US NEWS & WORLD REPORT 07/18/12
By Michael Shank

David Rosnick is spot on in “Breaking Down the Causes of Income Inequality” (07/16/12), but what about the effects of income inequality? Our research at the Institute for Economics and Peace shows that America’s high income inequality — at its highest level since the early 1900s — also strongly correlates with high rates of violence, which costs our economies even more money in terms of lost economic productivity. But don’t just take our word for it. The research of economists Richard Wilkinson and Kate Pickett at the Equality Trust, and authors of The Spirit Level: Why Great Equality Makes Societies Stronger, supports this thinking.

In fact, the economic impact of violence on the world’s global domestic product neared $9 trillion this year, according to the Global Peace Index, which, now in its sixth year, measures 23 indicators of violence from ongoing violent conflict, to safety and security in society, to militarization. That’s money lost from the direct act of violence (e.g. a homicide’s medical, police and court costs), and money lost from the fact that the person killed is permanently removed from the workforce and from constructively contributing to a society’s economic growth.

Nine trillion dollars is a lot of money lost to violence. A mere 25 percent reduction in worldwide violence would garner well over $2 trillion, a meaningful sum in an age of austerity budgets and rising debts and deficits.

For America alone, a 25 percent reduction would garner an additional $500 billion. This is no small change considering Washington’s conversation on defense cuts of a similar figure.

Reducing income inequality, then, brings additional benefits. If policymakers are willing to tackle inequality and poverty — through, among other measures, improved educational, health and economic opportunity — they will undoubtedly see savings in reduced costs associated with violence. Convincing them to do so, however, is the key.

Michael Shank
U.S. Vice President
Institute for Economics and Peace