received an average of 5.5%.

Regardless of whether the difference in share percentage among groups is statistically significant, it is clear from the graph that the share going to the poor is larger in the wealthy nations. The shares are smaller in the groups that included countries with lower per capita incomes, indicating that even in terms of income distribution, the poor do better in rich countries.

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