Economic Inequality in the United States - Essay Example

Section The impacts of the wealth inequality have always been viewed and analyzed in moral sense and in those terms the wealth and income inequality has been termed as a moral evil and not a social or an economic evil. But the fact of the matter is that it is quite more than that. The Nobel Prize Winning economist, Robert J. Shiller is of the view that the rising inequality in terms of wealth, income and resources in the United States and anywhere else is the biggest problem and should not be treated lightly. Here let us look at some of the effects or impacts of the economic inequality amongst the masses on the economy of the country as a whole. But first, let us analyze the condition of the U.S wealth distribution at the moment. According to a report published by the economist, the top 0.01% of the US consisting of some 16,000 families have full control over $371 billion. That is more than 11% of the total wealth of the US. This is the highest rate of inequality recorded and it was met once before in the year 1916. Taking a wider parameter into consideration, the top 0.1% of the US, which consists of some 160,000 families have control over the 22% wealth in all of US. This makes about $73 million per house hold. The surprising and tragic fact is that this amount of wealth is also equal to the total amount of wealth controlled by the bottom 90% of the U.S population. Now let us describe the indirect impact and effects of these inequalities in the economic growth of the country. These unequal distributions of wealth and income are mostly seen in a capitalist country. Therefore the haves get richer and the have nots get poorer day by day and ultimately, the inequality leads to unemployment of a huge load of persons every day. Now unemployment can directly hurt the economy of a country. Let us explain the phenomenon here. Unemployment is not merely that simple an issue as it seems, it is a waste of the resources. Apart for being that, it also has the tendency of generating redistributive pressures. These would then lead to the subsequent distortions which would ultimately drive people to poverty. It would also be a catalyst in eroding the self esteem of the have nots and ultimately, the problem would be led to unrest, social dislocation and conflict, about which it is safe to say that it would damage the economy. The economic inequality would also lead to many social conflict situations like monopolization of resources. For instance, the labor force is taken into consideration. The monopolization would be such that there would be fewer employers in the field and they would require only a limited amount of workers. This would help the other employers to exploit the fact of the lack of competition. This would affect the market such that the consumer would have no choice and the higher rates would be paid. Similarly, in all other sorts of resources, the monopolization would come into play to affect the economy adversely. It is notable to quote here that after keen observation, one is inclined to believe that economic inequality and the distinction of classes of people into elites and the masses was a very important factor in the fall of some of the civilizations like Roman Empire. Now talking about the direct impact on wealth inequality on the economic growth, the International Monetary Fund’s economists suggest that the inequalities in the wealth and the income are negatively and adversely affecting the economic growth when considering them in correlation to each other. According to them, the main reason behind it is that a strong demand would be arisen from the society for the redistribution here the most of the population does not have access to the resources which are more productive in nature. As the economic gap between the rich and the poor widens, they grow apart in their habits and resources, theur cultural and customary differences increase and as a result the gap between them would grow to such an extent that the idea and the demand of the redistributive tax and the spending policies enhance. Apart from these facts and logical arguments, the authority that specializes and regulates the economic issues, the organization for economic co-operation and development (OECD) is of the view that there has been experienced a reduction in the economic growth of a country as well as the whole economic growth speaking internationally when the wealth of the globe or a state is concentrated in a limited few individuals or entities rather than equal or atleast just proportionate distribution. Another factor which may be considered to be indirect according to some views is that the crime rate of a society tends to increase when the economic inequality persists and the wealth distribution is unfair. Now the question arises that this rising of crime rate in a society may be harmful to the peace and tranquility situation in a society or even harmful to the executive to some extent but how is it related to the economic growth in a society? The answer to that question is quite simple. A major part of economy of a country depends on the foreign trade if the particular country and therefore the economic growth is directly proportional to the reputation of the state internationally, as the foreign trade is directly correlative with the international reputation. Now let us consider that the inequality of wealth and the income has increased to such a great magnitude that the crime rate increases accordingly. The international reputation of the country or state will be adversely affected accordingly and hence the foreign trade would be affected in the negative sense which would then indirectly affect the economic growth. Section 2 Now as it has been established that the impact and effect of the economic inequality as well as unequal wealth distribution is huge, let us now discuss what are the ways, by the virtue of which these impacts and effects can be avoided. After careful consideration and keen observation, the following are some of the ways which are thought to be controlling, removing or reducing the effects and impacts of economic inequality and unequal distribution of wealth: The first and one of the most fundamental and important solution to the problem is by raising the amount of minimum wage of the working class. That too of the lowest paid working class. This will have a very positive impact on the economic growth of the country. The logic behind that is that the most of the population of the country that receives wages or works for a salary is the lower class of workers and if their wages would be increased the total amount economy would be positively affected. Take for instance the case of US. The total amount of the lower class workers that would benefit from this increase in wages would be more than 4.5 million according to a survey. And the total amount of economic improvement would be round about $ 2 billion, if the policy is sanely adapted and the minimum amount of wage that has been increased would be more than $ 10. The most beneficial fact about this policy is that it would hurt neither the employer nor anyone else. The government can set a minimum amount of wage and throughout the country that should be followed in order to implement this policy. The second most effective way out of the problem we found was by increasing the amount of tax on the earned income. This would not only affect the conomy in an indirect manner but practically, the inequality would be reduced and controlled. But it should be kept in view that the amount of tax increased should be reasonable and the increase should be imposed on the elite. That can be done by observing and working out by surveys that what is the average income and wealth of an elite class member. Then the imposition should be made keeping that average as a minimum requirement for the increase to be applicable. This could help the economic growth by a huge factor and many families could be brought out of the poverty circle. Once again if this policy is going to be implemented, it should be implemented after taking in consideration the said facts otherwise, it would not only go towards failure but it would create more problems for the poor. Another important indirect factor is by investing in the education. There are innumerable examples of the countries where there is political and economic inequality and it was said to depending upon the literacy rate. But after that country had taken notice of this fact and started working on the literacy rate and investing on the education, the economic growth took a 180 degree turn from worst to best. It is true that it would be a gradual process to invest in the education and then expect economic growth towards the north but then again, if one waits, the fruit one bears is the sweetest. Therefore investing in the education of the country is another way of going about it. Once again, if this policy needs to be implemented, there should be some checks and balances and the result should be fool proof as if the corruption in the general sense hits this department too, then the economic growth would be turned into economic depression. Similarly if the education system introduced is targeted at providing cheap education to the lower middle class as well as the lower class and not raising the expenses that only the elites would be able to benefit from the system, only then can this policy be successful. Moreover when elaborating the tax distribution and the taxation system development, one is inclined to suggest the principles of tax distribution on the basis of vertical and horizontal equity. Now to understand this concept of equity, one must take two situations, one when there are more than one persons who are equally capable of earning the same amount of money and are almost equally wealthy. The second situation is where the persons are not equal when speaking financially and in terms of their resources. In the first situation, the doctrine of horizontal equity will come into play. This means that if the resources of the individuals are almost equal and their income is the same then the same amount of tax would be imposed on them regardless of the influence one has or due to some position one holds. The second situation would then support the doctrine of vertical equity in terms of tax distribution as the taxes imposed would be of different amounts based on the principles equitable justice. If this process is complied with by utter fairness and not keeping in view the influences, the economic growth would be affected positively and the inequality would be further removed. Apart from the tax distribution tactics, there are a number of individuals, entities, organizations and artificial persons who evade the taxed and have found the loop holes in the taxation system. These problems should be met with instantly if there is to be any hope of removing the inequality of wealth and income. And lastly, the problem that should be looked after by the government and the policy makers is to reduce the unemployment by any means possible. A report published by the International Monetary Fund suggested that the unemployment is the base and root of most of the evils, both social and economic in a society and it should be eliminated as soon as possible by any means whatsoever. To conclude the essay, we have seen the problems caused by the inequality of wealth and their solutions in a society but what matters the most is the policy making and the efficiency of the policy makers. It depends upon how fair and how dedicated they are towards the removal of the said trouble from their country. References Arrow, Kenneth J, Samuel Bowles, and Steven N. Durlauf. Meritocracy and Economic Inequality. Princeton, N.J: Princeton University Press, 2000. Print. Page, Benjamin I, and Lawrence R. Jacobs. Class War?: What Americans Really Think About Economic Inequality. Chicago: University of Chicago Press, 2009. Internet resource. Osberg, Lars. Economic Inequality in the United States. Armonk, N.Y: M.E. Sharpe, 1984. Print. Nelson, Joel I. Economic Inequality: Conflict Without Change. New York: Columbia University Press, 1982. Print. Read More