Inequality in Economics - Research Paper Example

Economics

New York Times dated March 30, 2011, published an interesting article Inequality Is Most Extreme in Wealth, Not Income, written by CATHERINE RAMPELL in its economics section. In this article, the author’s main argument is that most of the income gains over the last few decades have gone to the very richest Americans. I strongly agree with the views of CATHERINE RAMPELL and this paper is written favor of the views and opinions of CATHERINE RAMPELL which are expressed in the above article

(Rampell)
The above chart clearly shows that around 21 percent of income was received by just 1 percent of earners. In other words, 1% of people in America control more than 1/5 th of the total income generated in America. This is a striking fact. The author argues that economic inequality is not all about how much you make — it’s about how much you have (Rampell). For example, it is quite possible that an average American makes substantial money from his profession or business. However, it is not necessary that the amount he makes may be sufficient enough for his expenditure if he may have more family members. In other words, an American who has only 3 members in his family and another one who has 5 or 6 members in his family cannot be considered equal with respect to economic equality, even if they earn the same income. The following chart illustrates this argument clearer.

(Rampell)
From the above chart, it is clear that even though the top 1 percent of earners receive about a fifth of all American income; they hold about a third of American wealth. In other words, the income received and the income controlled by the top 1% is unequal. In fact, the top 1% controls more wealth than the actual wealth they received or earned. From the above fact, it is clear that the richest people in America are able to save more than what the average American saves. The recent recession underlined the above fact. The richest people in America succeeded in escaping from the recent recession without causing much damage to their economic interests whereas the average American suffered a lot because of the recession. In other words, the savings of the average American were not adequate enough to meet any unexpected economic catastrophes.
Highest-earning Americans save more whereas the lowest-earning Americans save less. In other words, as time passes, more and more wealth will be controlled by the highest-earning people compared to the lowest-earning people which is the major reason for economic inequality in America. Along with the increasing economic power, the bargaining power and the influence of the rich people may also increase. In other words, more of the shares of the governmental subsidies, relief packages, rebates, etc will come into the hands of the rich people rather than going into the hands of the poor people. For example, President Obama has recently huge stimulus packages to help the people to come out of the economic crisis. However, the majority of the shares of these stimulus packages went into the hands of the highest-earning people. Wolf (2009) has pointed out that the stimulus plan will strengthen the economy by creating millions of good-paying jobs; delivering tax relief for 95% of workers and investing in America’s future by fixing our communities' roads and bridges, improving our children's education and making America more energy independent (Wolf). However, as per the statistics available, it is quite clear that these stimulus plans failed to generate much impact on the lives of ordinary people. When Obama proposed the 700 billion bailout package to the struggling industries in America, many people raised their eyebrows. The major share of this huge money was gone into the hands of private businessmen. In other words, Obama collected the money from the taxpayer’s pocket and distributed it to private businessmen. In other words, the rich people became major beneficiaries of these stimulus packages also. Under the above circumstances, Rampell’s arguments seem to be valid. She has also pointed out that “higher-earning Americans also have the resources to pay for better tax preparation, which helps them reduce their taxes and save even more money, and people who have already accumulated wealth stand to earn a lot in capital gains, which are also taxed at a lower rate” (Rampell)
Rampell also pointed out that income-related wealth disparities are growing steadily from the ’70s onwards (Rampell). All the administrations in the world are trying to decrease the gap between the rich and poor, at least on paper. However, in practice, the poor people are getting poorer whereas the rich people are getting richer. The trends show that. In other words, the economic systems or the administrative procedures have a lot of loopholes which is exploited by the richest people. For example, it is an accepted fact that majority of the American Congressmen are working as lobbyists for business people. These congressmen accept huge amounts of money for their election campaigns from the rich people and subsequently, they became the slaves of these businessmen. Even though the ordinary people are responsible for voting for these Congressmen, money for election expenses is coming from the rich people. Congressmen give more importance to the money donor rather than the vote donor while arguing in the policy-making bodies. Thus the interests of the rich people will be conserved always at the expense of the interests of the poor people. Thus the poor people always getting poorer whereas the rich people always getting richer which is evident from the statistics provided by Rampell.
To conclude, Rampell’s arguments about the discrepancies in the wealth distribution system in America seem to be valid. The major share of the American wealth is controlled by the rich people. Rich people always have the power, resources, and influence to sustain their interests whereas poor people do not have these things which resulted in unequal income distribution. Read More