Some new IMF research (pdf) finds that "more unequal societies have slower and more fragile economic growth". Readers of Sam Bowles - and everyone should be - won't be surprised by this. But could it be that there's a mechanism here that is being overlooked - namely that egalitarianism helps to promote growth-enhancing policies?
Take immigration. There's decent evidence that immigration can foster economic growth by raising (pdf) innovation and productivity. Why, then, are people so hostile to it? One reason might be that they feel uncomfortable at icky foreigners talking funny. But another reason might be that they don't feel that the economic research is right. There could be three reasons for this, all arising from inequality:
1. Immigration is, as James Morris says, a "vortex issue; it it sucks in concerns about housing, wages, benefits, jobs, public services." However, if we had a more egalitarian society in which there were more and better social housing and public services, these concerns would be allayed, and so hostility to immigration would be less.
2. Trust. Voters don't trust those politicians and experts who point out the economic benefits of migration; it's no accident that populist anti-immigrant parties often pose as anti-establishment too. However, as Eric Uslaner has shown (pdf), distrust is a product of inequality; one reason people distrust politicians and experts is that they are "others". It's possible, therefore that more equality would, eventually, foster more trust in the experts who point to the benefits of migration.
3. In a class-divided society, the benefits of migration (or at least the immediate and obvious ones) accrue to the rich, in the form of cheap labour and Filipina servants, whilst the poor feel the costs. An egalitarian society, by contrast, would spread the benefits more widely. In an economy of worker coops and full employment, workers would respond to immigration less by thinking "he's taking my job" and more by "he's freeing me up to do more productive stuff."
In these ways, equality can facilitate growth by making it more likely that a growth-enhancing policy will be adopted.
I suspect the point widens. Egalitarian societies might be more likely to favour globalization and free trade, insofar as the benefits are distributed more evenly, and they are less likely to oppose technical change or creative destruction which (temporarily?) destroys jobs: Luddites, remember, only smash other people's machines.
I say all this as a response to Tim Worstall. If you really want classical liberal policies that foster growth - such as open(ish) borders, free trade and the creative destruction of market forces - you might need some form of equality as a precondition for them.