Effects of Wealth Inequality - Research Paper Example

 Effects of Wealth Inequality The topic of wealth is essential because it helps governments and citizens understand the need to redistribute wealth fairly among citizens. The distribution should not discriminate against an individual based on religion, ethnicity, race or even sex. The topic uncovers details of historical injustices worldwide that requires urgent remedies. Inequality of wealth refers to lack of balancing in the distribution control of wealth, power and innovation. There are also instances of unbalance in culture, neighborhoods and society in people’s daily lives. The last few decades have however witnessed massive changes in the distribution of wealth in the society. The lack of balance in the wealth distribution is mainly common in the field of income distribution. There is also an explosion of moral and cultural inequality that has remained deeply rooted in the society today. Inequality is a big challenge that has created huge disparities in almost all economies of the world. Countries such as United States, Denmark, South Africa and Afghanistan are among the examples of economies that face such economic disparities. Wealth inequality has a different meaning in the political context and before law. It may refer to applying the legal code impartially without paying attention to the wealth, nationality, social standings and religion of citizens. However, social inequality has an open-ended meaning. It is only in the reformists’ view that people can receive same treatment. It is important to note that social inequality is useful in reflecting various ideals such that everyone has empowerment to utilize his own agency. The instances of inequality worldwide are increasing because most people are losing agency not only loss of income. In addition, many economic factors such as unemployment, inability to pay rent and credit card debit have great deals of effects on wealth inequality. Such factors make individuals much dependent with narrowed options due to impoverishment. However, loss of agency entails more than money factor. The research question here therefore cuts across the effects of wealth inequality in various countries all over the world. Characteristics of Wealth Inequality Growth in Wealth Inequality It is evident that wealth has grown over the past half a century, particularly between 1963 all the way to 2013. However, the growth has never been even for all groups and individuals. Families found near the wealth distribution bottom have moved from having average wealth to no wealth. Unfortunately, the bottom percentile has today gone to approximately $2000 dollars in debt. Those who were present at that time were in the middle wealth possession and managed to double their wealth. Further, families near the top percentile ensured that their wealth quadrupled. Wealth inequality has therefore risen significantly. Families near the top had almost $ 6 dollars for each $1 dollar of individuals at the middle (Griffith et al.17). It is surprising that by the year 2013, the families at the top income percentile had acquired more than twelve times what the middle class had. Income Inequality Results into Wealth Inequality It is common to note that in any situation where there is rise in the income inequality, there is also rise in wealth inequality. Factors such as real estate, savings and businesses minus debts affect wealth inequality. Wealth is vital because it cautions families against situations of emergencies and as well gives individuals an opportunity to rise up the ladder economically. In many cases, there are instances where wealth disparities are more exaggerated than it is with the income disparities. Income has ability of worsening wealth inequality because of the income available for people’s savings as well as investment matters. When one focuses on private income that includes dividends and earnings, it is indicative that the top had 70% in increase of their income from the year 1963 to 2013. However, the bottom percentile families had their income remain almost constant. Growth in Racial and Ethnic W2ealth Disparities The progress in the family set ups indicate that the majority of the world’s population will soon remain predominantly to be family of colors. The average wealth of the white families by 1963 was $117,000 above the wealth that non-white families owned (Almås 33). However, disparity increased to $500000 at a level higher than the wealth of African American families as well as Hispanic families. Despite Hispanic families maintaining high levels of extreme wealth, their wealth later deteriorated significantly up to recent years. The Aged Possess More Wealth than the Younger Population The aged white families tend to possess more wealth compared to Hispanic or African American youthful population. The wealth gap shows definite indication of widening as the population ages up. Research shows that in their 30’s, whites possess an average of $140,000 than what African Americans have. The ratio is 11 times as much. In addition, there is reduction in the median wealth by race. It is however surprising that the dollar does not grow in the same ratio as the dollar gap grows. Researches indicate that whites have an average of seven time’s median wealth that is more than Americans who are also Africans in their 30’s and later in their 60’s. Differences in Earning and Widening Racial Wealth Gap It is difficult to maintain savings once an individual has lower earning. Research indicate that an average African American earns only $1.5 over life time while a white American can earn up to $2million in a lifetime. It is even worse for a Hispanic who only earns an average of $1 million dollars. Wealth inequality in the United States United States just like other parts of the world display massive instances of wealth disparities within its economic sectors (Beck 230). In fact, it has the greatest wealth disparity between the poor and the rich than the case in any other developed nation in the entire world. There is a heated debate going on in the American’s wealth and income inequality among citizens. Others argue that the debate started as a ploy to surrender political advantage to a particular class. It is evident that this income inequality has evolved since 1913. Consequently, analysis indicates the much an individual can earn as he works and the much he can invest. While on the other hand, wealth inequality indicates the difference in the much an individual earns and the other assets. Effects of Wealth Inequality in the USA Expansion of Borrowing Opportunities Due to deregulation of finances, borrowing opportunities have increased with consumer credit, subprime mortgages, and home equity loans. In other cases, the financial deregulation leaves consumers without sufficient protection against some predatory and unscrupulous forms of lending. It is therefore vital that financial regulation and consumer protection takes effect as well as stepping up savings among the middle class. Another effect is the introduction and increase in tuition. Student's loans increased due to the increase in the tuition services (Balac 22). The case however limits to the higher education cases for tuition fees. Inequality is a natural impact of capitalists’ economy and competitive economy. However, it is vital to talk about inequality and address its consequences in the USA because it is bad for business. In addition, wealth inequality presents a disadvantage such that the poor continue to grow poorer while the rich get richer. This problem is synonymous with America due to its competitive and capitalistic economy. The overwhelming majority therefore remain in high levels of poverty while only a few enjoy the lion’s share of the country’s wealth. Consequently, the overwhelming poor majority end up in missed educational opportunities, ill health, symptoms and consequences of depression and alcoholism and obesity. Further, wealth inequality in the US has resulted into substantial wealth democratization. Consequently, the largest share of the national cake remains a preserve for a few top 0.1 percent of the USA population. However, due to democratization, the percentage of the top rich individuals has risen to a whooping twenty two percent by the year 2012. Inequality in South Africa South Africa, just like other developed and developing countries have its own issues with wealth inequality. There exists only two primary methods of determining how wealthy an individual is. The two methods include determining the value of property and the much an individual owns in the share market. Sometimes it becomes difficult to establish how much share an individual owns in the market because some property shares do not have direct links to individuals particularly in the South African state. In most cases, prices of shares often fluctuate making it difficult to determine the value of assets until the owners do sales. South Africa has shown real economic growth averaging over three percent. Consequently, creation of at least three million net of jobs. However, the number of jobs outstripped the labor force growth particularly between 2003-2008 when the country witnessed a rapid economic growth. The rate of unemployment hit the highest peak in March 2003 at 31.2%. The advent of the economic downturn of the world led to a small economic growth of only 1.16%. Despite South Africa getting richer for over fifteen years in real terms, the trend they used to distribute functionally the national income became a worrying trend. Various strata of the South African society failed to receive fair deals from the distributions. This resulted into the fundamental question of the political economy (Yellen 386). Racial segregation, just like in the case of America took central point. Africans earned the least of about nineteen to two hundred and fifty seven thousand. Such Africans belonged to category R10, 000 while the top class whites earned up to eight hundred and eighty eight thousand while the middle class attained the crown of being the majority. The middle class earned up to five hundred thousand. This resulted into wealthy inequality since the whites and the top class who had solid income managed to control the national income distribution. Effects of Income Inequality in Denmark Denmark has disposable income that is equal to the income of the rest of the world. By 2003, OECD reported that Denmark had the Gini Co-efficient of 0.23. However, changes in both the tax structure and the primary distribution of transfer systems. Denmark has had disparities in the growth of income because its top deciles grow at a faster rate than the bottom deciles. Consequently, the bottom income displays faster growth than that witnessed among the lower income earners. In Denmark, there is creation of more income at the labor market inform of earnings than in any other sector of her economy. The country mainly applies progressive tax that tries to create equality among all citizens. Effects of Wealth Inequality in South Africa Wealth inequality resulted into new order of redistribution of wealth. Many blacks who were poorer benefited from this project because it opened up the new market opportunities to each individual. The order opened up opportunities to everyone irrespective of their races or ethnicity. However, the poorest still remained stuck at the long queue job back for long (Hamilton 47). The creation of new millions of jobs was the only solution that helped to reduce woos of the poor. The creation of millions of jobs was because of prosperity that the country witnessed between the year 2000 and 2008. The government policy takes credit of the opportunity because the poor highly improved their lot compared to the initial condition in which they were. Wealth Inequality Led To the Establishment of Child Support Grant Currently, the project is supporting over eleven million children after economic conditions gave room for fiscal constraints. The project that target children under the age of eighteen proved successful after greatly reducing poverty in South Africa. However, the project did not play a role in reducing the gap between the poor and the rich. The power had their income gains lower than those of the middle class did. Consequently, the wealth inequality widened significantly. Wealth Inequality in Afghanistan Wealth inequality in Afghanistan shows similarities with the rest of the countries. The effects are similar because the gap between the few rich individuals is showing huge disparity. It is vital to note that Afghanistan however faced various political turmoil as well as terrorists’ threats. Further, the country received attacks from states that viewed it as a field where terrorists carried out their terrorism activities (Salverda 99). The instability and attacks on its land brought about economic failure that saw almost every individual in the land remain economically equal. The country therefore today displays a situation with limited wealth inequality. The disparity is less compared to most developed and developing countries in the globe. Conclusion and Effects of Wealth Inequality in Bahrain Bahrain is one of the countries in the world that have displayed greatest income distribution inequalities among its citizens. Bahrain, whose population of Shia comprises 70% of the entire population witnesses high levels of poverty among the Shia community. However, the Sunnis are enjoying top riches of the nation accompanied with high levels of luxury. Consequently, the nation has seen massive effects, particularly the manner in which the majority Shias feels discriminated by the minority Sunnis. The Sunni royal families rule the majority Shias because they control the lion’s share of the national resources. For such reasons, it is evident that even the majority who are pro Bahraini government are the Sunnis. Despite the few royal families from the Sunnis, Shias still have economically powerful families who have high rankings in their own government. The presence of Shia Government is the major reason behind the division in Bahrain. The government of Bahrain is today facing the tough challenge of dealing with the effects of wealth distribution inequality after actively discriminating against the majority Shias. Another big effect today in Bahrain because of wealth inequality is that the Shias have predominantly become the anti-government protestors and pro-reforms to ensure reduced discrimination against them. In addition, Bahrain also witnesses instances in recruitment exercises whose origin came from British colonialists. The British only recruited top government officials and officers from among the British themselves. The country today still discriminates against its citizens because they hire military only from imported mercenaries. The governments of various states should put various mechanisms of bridging the inequality gaps. Such mechanisms should include introduction of equalization funds to bridge the gaps between economically low regions and those that are economically vibrant. Further, each government should create employment opportunities that offer salaries and wages that do not create wide gaps to individuals within same economy. It is not fair when the reach continue becoming richer while the poor have a permanent poverty circle. Works Cited Almås, Ingvild, and Magne Mogstad. "Older Or Wealthier? The Impact Of Age Adjustment On Wealth Inequality*." Scandinavian Journal Of Economics 114.1 (2012): 24-54. Business Source Complete. Web. 24 Apr. 2015. Balac, Zoran. "Monetary Inflation’S Effect On Wealth Inequality: An Austrian Analysis." Quarterly Journal Of Austrian Economics 11.1 (2008): 1-17. Business Source Complete. Web. 24 Apr. 2015. Beck, Roger B. The History of South Africa. , 2014. Print. Birtchnell ,Thomas and Caletrío, Javier. Elite Mobilities. Routledge, 2013. Print. Burchi, Francesco, and Andrea Passacantilli. "Inequality In The Monetary And Functionings Spaces: The Case Of Peru Under The First Garcia Government (1985-1990)." Journal Of International Development 25.3 (2013): 340-361. Business Source Complete. Web. 24 Apr. 2015. Garip, Filiz. "Repeat Migration And Remittances As Mechanisms For Wealth Inequality In 119 Communities From The Mexican Migration Project Data." Demography 49.4 (2012): 1335-1360. Business Source Complete. Web. 24 Apr. 2015. Griffith, David A., Goksel Yalcinkaya, and Gaia Rubera. "Country-Level Performance Of New Experience Products In A Global Rollout: The Moderating Effects Of Economic Wealth And National Culture." Journal Of International Marketing 22.4 (2014): 1-20. Business Source Complete. Web. 24 Apr. 2015. Hamilton, Lawrence. Are South Africans Free?, 2014. Print. Printarbury, Colin, and Hitchins, David. Inheritance and Wealth Inequality in Britain. New York: Routledge, 2012. Print. Salverda, Wiemer. Changing Inequalities in Rich Countries: Analytical and Comparative Perspectives. , 2014. Yellen, Janet L. "Important Questions About Income And Wealth." Vital Speeches Of The Day 80.12 (2014): 382-386. Academic Search Premier. Web. 24 Apr. 2015. Read More