Income Inequality Has a Negative Effect on Economic Growth (Name) (University) (Course) (Tutor) (Date) Introduction Income gaps have continuously varied in degree in relation the economic graph. In essence, the level of equality is argued to differ widely in the world over (Cleaver, 2013)…
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Conversely, the possibility of all the income going to one person denoted as having a Gini coefficient of 1 (Minton, 2012).Global inequality is demonstrated through income gaps that have been witnessed between individuals, where the gap between the rich and the poor has drawn closer. Therefore, income inequality has a negative effect on economic growth. Intensive Global Inequality Apparently, income equality as an extra ordinary economic development is not based on the United States of America only. Other countries in the world such as Britain, Canada, China, India, and even Sweden have experienced an increase in the national economic share to around 1 % (Cleaver, 2013). Similarly, one of the world’s famous magazines, Forbes has argued that in the United States of America, there are around 421 billionaires, Russia has 96, China has 95 and India has 48. In addition, Santiso & Blommestein, 2007 argues that the world richest man is a Mexican who is worth approximately $ 69 Billion, the largest building belongs to an Indian among other economic income disparities. In a general sense, the concentration of wealth has become part of a wider disparity in the in income distribution. This is arguably true because some parts and groups of people do not receive the share of resources. This leads to negative economic growth. Consequently, the income gap has continually varied in most countries in the world for the last three decades. For instance, the Gini coefficient in the United States of America has gone up to almost 30% from 1980 with coefficient ranging at 0.39. In China, the coefficient has increased by 50% reading at about 0.42. In the same way, Sweden has increased by around 25% read at 0.24 Gini coefficient (Jubis, 2013). However, in contrast to this, Latin America has been named as the world unequal continent since it has experienced a down ward trend demonstrated through the sharp decline of the Gini coefficient (Dicken, 2010). In light of such deliberations, it is correct to argue that the income gap leads to negative economic growth. This assertion is true because people with low income would not be in a position accomplishing all their needs. Income Inequality as the ‘Delay Factor’ to Recession Recovery It is argued that income inequality has become a barrier or a slowing factor towards the recovery of the great recession. A recent debate economic contraction has given a vivid picture on the level of income inequality in the economic development. In light of this, two liberalist economists have given their contribution toward this debate (Stevenson & Duch, 2008). According to Stigliz, the economic inequality is preventing the recovery of the global recession due to numerous reasons. To begin with, the liberal economist argues that the middle class is not capable of giving support to consumer spending, which has driven the growth of the economy for the longest period (Stevenson & Duch, 2008). For this reason, most people in the United States of America cannot manage to pay education for themselves and their children. Moreover, Stigliz articulates that the enormous lack of income from the middle class has led to the lack of tax payments a situation that is associated with frequent and more severe cycles of income inequality (Jubis, 2013). It is apparent that with low income, some people would not be able to revive any economic activities within
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