On 1) You don’t dismiss literature on gearings and you are clearly speaking about the aggregate. But logically to speak only of the aggregate is to dismiss the literature on, to use another term, disparate economic spheres (or to use another, asymptotic economic trajectories).
To reiterate my initial point, there has been much growth over the last decade in certain economic spheres — especially those involved with or with close affiliations with the financial sector — this would mean those who already had substantial capital or those who had easy access to it. This would be the top quintile (though I am making some basic assumptions here).
My argument here then is that it may not be very useful to have an economic discussion from the point of view of aggregate GDP or other related metrics. Perhaps most economic thinking is too simplistic in this light — certainly from the government’s perspective. For what needs to be more prevalent is closer study of the separate economic spheres, each in its own right, and then in a full relational sense.
Though you are concerned with the US, the case of China pre-09 is a helpful one. Aggregate growth was approx. 15% for a number of years — a phenomenal rate of growth. However, the primary beneficiaries of this growth was a small percentage of the population. The Gini coefficient rose to an unprecedented height in 2009. It was at its lowest in 1982 prior to the enormous growth surge that characterized the next 25 years. Much of this disparity is attributed to the disjunction between urban and rural policies (and that fact has some bearing on the US situation). Regardless, it’s an interesting example of how aggregate growth may be a) undemocratic in a broad sense and b) anti-utilitarian (if the latter’s moral principles are in any way a matter of concern). My point here is that growth alone is no panacea.
But that is China; but just because it is China that does not mean to say the dynamics are not applicable here.
Turning to the US, the 1950s and 60s were an era of great expansion and the Gini then was much lower than at present. So, in effect to support your thesis, growth and a low Gini are not incompatible in the US. However, during this expansion monetary policy was very different from today’s very liberal policy. Also, there was more regulation of the financial sector, which under Reagan would begin to be deregulated more and more.
There is an interesting paper that addresses financial sector growth and aggregate growth (http://www.bis.org/publ/work490.pdf). Indirectly, it supports your point in that it shows how growth in a particular sector can reduce aggregate growth. Here I’m in danger of arguing against myself. But that’s okay.
The point about your 4 options and the proportionally incremental model of wealth distribution you advocate would theoretically have the effect of enhancing growth by reducing the availability of the money supply to the financial sector. But only if we assume that unlike China 1980–2009 and unlike America 1890–1929 other sectors’ and interests’ demands are not made on the money supply. China again comes to mind in that its growth resulted in a high Gini and if the premises of the BIS paper are correct there would have been no financial sector boom — partially because the banking system during those years was completely controlled by the state.
One way to think about your ideal option is to see it as an emulation of the distribution process (intended or unintended) of the 50s-60s era ( which is interesting because many high-level policy makers were born during this era and may have benefited from its broad social advantages — the University of California for example was free; today I believe undergrad tuition is approx 11,000/yr).
Finally, if all of the above is true the question is whether the model you propose is achievable by increased growth in the aggregate or simply by reducing growth in certain sectors through regulation and monetary policy. But the choice may be a false one since the paper above if true means that future growth is attainable simply by exercising the latter measure; the consequence of that latter measure would most likely mean more access to the money supply for other sectors.
[I am still thinking about point (2).]
