Category: Economic Inequality

The Problem of Economic Inequality in Modern South Africa

Today South Africa is still not a free and fair democracy as defined in our Constitution. There are huge divisions in society due largely to the past apartheid regime. This disparity manifests as economic inequality including income, employment and educational inequality. It also manifests as social and geographical inequality and the lack of basic services to certain residential and rural areas. Numerous laws have been created to address this disparity, yet we are still viewed as one of the most unequal nations in the world. How can we even dream of that free and fair democracy defined in our constitution when these divisions created by our past have not been healed?

Economic inequality is a legacy of apartheid during which marginalized people were forced to live far from economic opportunities. According to the World Inequality Database, the top 10% of South African earners, mostly white, still earn almost 65% of all the income in the country, and the remaining 90%, mostly blacks, only get 35% of the total income of the country. This is a huge income inequality. Directly linked to this are unequal job opportunities with far more Black than White people being unemployed. In fact, statistics show that the unemployment among black South Africans stands at 39% compared to just 8,3% among white citizens. Education is a huge factor in this economic inequality. A report by Statistics South Africa revealed that 15% of Black South Africans dropped out of school with only a primary school education while the country still produces more white university graduates than any other group. Lack of finances, lack of transport, lack of skills, racism during recruitment or education issues such as lack of good schools in ‘black’ areas are some of the reasons for this disparity which has its roots in the country’s racist history. We cannot be called a true democracy when economic inequality is so blatant.

Geography is also a huge part of how divided our society is. Black people were forced to live in rural homelands and areas on the outskirts of cities that lacked basic services and infrastructure. Today most of these areas are still regarded as poor neighborhoods and still have a majority black population. Despite promises made during the transition period from an apartheid regime, by 2015 almost 66% of the total population still lived in areas that lacked access to improved sanitation. Black women in rural areas still spend one-third of their time fetching water from streams and wells because they are still without running water. Even now, 24% of schools in South Africa have no running water and 20% have no functioning sanitation. The health impact of inadequate sanitation can be serious with large numbers of cases of diarrhea in children under five and numerous outbreaks of cholera. Furthermore, people from rural areas do not have proper access to health care due to a shortage of medical resources and health care workers. Continued inequality and rural health neglect have been cited as the main reason for this. Once again, these divisions from the past are still in existence 26 years after apartheid ended.

There is the argument that legislation such as the Skills Development Act 97 of 1998 and the Broad Based Black Economic Empowerment Act are in place to address the racialized inequality in South Africa. These acts ensure that black people receive preferential treatment in the job market and attempts to place black people in management positions and as shareholders in businesses. However, the BBBEE Commission has revealed that between 2015 and 2018, the number of black business owners had in fact decreased and the BEE policy had failed dismally. Some of the reasons are due to a failure to regulate the policy. The economy thus continues to be unequal due to a lack of inclusivity and inequality.

The economic divide between the rich and the poor, and the unequal distribution of facilities and inadequate access to basic services by large segments of the population, clearly demonstrates that the divisions of the past have not been properly healed despite the ruling party’s mandate to redress these imbalances. It is clear that decisive action is needed to heal the divisions inherited from the past. Then and then only will we progress to that free and fair democracy outlined in our Constitution.

The Problem of Political, Social and Economic Inequality in the Modern World

The 21st century discord is a majorly increasing problem in today’s world in regards to political, social and economic inequalities. These issues are growing at an astonishing rate and if they are not resolved soon, they will cause us to degrade as a human race and destroy the infrastructure for future generations to come.

Social inequality is when resources in a given society are distributed unevenly, typically through norm of allocation, that engender specific patterns along lines of socially defined categories of people. One of the most evident factors of these is gender inequalities. This can be seen in many areas of the world such as the workplace where women are placed in situations where they have a glass ceiling which results in them not obtaining promotions and higher training. It has been noted that men get promoted at higher rates. In turn, this leaves 85% to 75% of all women in large corporations in a glass ceiling situation according to the Huffington Post. The gender pay gap is also a very large and growing sector of inequality in today’s world. According to a report written on payscale.com they have estimated that a woman’s salary is 22% less than that of a male with the same qualifications and experience. For women, this can become discouraging and frustrating as it is easier for a male to move up in the corporate ladder. In most instances this causes women to leave their jobs and rather run the household thus leaving only one breadwinner to support the family. Thus, casing the social inequality to increase over time by default as well as raising the already growing statistics of men in high corporate roles. This proves how deeply social and economic inequality runs in today’s business world as this prejudice is set as a growing standard this in turn causes the economic inequality to increase.

Economic inequality can be referred to as the distribution of wealth and income. 82% of the wealth generated last year to the wealthiest one percent whilst the 3.7 billion people who make up the poorest half the world had no increase in their generated income according to a new Oxfam report. This shows how economic inequality does an injustice to the people of a society as the wealthy have enough money for many generations down the line and continue to obtain more wealth but the poor stay entrapped in the poverty cycle and the economic inequality levels proceed to increase as the gap between these two circumstances grow at an irreversible rate. This is due to economies of countries not taking the interests of their lowest income brackets into consideration and rather those of the powerful and affluent.

Every person should have equal influence in their democratic and political environment but due to increasing levels of political inequality this does not take place as countries become greedy to ensure that they stay on top while disregarding the standards of living and interests of the poor. This is due to big decisions being made by the powerful and affluent which in turn create laws that benefit them rather than helping the society around them resulting in the societies around them not growing and improving which therefore leaves the inequality gap to growing even further. John Hopkins University conducted an investigation and found that out of 800 students only 4% of children from low-income families achieved a college education, compared to 45% of children from higher-income families. These statistics show how political inequality repercussions run far down all the way to education of the masses resulting in the poor staying uneducated therefore leaving them in a situation where they are unable to lift themselves out of the poverty cycle.

However, in a perfect world if all these issues had been fixed the world would not be able to run efficiently as economies strive on inequality and desperation to get things done. Without a low-income bracket there would be no one to do the jobs that are unpleasant to the ordinary person such as janitorial services and even simple services such as fast-food employees. If these inequalities are resolved people’s standards of living will be raised leaving large gaps in worldwide economies. Thus, resulting in economies collapsing. These circumstances are also highly unattainable as it would mean if people work harder, they will still achieve the same thing as everything is equal thus inversely if someone doesn’t work, they would still be equal which is unrealistic and unattainable. Therefore, these factors will result in an inequality being created once again.

In conclusion, inequality is inevitable as I have stated above it is what ensures that the flow of the economy keeps moving. However, these issues can be resolved to a certain extent to ensure more equal opportunities for all in order to reduce the sizes of the inequality gaps and stop them from increasing exponentially.

Economic Inequality and Its Implications

Inequality can come in many different forms like gender, racial or social inequality. In this essay, I will focus on economic inequality as it often exaggerates and contributes to the other types of inequalities mentioned. Economic inequality comes in two forms mainly: income and wealth inequality. There are many different measures of inequality: using the Gini Coefficient, ratio measures or looking at the wage gap. Generally, high levels of economic inequality are a bad thing for a country with negative implications for the economy, and as a result on the individual and society as well. It is associated with poor economic growth, crime and social polarisation. To support this, there is a lot of literature from many different countries analyzing the impact of economic inequality on the socioeconomic situation of a country and the extent to which inequality is a significant factor contributing to issues regarding society, the individuals and the economy. It is important to look at the impact of inequality as it helps direct policy makers who aim to reduce the negative impact of inequality.

Economy

Generally, we observe a negative relationship between economic growth and an unequal distribution of income. Furthermore, Panizza (2003) uses empirical analysis to find a negative relationship between growth and inequality in the United States using cross-state panel data from 1940 to 1980. Specifically, it finds that “a one standard deviation decrease in the Gini Coefficient is associated with a 0.2% increase in average annual growth over the next 10 years”. Given that the data is measured correctly in the annual reports of Statistics of Income (SOI), this relationship derived is causal as it is looking at panel data that controls for unobservable variables. Clarke (1995) also uses empirical analysis to find this negative relationship between inequality and economic growth using several different measures of inequality (Gini coefficient quintile measures, Theil’s index, etc.) suggesting that there is not an issue with how the data is measured.

There is a range of economic literature that discusses possible reasons for this negative association. Galor and Zeira (1993) discuss the possibility that this relationship is attributed to differences in investment in human capital. In the context of imperfect capital markets where the cost of borrowing money is more expensive than the price at which people lend, those that inherit wealth are more likely to invest in human capital as they don’t have to borrow as much for this investment. As a result, those initially favored in the distribution of wealth, can invest in education and training and earn a higher income as skilled labor in subsequent periods. If inequality is high and the percentage of people who can make these investments in human capital is small, this depresses aggregate economic activity in the short run. Because these affects are carried into the long run due to its effect on distribution of income and its intergenerational effects, an unequal distribution of wealth leads to low economic growth.

Alesina and Rodrik (1994) also supports this negative relationship between inequality and economic growth. It takes a political approach and states that high inequality of wealth and income result in policies that lower growth such as a higher rate of taxation. This is because disposable income, income after tax is deducted can be consumed and consumption stimulates the economy. The paper states that due to inequality, there are different optimal tax rates amongst groups in the economy as “the lower an individual’s share of capital income (relative to his labor income), the higher is his ideal tax, and the lower his ideal growth rate” since capital earning is derived directly from a higher economic growth rate. In economic theory, policies are determined by the median voter, ‘the median voter theory’, and the more equal a society is, the higher the capital endowment of the average voter and the more likely they are to choose policies that lower taxation and increase economic growth. The validity of this argument may be debatable and vary from country to country depending on their political system, e.g. especially in countries that are less democratic where the government does not respond effectively to voter demands. Furthermore, in democratic countries where there is a lot of inequality, there is a very large demand for redistributive taxation which can be harmful for economic growth as it may stun productivity among higher paid workers.

However, there is also research suggesting that the relationship between inequality and growth is a positive one. Particularly, studies from the 1960s on the equity-growth trade off. Kaldor (1957) explains that inequality in a society encourages innovation and productivity. If policy attempts are made to reduce inequality, for example through redistribution taxation, the returns from higher education for those aspiring for higher paid jobs would decrease and fewer people will choose to invest in education as a result. In such a case, although redistributive taxation can improve equity, it will have negative implications for economic growth. Furthermore, this paper finds that since the wealthy have a higher propensity to save and invest in capital accumulation, more inequality can lead to a higher growth rate.

Therefore, although more recent evidence shows a cross country data verifying a negative relationship between inequality and growth, the relationship is not clear and empirical evidence may be biased due to unobserved characteristics like innovation which can affect economic growth.

Individual

In this section, I will focus on the effect of inequality on crime rates as it is linked to issues of trust and social disorganization as well as economic issues. Inequality has a positive impact on crime. Lower economic growth, which we found to be correlated with higher inequality, increase unemployment and increases crime rates due to the financial rewards of crime.

Becker (1968) finds that the payoffs from crime are higher in an unequal society as income of victims is higher and criminals find that they have a higher payoff from illegal work than legal work. Furthermore, individuals with lower earnings have lower opportunity cost in terms of loss of income if they get caught (Fleisher, 1996). Inequality also has a behavioral effect on individuals and is found to increase violence and homicide levels. This is because inequality encourages social competition and limited opportunities (Galor, Zeira,1993) bring forth feelings of fear and violence. Elgar and Aitken (2011) found a negative association between income inequality and trust to demonstrate this. In economic literature, the effect of income inequality on crime rate has been measured using various indicators of inequality and crime rate, which imply robustness of these results. Fleisher (1996) for example shows the positive effect of an increase in size difference of incomes in second and highest quartile on arrest a court appearance rates. Fajnzylber, Lederman, and Loayza (1998) uses panel data to find the causal effect of income inequality on violent crime such as homicide and robbery.

Other research finds that income inequality has a significant impact on violent crimes exclusively and none on property crimes (Kelly, 2000). However, inequality results in high poverty areas and high poverty has a significant positive effect on property crimes.

Society

Economic inequality leads to social conflict and polarization. Wilkinson and Pickett (2009) find that inequality in a society contributes to feelings of anxiety and social competition which are driven by a sense of social deprivation and exploitation. In general, this paper finds that more unequal societies have more health and social problems.

The greater inequality is associated with a higher rate of homicide, violent crime, obesity, racism, teenage births, mental illness, social mobility and a lower rate of trust, and worse math and reading scores. Issues like racism and violent crime cause distrust and disassociation with certain groups in society.

I believe this evidence of distrust and social disorganization in unequal societies can also explain the high occurrence of crime in these societies as well as the low levels of political participation (Ulsaner and Brown, 2005). In unequal societies, the groups at the bottom of the income and wealth distributions feel exploited by those on top and feel as though they do not share common values. This can lead to lack of solidarity in society as people contribute less to common welfare (Pascov, Dewilde 2012)

Conclusion

In conclusion, the main impact of inequality is its effect on economic growth. The direction of this effect is unclear and can vary from country to country depending on the extent of inequality, and generally high inequality is considered to counteract the benefits of inequality to the economy, the social climate and the political system specifically. This is because inequality does not affect economic growth directly but due to the nature of the political framework in which policy attempts are made to reduce inequality that affect incentives and therefore growth.

References

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The Link Between Inequality in Chile and Peru and the Legacy of Neoliberal Reforms in an Era of Authoritarianism and Dictatorship

Inequality, in its myriad of social and economic forms, is a persisting issue in Latin American society. As of 2014, Latin America was found to be the most economically unequal region in the world: just 10% of the richest Latin Americans controlled 71% of the region’s wealth (Ibarra, 2014). When wealth is concentrated in the hands of the few, often so is power. It is argued that, for many Latin American nations, this is partially due to political systems being heavily skewed in favour of the business elites. Moderately high levels of corruption in the region stem from the capacity of undemocratic and populist politicians to exploit weak democratic institutions (Transparency International). When the interests of the elites are protected, it is at the expense of the well-being of the poor majority. In comparison to developed countries, Latin American governments spend 11.4 percentage points of GDP less on social services such as education, health, pensions, and infrastructure (Melguizo, 2017). Lack of social investment restricts inter-class mobility, reinforcing disparity both systemically and culturally. It is important to clarify is that wealth and income inequality is a representative of institutional capacity, not macroeconomic stability. Over the past few decades, Chile and Peru have both experienced extensive export-led economic growth and managed to more than double their respective GDPs in just under 30 years (Madison Project Data Base). Despite reduced levels of extreme poverty (World Development Indicators), Chile and Peru continue to be included in the 50 most economically unequal countries in the world (World Bank Estimate, 2015). Without effective redistribution methods, the previous economic growth was at the expense of equity. I will argue that income inequality in Chile and Peru is partially due to the legacy of authoritarian- and dictatorship-era neoliberal reforms, which continue to undermine the integrity of political institutions via systems of taxation and privatization.

Modern political institutions in Latin America struggle to navigate the persisting contours of neoliberal reforms from the late 20th Century. In response to the failure of Import-Led Substitution Industrialization, Chile sought market liberalization under the military dictatorship of Augusto Pinochet (Ibester, 2011). Economic growth was achieved via dramatic reductions in governmental regulatory and provisional capacities. Almost 20 years later, populist leader Alberto Fujimori would be responsible for the adoption of similar reforms in Peru (Stokes, 1997). In both cases, economic growth was extensive and socially exclusive. Following Import-Led Substitution Industrialization, institutions in Chile and Peru were weak, which allowed the actors from the private sector to integrate into political positions. Over time, an embedded network of elites accrued within each respective government (Fairfield, 2015). According to José Carlos Orihuela (2013) of the Pontificia Universidad Católica del Perú, these original political business elites prioritized “macroeconomic stability, aggressive trade integration, and business-friendly investment climate” (p.143). However, what they would end up truly prioritizing is the exclusion of the poor majority.

The neoliberal models adopted during the regimes of Pinochet and Fujimori continue to restrict avenues of national revenue, which inhibit modern Chilean and Peruvian governments from investing in social services to ease economic inequality. In terms of public financing capacities, the InterAmerican Development Bank advocates for taxation to be perceived as more than just a revenue tool. It stresses that a strong public financing capacity is critical in the development in social policies for growth and equity (InterAmerican Development Bank). The OECD reports that while tax revenues in Latin America continue to rise, they are lower in proportion of national income than most OECD countries (OECD, 2019). This relationship is not coincidental, as regions with higher inequality have been shown to develop tax systems with lower revenues (Ducong et al., 2018). In 2017, the total tax revenues as a percentage of GDP for Chile and Peru were less than half of those of major industrialized countries (OECD, 2016). High levels of taxation run in opposition to the neoliberalist beliefs instilled by Pinochet and Fujimori. Consequently, the modern tax systems of Chile and Peru prioritize economic growth rather than redistribution.

The United Nations Economic Commission (UNEC) for Latin America claims that European systems are 6 times more effective at redistributing wealth and reducing inequality than those within Latin America (Ibarra & UNEC, 2016). The majority of income tax systems in Latin America were not designed to service the interests of the wage labour majority, but instead aimed to incentivize the investment of capital-owners. It estimated that the average tax rate for the richest 10% of Latin Americans amounts for just 5% of their disposable income (Ibarra & UNEC, 2016). Structurally, income taxes in Chile and Peru are designed in favour of capital owners, as in both countries business elites maintain a greater influence in politics. In simplified conditions, income can only be taxed via wage-labour or capital wealth. For waged labourers in Peru and Chile, personal income tax is automatically deducted from their paycheque. However, taxing capital wealth is far more complicated and requires great administrative resources in order maintain accountability and transparency. Therefore, even though Peru and Chile have experienced marginal increases in corporate tax rates (Fairfield, 2015; Ibarra & UNEC, 2016), high-income sectors have access to the resources to avoid and evade these direct taxes (Ibarra & UNEC, 2016) – especially when institutions are weak. In Latin America, it is estimated that 4% of GDP is lost to tax loopholes (Ibarra & UNEC, 2016). Studies show that Peru is one of the region’s economies with the highest level of income tax evasion, which is estimated at 48% (Gómez-Sabaini and Jiménez, 2012).

Income inequality can also be affected by different forms of taxation. The common one found in Chile and Peru being a form of indirect tax, which are notably burdensome on lower-income citizens, called the value-added taxation or VAT. Targeting consumer goods and services, VAT is inherently regressive because it comprises a larger percentage of a low-income budget than a high-income budget. In 2005, former Chilean Finance Minister Eyzaguirre (Fairfield, 2015) explained: “If you compare the tax structure of Chile with U.S. or others, you will see that the proportion of indirect taxes – taxes on consumption – over the total tax burden is very high, and the proportion of direct taxes to ones that are more proportional to the level of wealth are very, very low” (p.23).

Resistance to change the tax burden, Eyzaguirre continued, is entirely a “political problem” (Fairfield, 2015). The persistently low tax levels of Chile and Peru echo their respective eras of neoliberal reform and aim to protect a free-market and small-state economy. The “political problem” that Minister Eyzaguirre is referring to is the belief that by concentrating capital in the hands of the elite, it will maximize their capacity to invest, and wealth will diffuse across the economy. This economic model, coupled with the weak institutions populated by the elite, does not encourage entrepreneurship (Mehlum et al., 2006). Under these conditions, reduced regulation incentivizes producers to become rent-seekers, and to pursue profits via corruption (Mehlum et al., 2006).

In response to the economic chaos of Peru in the late 20th Century, populist leader Fujimori administered widespread neoliberal reforms in order to pursue national macroeconomic stability. Peruvian mining operations were especially deregulated: reduced import tariffs, export tariff removal, streamlined foreign licensing, and relaxed indigenous land tenure (Bury, 2002). These reforms, coupled with Peru’s abundance of natural resources, attracted extensive direct foreign investment (Bury, 2002). However, it is speculated that the resource abundance of an institutionally weak country may increase the concentration of rent-seeking elites (Mehlum et al., 2006) and compromise the quality of democratic regimes (Ducoing et al., 2018). Referred to the “natural resource curse” (Sachs & Warner, 2001), there is some evidence to suggest that there exists a negative relationship between the share of natural resource exports to GDP and the long-run economic growth rate. In response to this phenomenon, transnational corporations were required to pay royalties to the Fujimori administration (Bury, 2002). A portion of these royalties were meant to be returned to the local communities which the mining operations affected (Bury, 2002). However, as an effect of the corruptive nature of weak neoliberal institutions, this failed to become a reality. In 2002, socialist opposition congressman Javier Diez Conseco led an investigation into the Fujimori redistribution systems (Congreso de la República de Peru, 2004). It was found that the privatization of hundreds of state-owned enterprises raised upwards of USD 9 billion, yet only a small fraction ever reached the hands of the Peruvian people (Congreso de la República de Peru, 2004). Fujimori-era neoliberal reforms have left a legacy of privatized and deregulated mining operations in Peru, which continue to stunt avenues of national revenues. This has left public services underfunded and access to quality education, healthcare, and social security is highly segregated.

The influence of Pinochet-era neoliberal privatizations in contemporary Chile are far more explicit, as it is still subject to the same constitution that Pinochet drafted in 1980. At the birth of the constitution, prominent elites were permitted to purchase formerly state-owned enterprises at little or no price (Torche, 2005). From thereafter ownership of social services was concentrated in the hands of the economic elite. Modern Chile possesses one of the world’s most high privatized economies, as even water is a privately traded commodity (Baer, 2014). Carlos Orihuela (2019) explains how Chilean public policy is compromised by the constitutional integration of business elites: “While beliefs shape behaviour, private interests also play a role. All policy experts face individual economic and political incentives, which can lead to conscious concessions of reason to interest- or to unconscious mental shortcuts” (p. 145). The concessions that Orihuela refers to are made at the expense of low-income citizens which do not have the resources to access social services when they are a private good.

The most notable of Pinochet’s privatizations was delegating the administration of social security to the private sector (Borzutsky, 2018). This created a new type of for-profit enterprise that continue to face little competition: pension fund managing corporations (Borzutsky, 2018). Just three firms account for 86% of all social security operations. This extent of market power has increased fees and by 2007, about 50% of the Chilean population were excluded from the private social security system (Borzutsky, 2018).

The healthcare systems in Chile and Peru are similar in both structure and inequity. The public health sector acts solely to subsidize the private sector (Mesa-Lago, 2005; OECD, 2016). Private out-of-pocket expenditure on health in Chile is the 3rd highest among OECD countries The high burden of out-of-pocket spending creates barriers to access health care services (outside of the basic benefit package), particularly for low-income groups and highlights the need to prioritize funding of social services (OECD, 2016). What appears to relay into other social services is the discrimination of women. Access to a minimum pension program in Chile is far more costly for women because they have longer life spans (Mesa-Lago, 2005). The discrimination of women is similar in the privatized healthcare systems of both Chile and Peru.

The neoliberal economic programs instilled by both Fujimori- and Pinochet-era governments, which emphasized the deregulation and sale of government enterprises to the private sector, have destabilized each respective welfare state in the long-run. Max Skidmore (2018) claims that the exacerbation of income inequality has “demonized” (pp.525) the welfare state in the eyes of macroeconomic well-being. By concentrating wealth upwards and withdrawing governmental provision from social services, Chile and Peru have entrapped themselves in a fanatical pursuit of never-ending economic growth. However, these neoliberal doctrines are fracturing in the wake of civil unrest, causing constitutional crisis in both Chile and Peru. This is especially prevalent in Chile, which is the most unequal member of the OECD. Despite having the highest GDP per capita in South America, the richest 1% of the Chilean population earns an overwhelming 33% of the nation’s wealth (Melguizo, 2017). Protests have erupted throughout the region, mostly concentrated in the capital city of Santiago. Protesters are calling for constitutional reform, citing Pinochet’s legacy as a root cause for the inequality. President Sebastián Piñera has recently promised to administer a marginally higher tax on the rich, which is one of the many demands of the protest. Peru has seen a corresponding increase in civil unrest and in September of 2019, dissolved congress in response. The outcomes of each movement are only up to speculation, but is appears that the majority are no longer willing to be passive in their oppression. As Pablo Neruda wrote, “For the thieving nobleman, privilege – for the man who steals bread, jail”. Perhaps this will be the generation that will no longer accept this as the rule and demand a future that is as inclusive as it is prosperous.

How Should the US Reduce Economic Inequality? Essay

Over the past few decades, America has been experiencing a great deal of alterations. One of those changes involves the growth of the country. The expansion rate in America has been rapidly growing since 1950. Decreased death rate and an increase in average human age are some of the leading causes of skyrocketing population. Growth has tended to be more rapid, especially in lower-working categories. However, social disengagement arising from growing inequality has not altered. Poverty and inequality are interlinked with one another. Increasing income inequality in recent years has triggered an overflow of analysis and speculation on the causes and consequences of those changes. Several rising differences between the distribution of income and wealth as a significant social impediment has seen in both academic and public deliberations. Whereas most of these scripts highlight the adverse consequences, others argue that income inequality isn’t increasing considerably. If it is, then it’s a reasonable and natural outcome within the economy, during which rewards have distributed in keeping with differing contributions to economic output, in which people have diverging abilities and attitudes towards significant damage to the functioning of capitalist economies, that have bought large material edges throughout the world. But still, others claim that considerations regarding economic inequality are disturbed, observing poverty as the real enigma.

The last dimension elevates the question: ‘Whether there is something concerning about inequality within itself that is uncertain independently of the reality that those at the lower edge of the income division are always poor, at least by the suitable nationwide measures?’. Everyone agrees that poverty is a critical social defect that condemns many people to lives that not solely lacks comfort and basic necessities; however, conjointly dignity and respect that they might get if they weren’t in impoverishment. Imagine a community in which poverty has dropped so that everybody has sufficient to begin productive and fulfilling lives, however, during which there is still notable economic bias. Such society has never subsisted; however, if one occurred, ‘wouldn’t it be useful to adopt strategies to diminish inequality, and if so, how?’. If income inequality is pitching in, or at least not increasing, and if it has no critical consequences on discernment of social justice or economic and political systems, neglect in support of attempts to diminish poverty. If inequality is mounting, and it will have an effect on inherent social relationships, the relevant policy, acknowledgment would be to tackle both each economy and poverty.

Economic inequality might affect the expansion of the economy, and, therefore, the economical use of resources like labor and capital. Some argue that countries with high levels of inequality experienced enormous economic growth. If this is accurate, this may suggest that efforts of lower economic inequality are costly because they reduce growth and prosperity. Studies show that over the past few decades, countries like Korea, France, Norway have a lot of income distributions and had showed higher economic performance compared to the United States. Over the period 1960-2015, average annual French economic growth was 2.75%compared to 3.04% for U.S. However, the U.S. growth rate is rising solely because of the growing population: 1.03% compared to 0.65% in France. Apparently, per head, economic growth reflects an increase in productivity, serving as a better indicator of rising economic prosperity, highly influenced by the growth of the population.

A possible method of concluding whether or not economic disparity disrupts social measures concerning justice would constitute on the stated views of voters themselves. While economists studied a typical unit of U.S residents on their opinions on income and economic inequality and their choices with regard, they discovered that the wealthiest 20% of the population held about 59% of the total wealth whereas the initial total through the course of the analysis comprised 84%. Once presented a questionable prospect among the United States income distribution and a uniform dispersion (comparable to that of Sweden), 92% preferred the uniform distribution. Individuals significantly depreciate the scale of inequality in employee profit, and, on the far side, their examples of countries, a considerable majority preferred more superior uniformity in the delivery of wages. Corresponding to different countries, they declared that there exists a higher forbearance for inequality in the United States. This conclusion denotes compatible by the survey outcomes on opinions approaching differences within the United States, explaining that a majority considers that the economic arrangement is verboten. Still, the traditionalists remain less vulnerable to accept the fact with the judgment than those toward the final left statement conclusions revealing that a significant primary dimension of Americans who believe that the wealth distributions are forbidden has endured over 60% since 1984. Eventually, a bulk of U.S residents continue to make their attempts to decrease these differences with the ability of distinctive support concerning philosophical attitudes and economic standing predictably.

However, critics state that ‘inequality provides greater incentive to hard work’. The tendency to make more wealth encourages people to achieve harder, furthermore aim to innovate and generate better and creative results. Without significant extra purposes for successful performance, there will be dramatically smaller inventions, development, including capital. If people who do not work hard and achieve their goals, obtain the equivalent or same honors as individuals those who strive vigorously, study, analyze and spend notable time, the latter succumbs motive to be prolific. A higher measure of sustenance helps a nation to support the poor and look after their needs. Inequality empowers major significant economies because there are rich people who earn a large amount of income compared to poor people. Large-income earners save more than lower-income earners. More enhanced gains unload resources concerning markets to obtain capital to higher purchases and investments toward technology and industry extension.

Also, aspiring, determinant and progressive learning and employment business methods are perhaps one among those numerous sturdy implements to boost the abilities of autochthones, molding them more ambitious. Effective employment business strategies can moderate many significant potential adverse consequences relating to work loss and promote departmental development through education dimensions or substitute fee payments. Furthermore, an expansion toward intergenerational movement produced by more significant ventures in childhood education would repay. Experiential instructive study reveals that substantial funding in youngsters provides tremendous profits toward literacy, health and well-being, and potency and skills. While inflation in minimum payment will lighten economic inequality within a precise time, a significant influence over the average time is questionable, as a high minimum wage can lead to a rise in unemployment, which could progress income inequality. Decreasing inequality by more ambitious and forward-looking education and labor market strategies will apparently possess a positive impression on the expansion of the economy, since we have bestowed, that vital disparities remain affiliated with the development of the economy moderately. Mostly these methods are equally supporting possible growth; the continuing obligation on the authority to proceed economic incentive attempts would manifestly handle.

Problem of Income Inequality in the United States

On May 7-9, 2018, UCLA staged a vigorous three-day strike. For a long time, not only UCLA, but also the entire UC system (UC system). More than 20,000 of the lowest-level employees (not professors, but meager labor) have been protesting, the financially fascinating University of California is actually on pay so embarrassing. Their ‘humble’ status is the cornerstone of keeping the University of California’s huge machine functioning. They include chefs, repairers, cleaners, porters, drivers, health care workers, and more. If the outstanding academic achievement of the University of California is ‘skyscraper’, then these workers are the foundation of the skyscraper. Their relationship with the UC system has been very tense. University professors and management have raised their salaries, but the salaries of these bottom-level employees have been close to the minimum wage. After California passed the bill to raise the minimum wage last year, their salary finally rose slowly – the school is still very reluctant. Not only is the overall treatment low, but also under similar positions, the treatments of different races and genders are not as ridiculous as other institutions, but they are also obviously unequal. The parade is vast, knocking on drums and passing through all corners of the campus. Not only employees, but many students also joined the parade. Some professors even joined in solidarity. The protesters had a clear division of labor and knew that the parade would cause them to lose their wages. Therefore, many volunteers and sponsors were convened, and a large number of booths were set up to provide food and rest services. Outside the UCLA hospital, the placards piled up like mountains. Any passerby passing by can pick up one and join the demonstration queue.

Why there are more than one strikes happening almost every year? Some demonstrators said that there has been no salary increase or contract in the past few years, and they have taken the lowest salary in the systematic work with excellent academic performance. Inequality in income has put them on the road to rights protection. Technological progress has greatly improved labor productivity, but it has gradually phased out traditional labor and gradually brought about the ‘Matthew effect’ on the income gap. With the popularization of advanced technology in industrial production, the production process tends to be intelligent. Laborers who remain in the industry need to have unprecedented levels of knowledge and skills and need specialized training. The threshold of laborers in modern, automated factories have greatly increased. The income of senior technicians who have crossed this threshold is constantly rising, while those with low education levels, poor technical skills and unprofessional training are gradually losing competitiveness in the labor market. It can be seen that in the labor market, technological advancement has increased the demand for complex labor, and the demand for ordinary workers in the job market has shrunk accordingly. This inevitably leads to a large number of ordinary workers becoming surplus labor, thereby increasing unemployment. The laborers, who barely left, have to accept lower wages. Although the tertiary industry in the US society has absorbed a large amount of employment, its average income level is still quite low. Under such circumstances, if the redistribution of the income structure is not achieved, or the industrial structure and compensation are re-adjusted, it is difficult to get rid of the ‘Matthew effect’ that the technological gap brings about a widening income gap.

What social problems are behind the income inequality? Social classes are the most common type of grouping used to depict economic groups in a particular society. Although the three most frequently cited classes are low-level or working-class, middle-class and upper-class, in reality, American society cannot be classified neatly. American society has enormous wealth, income, education, and occupational differences, and no system can completely classify them. Further complicating the social class is the adoption of other tiered systems based on the values or norms of these societies in different societies and elsewhere in the world. Deep social problems such as racial discrimination continue to be the embarrassment of managing income inequality. The deep-seated problems of American society have also profoundly affected the formation of the gap between the rich and the poor. For example, the issue of racial discrimination, although the US public policies and laws and regulations rarely have discriminatory provisions, racial discrimination is deeply embedded in every corner of the economy and society. The level of education of black Americans is still much lower than that of whites, and the employment of blacks is clearly concentrated in low-income areas. The wealthy whites in the Los Angeles metropolitan area do not want to have much communication and connections with black races and low-income groups. The racial differences in education and division of labor bring profound social problems, and the negative impact on society is almost impossible to eliminate. If social problems such as racial discrimination cannot be eradicated, they will still be the root cause of the widening gap between the rich and the poor. One of the reasons for the fact that whites in poor schools are less is that low-income whites are less likely to live in communities where the poor are concentrated than those with the same income.

Another term that is often used when discussing the economic level of an individual or family is ‘economic inequality’. This refers to the main difference in economic assets and income distribution among the population. The widening gap between the rich and the poor is the most basic problem in American society. It is not only an economic issue but also a social issue. The US policy is biased towards the affluent population. The rich have an important impact on the taxation policy and the allocation of resources for public goals such as education, health care and retirement, social security, and employment. The political equality in the United States is severely challenged. Economic inequality is seen as the root cause of political inequality. Taxation is the main lever for regulating economic inequality. The tax policy that mainly benefits the rich is an important reason for the widening gap between the rich and the poor in the United States and the crux of political conflict.

In ‘Capital in the Twenty-First Century’, Thomas Piketty pointed out that at the highest levels of society, income from capital (production materials, deposits, stocks, real estate, etc.) outweighs income from wages, salaries, and bonuses. In the United States, inequality is becoming more and more serious, and a large part is caused by capital gains. In Europe and the United States, the wealth of 1% of the richest people is accumulating faster than many developing countries. This large concentration of wealth has an impact on politics. The rich use more money for politics, such as providing campaign funds, lobbying government officials, and increasing the influence of interest groups on elections, legislation, and bids.

Piketty points out that income inequality has a snowball effect on wealth distribution. The highest income is stored with high interest, which makes the wealth concentrated in a large amount, which makes the wealth inequality expand continuously. The expanded wealth inequality leads to further concentration of capital gains. The middle class and low-income workers do not have enough money to support their livelihoods. They often rely on borrowing to live, and they are incapable of accumulating wealth. This creates a vicious circle of perpetual rich people getting richer and poorer getting poorer. The basic situation of economic inequality in the United States, Piketty believes that this is not an accidental phenomenon, but it is considered to be a feature of the capitalist system, but to be reversed, only through state intervention. If this system is not reformed, the democratic order will be threatened.

Social and Economic Inequality in India and South Africa

For the beginning, I would like to define the notion of economic and social inequality, before we move to the main idea of this research. Economic inequality has two meanings: it can either refer to income distribution or wealth distribution among countries. Income distribution and wealth distribution refer to the national income divided among citizens of a country. According to McCarthy (2018), ‘social inequality is traditionally defined as the existence of unequal opportunities for different social positions or statuses for various individuals within a group or society’. Now that we know the meaning of economic and social inequality we can move forward to the main idea of this research, we are going to analyze some countries to see how things have changed during the years and what would be useful in order to prevent inequality or to alleviate it.

One of the first countries we are going to analyze is India. As we know India is the 2nd largest country in the world after China, with a population of 1.3 billion after estimates from United Nations (2019). A little bit of history: we go back to 1980s because in that period ‘domestic reforms started in what is now one of the most attractive markets for global investors’ (Sintia, 2018). Also, Sintia (2018) notes that India was slowly easing restrictions and eliminating ineffective policies that had slowed social and economic progress decades after the country obtained its independence from the British Empire and in the early 2000s witnessed India entering the fastest period of economic growth in its history, averaging more than 8% increase a year from 2004 to 2014, but three years later, the country’s gross domestic product reached $2.597 trillion, which surpassed France’s GDP of $2.582 trillion. Despite their fast economic growth India is still considered one of the countries with a big gap between social classes. People are living in poverty and that’s not all, after a report made by Global Hunger Index in 2018 it came out that India is ranked 103rd from 119th countries on the hunger issue. These are worrying news for the Indian population. However, the situation has slightly changed over the years from 2000s. As it stands now, the GHI score for India is decreasing from year to year, the current GHI score is 31.1%, which means that the level of hunger is really serious. But, India’s top 1% owns more than 50% of the country’s wealth and it is the world’s second largest food producer and yet is also home to the second-highest population of undernourished people in the world (FAO 2015).

This hunger issue comes from the negative effects of economic and social inequality, if there would be a better distribution of money and a wage increase for the lower classes, poverty wouldn’t affect that much the population as it is nowadays. As GHI (2016) mentions that ‘the poorest people in India are those who belong to Scheduled Castes and Scheduled Tribes – traditionally oppressed classes for whom the Indian constitution provides special affirmative provisions to promote and protect their social, educational and economic interests’. As a consequence, ‘Dalits and Adivasis are over-proportionally affected by poverty, with 104 million people belonging to nearly 700 distinct ethnic groups, India has the second-largest tribal population in the world’ (Government of India 2011). This means that ‘47% of the rural tribal population lives below the national poverty line, compared to the national average for rural areas of 28%’ (Rao 2012).

According to Oxfam (2018), in the period between 2006 and 2015, ordinary workers saw their incomes rise by an average of just 2% a year while billionaire wealth rose almost six times faster. The CEO of Oxfam India, Nisha Agrawal (2016) mentions that: ‘The Indian government’s efforts at reducing inequality and combating poverty faster are woefully inadequate. It needs to stop the super-rich and the corporates from continuing to rob India of its wealth, but also needs to invest more in agriculture, and implementing fully the social protection schemes (such as rural job scheme and the Food Security Act) that already exist’. Although, this is not the only problem in India, ‘malnutrition undermined people’s health, often leading to the needless grief of a child’s preventable death or the catastrophic loss of a mother in childbirth’ (David, 2016). The death rate while giving birth is decreasing. In 10 years it has decreased. It’s a small progress and more children have the chance to live a normal life, these are good news because the eradication of hunger and poverty is present in a continuous process to give children a normal life. Unfortunately for those children who have the chance to survive at birth, some of them are dying before the age of 5. The death of children under 5 years is steadily decreasing. As reported by the United Nations (2018), “The under-five mortality rate of India at 39 per 1000 now equals that of the world, highlighting the much faster decline by India in the last five years as compared to the global decline” and ‘the gender gap in child survival has reduced almost four-fold in the last five years, with under-five mortality of girl child now being 2.5% higher, compared to nearly 10% in 2012’. Moreover, from the data that we have analyzed on India we can observe a decrease over the years, on different problems such as hunger, infant death, malnutrition and of course poverty, these decreases are really encouraging for the Indian population giving them hope.

Furthermore, we are going to analyze another country and its issue in the economic and social inequality. The other country we are going to analyze is South Africa. As mentioned by Terence (2018), ‘South Africa is not only the world’s most unequal country, but that extreme inequality has become a major constraint to higher levels of economic growth, because it is undermining policy certainty and depressing investment’.

Indeed, South Africa is the most unequal country in the world, and as consequence its own citizens have to suffers because of this, hunger, poverty, children starving, no workplaces. In line with the furnished information by the World Bank (2017), ‘Job creation is one of South Africa’s fundamental goals, with the country’s National Development Plan (NDP) targeting the creation of 11 million jobs to reduce the high unemployment rate to 6% by 2030, and to significantly reduce poverty and inequality. But to meet this target, the World Bank estimates that the economy would have to produce at least 600,000 new jobs on average, annually’.

South Africa is the most unequal country in the world and its poverty is the ‘enduring legacy of apartheid’ and unemployment disproportionally affects black South Africans, perpetuating apartheid’s inequality (World Bank, 2018). Sulla (2018), mentions that: ‘The country was very unequal in 1994 [at the end of apartheid] and now 25 years later South Africa is the most unequal country in the world and there is no country where the inequality is higher than South Africa’.

As a result, black African people struggle to find a job; they live in poverty. Because people struggle to find a job, without any income, or any resources, hunger comes into game. The hunger issue is not that serious as it is in case of India, but yet it still exists.

According to GHI (2018), ‘South Africa is ranked 60th country out of 119’, and ‘the hunger issue is moderate’. South African Child Gauge organization (2018) mentions that ‘a third of South Africa’s children at serious risk of hunger and around 20% of (or one-in-five) children do not live with their parents, also around 40% of kids are growing up without a father, without a ‘breadwinner’, or at least an additional source of income, children with absent dads are suffering this cruel fate’. Living without a father and living only with the mother is really hard for a kid and also for the mother, she has to go to work to earn money and at the same time somehow to be sure that her kid is ok. Gender inequality is still present in South Africa, opportunities for work and the amount of wage earned is lower, having to take care of 2 or 3 is hard with lack of money or an income and it often leads to hunger, malnutrition and in the worst-case scenario, to death. As mentioned by Xikombiso and Irene (2017), poverty leads to food deprivation and under-nutrition, which in extreme cases leads to stunting. In 2014, over 10 million South Africans, 19.7% of the country’s population, reported having inadequate food access. Factors such as accessibility, affordability, and quality of available food are part of the reason why over three million people (6.5%) reported had severely inadequate food access. In accordance with David, Louis & Lori (2017), about 53 children under the age of five die in South Africa every day and three-quarters of them do not live to see their first birthday. Most of these children die of preventable causes with malnutrition a key driver of under-five mortality in South Africa. A total of 31% of children who died in hospital between 2012 and 2013 were severely malnourished and a further 30% were underweight for their age.

Malnutrition doesn’t only threaten children’s survival, it undermines their ability to thrive and achieve their full potential. However, this is the result of economic and social inequality. Schools in South Africa are poor and the preparation of teachers is also poor. As mentioned by UNICEF, primary schooling is compulsory for children aged 7 to 15 while an integrated approach to early childhood development aims to give all children between birth and school-going age the best start in life, not to mention that schools’ policy has abolished school fees in the poorest primary schools across the country, helping to attract poor, orphaned, disabled and vulnerable children to school. And yet performance levels are lower than in many other countries in the region and also high levels of school attendance, gender parity in both primary and secondary education and pro-poor school policies are achievements that contrast with the poor quality of education. Even though, South Africa has schools which abolished the fees for education, many children experience a broken journey through school, interrupted by irregular attendance, absent teachers, teenage pregnancy and school-related abuse and violence. Also, around 27% of public schools do not have running water, 78% are without libraries and 78% do not have computers.

Because of the inequality still existing today children don’t have the same possibilities to study as other kids around the world. Kids from disadvantaged backgrounds who live in poverty quit school. Money is the root of all evil if it’s not used in the right way to make the world a better place where to live in. From the data we have analyzed we can observe a slightly improve against poverty in both cases. To fight against economic and social inequality governments ought to stop rich people by taking advantage of poor people by being exploited. For example, in India, some people are working until they are really exhausted; the negative thing about this is that workers are paid just over $2 (£1.30) a day, when they should be paid $7 for a 12-hour shift (Humphrey, 2012). In both countries, India and South Africa rich people get richer, while the poor people get poorer. The sad reality today is that rich people don’t care about their workers in poor countries, they just want money, don’t care about employees who are struggling to make a living for their family to have a normal life at least. What we can do to prevent poverty or to alleviate inequality? To prevent poverty or to alleviate inequality we have international organizations such as UNESCO, UNICEF, ARK, OXFAM. All these organizations have one common target, and that target is to stop poverty and give people a chance to live a normal life.

As UNICEF (2003) stated that their mission is to advocate for the protection of children’s rights, to help meet their basic needs and to expand their opportunities to reach their full potential and is committed to ensuring special protection for the most disadvantaged children – victims of war, disasters, extreme poverty, all forms of violence and exploitation and those with disabilities. Also, their mission is to promote the equal rights of women and girls and to support their full participation in the political, social, and economic development of their communities.

According to OXFAM, ‘In poverty, people have little power and are denied an effective voice. Poverty means little income, too few assets, lack of access to basic services and opportunities, deep inequalities, ongoing insecurity and little opportunity for development. Poverty is rooted in inequality, and in human action or inaction. It can be worsened by natural disasters, human violence, oppression and environmental damage, and maintained by institutions and economic means’. Also, OXFAM mentions that ‘our vision is a just world without poverty: we want a world where people are valued and treated equally, enjoy their rights as full citizens, and can influence decisions affecting their lives’ and ‘people have a right to life and security, to a sustainable livelihood, to be heard, to have an identity, and to have access to basic social services’.

As we observed the missions of these two organizations to alleviate poverty we have to stand together and help poor people in order to live a normal life.

As a conclusion, we should care about economic and social inequality and in this case governments ought to fight against them to provide for their citizens a higher income, more opportunities for a job, better education. If we are able to end poverty, prosperity begins. If we end hunger people start to blossom to reach their full potential. We are shaping the world with the actions we take and every kid/person deserves the right to live a normal life.

Essay on Inequality in the Distribution of Wealth

Inequality in the distribution of wealth is an issue in the majority of societies. The US faces a similar problem where there are considerable disparities in the distribution of income and wealth. The existing studies and statistics reveal that Hispanics are hugely affected since they occupy the lower end in the distribution of wealth and income compared to other ethnic groups. The problem leads to the reduced participation and representation of Hispanics in democracy due to the lack of influence. The government has not been successful in resolving the issue, even with the existence of bureaucracy. I would partner with the government to support the development of a policy for improving the minimum wages expand the infrastructure to revamp the capacities of the low-income communities.

Inequality in the Distribution of Wealth

Inequalities in the distribution of wealth is a common issue in society. There exist extreme disparities where a small percentage of the population has a high concentration of income that the biggest percentage of the population. The inequalities in income create huge gaps between wealthy and low-income households. Income inequality and disparities can be viewed through a diverse array of segmentation based on the different types of distributions (Lindert and Williamson, 2016). For example, the differences could be analyzed based on ethnicity, gender, occupation, geographic location, and historical income. In this scenario, Hispanics are earning the lowest compared to other ethnic groups such as Asians, Whites, and African Americans. Hispanics are significantly affected by the unequal distribution of wealth compared to other ethnic groups despite the efforts put by the government to eradicate the problem.

Importance of Resolving Unequal Distribution of Wealth

Wealth inequality is a threat to economic growth for the country, but it causes a wide range of problems in the long-run. When rich people receive high income, they are likely to save more, and the total consumer spending would fall, thereby increasing the unemployment rates (Lindert and Williamson, 2016). Additionally, whenever households have constant and fixed expenses, low incomes affect their living standards. For example, in case an income remains static or falls, they have to borrow to meet their monthly expenses. This style of life is not sustainable since debt payments are likely to exceed the abilities to repay, hence creating a credit to dry up. Consequently, low-income populations are likely to lose their abilities to meet necessities and even their homes. Inequalities in income distribution segregate people on their incomes where an ethnic group would feel more disadvantaged than the rest. As such, the perspective would destroy the peaceful relationships existing in the community. Therefore, ethnic wealth inequalities would assist in resolving issues of unemployment, improving the standards of living, and promoting a peaceful society for political and economic growth.

How Unequal Distribution of Wealth Is Affected by Federalism

The federal government has affected the unequal distribution of wealth due to the lack of effective policies to promote equality in access to education, employment, and even citizenry. The flawed immigration policy has disadvantaged Hispanics since their low-incomes have been attributed to immigration patterns. The population of the unauthorized migration of the Hispanics between 1970 to 2016 grew by 50%. (Kochhar and Cilluffo, 2018). Notably, the population of these immigrants is at the lower end in income and education distribution. A research conducted in 2017 revealed that by 2015, foreign-born Hispanics aged 25 and below had not graduated from high school, an unusual trend compared to the rest of Americans, which is at 13%. Hispanic immigrants with a degree only constituted only 11% of the population compared to Americans, which had an overall of 31% (Kochhar and Cilluffo, 2018). Hispanics hold an influx of lower-income and skills that contribute to huge gaps in wealth distribution when compared with other ethnic groups.

The federal government has not effectively managed to harness income distribution and access to resources and opportunities for all. Wealth accumulation of an individual may not solely rely on the inter-generational legacies. For instance, individuals from similar backgrounds have different levels of income that determine their abilities to acquire wealth through savings. Killewald and Bryan (2019) found out that the place of residence, home-ownership, household characteristics, and education and income have significant impacts on wealth accumulation. A lack of strategic positioning creates a challenge for a household or a particular ethnic group to acquire wealth. Therefore, the inability of the federal government to close the substantial racial disparities in home-ownership, marriage, income, and educations keeps the gap growing over the years. These factors explain the primary cause of the Hispanics being at the lower end in income accumulation due to a lack of strategic positions in exploiting them.

Infringement of Civil Liberties by Unequal Distribution of Wealth

The existing research suggests that government policies usually meet the preferences held by the populations with higher income (Gilens, 2012). The most affluent citizens have a more significant say in policy development where a majority of the Africans have little or no say in such scenarios. Hence, the achievement of ideal political equality is a challenge due to the considerable gaps in economic inequalities. Gilens (2012) notes that the US government has been a plutocracy more than democracy for many decades. There is an unequal say in the development of government policies where low-income households have insignificant contribution democracy compared to the most affluent ethnic groups.

Wealth inequality seems to have a similar impact on economically advanced democracies. Economic inequality disadvantages low-income people because the populations tend to have reduced political representation (Rosset et al., 2013). A huge gap in wealth distribution makes the government significant represent the middle- and high-income classes while the low-income population becomes underrepresented. Additionally, low wealth accumulation is likely to lower the levels of political interest, electoral participation, and political discussion since the households have reduced confidence in such practices. The unequal distribution of wealth tends to increase the relative power of the affluent people, while the inequality undermines political equality.

The concept of unequal wealth distributions is well explained in the relative power theory. The model views wealth as a political resource where the holders use it to exercise power over those who do not have it. The theory suggests that in a scenario where there are huge gaps between the rich and the poor, the richer are likely to gain more wealth while the poor become poorer (Solt, 2008). The rich use their resources to increase their political engagement and influence in a government, thereby dominating the low-income populations. In the US, Hispanics are at the lower end of the welcome distribution, and therefore, their political participation is reduced. Underrepresentation in the government offers an opportunity for the wealthier races to create policies that favor them or promote their wellbeing. As such, Hispanics and other low-income races, such as Blacks, are likely to have their civil liberties reduced due to their low economic power.

Process of Bringing Unequal Distribution of Wealth to Congress

The process would begin with an investigation of the issue of unequal distribution of wealth amongst the various ethnic groups. Invitation of media personalities or liaising with them would attract media attention. The exploration should offer an account of the races in diverse work environments and occupations, potentially involving the causes of the problem. Experts and individuals holding the high ranks, including the president or the office of the presidency, can also be interviewed or allowed to express their opinions. A journalist should suggest ways of promoting equal distribution of resources across all the races by offering alternative solutions, particularly those that might have been used in other governments. The ability to explore an issue and offer suggestions better than the existing policies would catch the attention of the legislators and even other citizens, thereby increasing the weight of the matter. Consequently, legislators would seek to bring the issue into Congress, where it would be discussed through the established procedures to become a bill.

Congress has the primary responsibility for making laws. The process of making law is not an easy task since the procedural obstacles hinder the proponents while favoring the opponents of the legislation. Making of law involves complex written procedures that need to be followed whenever a member of the Senate or House introduces a bill (Adler & Wilkerson, 2013). The introduction of a bill into Congress that would help resolve the unequal distribution of income might be an uphill task considering the enormous government policies seeking to promote economic equalities through incomes, education, and political representation, amongst others.

However, regardless of the ongoing debate of the unequal distribution of wealth, the media is a useful tool that could be used to draw the attention of the lawmakers on the issue. Melenhorst (2015) notes that existing studies reveal that journalists exert a significant influence on the critical aspects of politics. As such, the media could be used to explore the concept and variations in the unequal distribution of wealth due to ineffective government policies. The income levels and access to quality education and other opportunities need to be explored to a larger extent to create a concern for all the citizens. The influence of the media can be used to acquire legislators’ attention to develop legal regulations of the issue. Melenhorst (2015) also notes that politicians are always critical whenever responding to the attention of the media, either directly or indirectly.

The Attention of the Current President Regarding Unequal Distribution of Wealth

The current president, Donald Trump, was a huge beneficiary of the unequal distribution in rising to power. Sherman (2016) reported that Trump was highly voted the middle-class and former middle-class since this group of people felt they had been ignored for long. Their hope, mortgages, and jobs were gone due to the perception that income inequality and poverty are problems for the minorities instead of the ideal view that they are affected by class, race, and ethnic background. Trump was expected to develop policies that would help resolve social inequalities and making America great again, a common slogan during his presidential campaign.

However, President Trump has not successfully closed the gaps in the unequal distribution of wealth. Instead, a recent study revealed the income gap between the rich and the poor has been growing over his reign, thereby pushing the country to suffer from potentially deadly effects. (Fadulu, 2019). The repercussions of the expanding gap are that the wealthier people are living longer lives while the poor shorter lives. The current government recorded the lowest poverty rate in 2018 since 2001, which stood at 11.8%. Unfortunately, the median household was $63,000 the same year, which remained unchanged from 2017. The income gains also slowed since an increase was recorded in 2016. Consequently, individuals from low-income ethnic groups such as Hispanics are likely to have their expectancy rates further reduced due to the difficulties they face in old age. The current government has not done adequately to solve the unequal distribution of wealth amongst ethnic groups.

Impact of Bureaucracy on Unequal Distribution of Wealth

Research on the impact of bureaucracy on the unequal distribution of wealth is limited. Henderson et al. (2007) suggest that effective and stable bureaucratic systems can help create strong state economic agencies. The organizations would encourage businesspeople to invest while the government expands the public infrastructure. The agencies help to create room for reducing the occurrence of corruption by allowing the cost of hidden taxation, especially in the private sector. Bureaucracies are encouraged to increase the viability of an economy for investors, thereby creating more employment opportunities for people. Bureaucracies have been found to support economic growth but no close correlation with the distribution of wealth.

However, Utama (2014) noted that low quality of bureaucracy would create room for the leaders to pursue their interests. As a result, the inequalities in the distribution of wealth and income would be rampant. Although it might not be clear about the impact of bureaucracy on the distribution of wealth, it suggests its ineffectiveness in addressing the issue since the current government has not managed to close the gap.

Current Organizations Addressing the Problem

The government has the primary responsibility for solving the unequal distribution of wealth issue in the country. It uses its agencies, including the legislature, to develop policies and the Federal Reserve that oversee the management of income and wealth. The primary changes conducted by governments in the management of the distribution of wealth include taxation and the stock market. The government agencies harness measures of distributing income across the various households, such as the Tax Cuts and Jobs Act, to control the accumulation of wealth (DeVore, 2020). For instance, the tax reform of Trump focuses on an overhaul of tax codes, corporate tax rates, and tax benefits. Through such measures, the government seeks to protect the interests of the low and middle-income classes.

Partnering with the Government to Solve the Issue

I could partner with the authorities and legislators, either local, state, and federal government, to eradicate unequal wealth distribution in different ways. I would suggest that the government makes employment more profitable, particularly for low-income employees. Raising the minimum wage would a way of improving the financial capacities of households from the low-income class. As such, this technique would help the government make workers expensive without hurting them. Another strategy for making the workers expensive is to increase the earned income tax credit and to offer subsidies for the child-care services for low-income families. Consequently, easing the occupational licensing needs would create effective paths for more people to assume higher paying job positions.

I would join and applaud governments’ efforts to expand the infrastructure, especially in regions covered by low-income households. Better schools, hospitals, and transport networks are likely to improve the prosperity and productivity of workers and businesses. Additionally, increasing digital connections, particularly for the sparsely populated populations, would offer increased opportunities. The overall expansion of the infrastructure would enable minority communities such as Hispanics to grow their capacities through businesses, education, and quality care to facilitate their efforts in the accumulation of wealth. As such, rural areas or regions occupied by low-income communities would support the growth of decent homes for minorities to access developmental subsidies and relaxed zoning for their families. Therefore, since the government uses policies and public mobilization to solve the unequal distribution of wealth, I can partner with it by joining and applauding such efforts.

Conclusion

The common issue in my society is the unequal distribution of wealth amongst the communities. Hispanics have been the most affected due to the high rates of poverty and the occupation of low-income paying jobs. The significance of solving the unequal distribution of wealth is to improve the living standards of the community and the entire country. It would also improve employment and promote a harmonious society. The federal government has affected the unequal distribution of wealth due to the lack of effective policies to promote equality in access to education, employment, and even citizenry. The issue decreases the low-income engagement and interests in politics, thereby prompting them to willingly and unwillingly follow the policies developed by the most affluent ethnic groups. The current government has not been effective in resolving the issue since the gap between the rich and poor is widening.

References

1. Adler, E. S., & Wilkerson, J. D. (2013). Congress and the Politics of Problem-Solving. Cambridge University Press.
2. DeVore, C. (2020). The Trump Tax Cut Is Two Years Old, Where Are the Jobs Being Created? Forbes.com. Retrieved from https://www.forbes.com/sites/chuckdevore/2020/03/05/the-trump-tax-cut-is-two-years-old-where-are-the-jobs-being-created/#7c7c5f4f2bfe
3. Fadulu, L. (2019). Study Shows the Income Gap Between Rich and Poor Keeps Growing, with Deadly Effects. New York Times. Retrieved from https://www.nytimes.com/2019/09/10/us/politics/gao-income-gap-rich-poor.html
4. Gilens, M. (2012). Affluence and Influence: Economic Inequality and Political Power in America. Princeton, NJ: Princeton University Press.
5. Henderson, J., Hulme, D., Jalilian, H., & Philips, R. (2007). Bureaucratic Effects: ‘Weberian’ State Agencies and Poverty Reduction. Sage Publications, 41(3): 515–532. https://doi.org/10.1177/0038038507076620
6. Killewald, A., & Bryan, D. (2019). The Production of Wealth Gaps Between Whites, Blacks, and Hispanics. Harvard.edu. Retrieved from https://sociology.fas.harvard.edu/news/production-wealth-gaps-between-whites-blacks-and-hispanics
7. Kochhar, R., & Cilluffo, A. (2018). Key Findings on the Rise in Income Inequality within America’s Racial and Ethnic Groups. Pew Research Center.
8. Lindert, P. H., & Williamson, J. G. (2016). Unequal Gains: American Growth and Inequality since 1700. Juncture, 22(4), 276-283. https://doi.org/10.1111/j.2050-5876.2016.00874.x
9. Melenhorst, L. (2015). The Media’s Role in Lawmaking: A Case Study Analysis. The International Journal of Press/Politics, 20(3), 297-316. https://doi.org/10.1177/1940161215581924
10. Rosset, J., Giger, N., & Bernauer, J. (2013). More Money, Fewer Problems? Cross-Level Effects of Economic Deprivation on Political Representation. West European Politics, 36(4), 817-835. https://doi.org/10.1080/01402382.2013.783353
11. Sherman, E. (2016). What a Trump Administration Might Mean for Income Inequality. Forbes.com. https://www.forbes.com/sites/eriksherman/2016/11/12/what-a-trump-administration-might-mean-for-income-inequality/#232677643a78
12. Solt., F. (2008). Economic Inequality and Democratic Political Engagement. American Journal of Political Science 52(1): 48–60. https://doi.org/10.1111/j.1540-5907.2007.00298.x

Socioeconomic Inequality of the Post-Communist Countries of Eastern Europe and Its Reasons: Essay

It is undeniable that the post-communist countries of Eastern Europe are now experiencing inequality. Assessing the causes of such a phenomenon is an intricate issue because of the very dynamic essence of the concept of inequality itself. Crucially, this essay will delve into the contrast between the ‘distributive conception’ of inequality and the ‘relational view’ of inequality and their implications. As such, this essay will explore the consequences of the metropolization experienced by such countries, the consequent social polarisation, and the impact of capitalism on inequality. The statistical data deployed in this essay are collected from the database of Eurostat: an institution that standardizes sets of data coming from different European states, as such, now that most processes of economic transformation in the CEE counties have been completed, comparison between different states can be meaningfully performed. Therefore, this essay seeks to show that capitalism itself is the ground of all the various causes of the socioeconomic inequality experienced by post-communist countries of Eastern Europe.

Even if describing inequality in economic terms might seem reductive, inequality is usually discussed in such interpretation because it is the only way to observe and assess intangible phenomena such as social contracts which, otherwise, cannot be empirically assessed. This perspective reflects the distributive conception which consists in the mere coincidence of what one person has with what others in the comparison class independently have, and need not entail that the persons being compared stand in any social relations with one another. Following such reasoning, inequality is caused by an unequal distribution of goods and is thus strictly related to economic growth, hence, I shall now consider the causes of growth disparities in different CEE regions and countries. Growth dissimilarities between confining countries can be attributed to the J-curve effect. Indeed, by analyzing the development paths of the CEE countries, we can see that at least to some extent in the first phase (1989–1995) they followed the J-curve, which says that the more radical the economic reforms, the deeper the initial economic crisis and the smaller the risk of stagnating growth at later times. This can be noticed if we compare two countries such as Poland and Romania; the first firmly employed radical reforms which started an initial economic recession quickly overtook by a prompt GDP recovery in 1990 and 1991, while the latter hesitation to initially reform their economies later headed to a slower GDP growth until it accedes to the EU. However, such an explanation can be considered superficial, since it does explain economic growth dissimilarities observed within regions of the same country, but only at national levels. It cannot, therefore, be the sole explanation of why post-communist European countries experience inequality. For a more accurate and truthful investigation of such phenomenon the new economic geography thesis, which since the 1990s has focused the attention of economists on the way that geography influences economic growth, in particular the spatial agglomeration of economic activity, needs to be carefully analyzed. Indeed, what they discovered is that such countries are increasingly affected by two main phenomena: globalization and metropolization. The latter is a key process responsible for the widening of disparities in the development levels between the best-developed and the worst-developed regions of individual countries. Indeed, such economic broadening happened because only the biggest metropolitan centers had the infrastructures and human capital resources necessary for the development of modern economic tertiary sectors such as finance, advertising, law, and insurance. They, therefore, developed and diversified their economies, while non-metropolitan regions were left to the less profitable agriculture as the main mean of revenue. This can be seen if we compare the GVA (gross value added) share in advanced services compared to a national average of 100, with cities such as Vilnius, Warsaw, Prague Budapest, and Bratislava averaging between 140-190, while southern regions of Latvia and central regions of Poland and Czechia averaging between 50-60 (Eurostat, 2012). But also if we consider that 174 regions of the CEE states had a GDP per capita below the national average, while 20 regions had more than double the national average (Eurostat, 2012). Indeed, the causes of regional divergence include exogenous, endogenous, and structural aspects, with exogenous referring to the accessibility of a region, endogenous to the diversification of the region’s economy, and structural referring to the presence and concentration of advanced economic sectors. Hence, it is evident that the beneficiaries of the economic transformation following the EU accession were the metropolitan areas. Indeed, due to greater economic diversification in sectors of greater value, possible due to better human capital and essential infrastructure such as airports, metropolitan areas were the main receiver of inward capital, meaning that they economically developed to the detriment of non-metropolitan areas which were left to rural agriculture as the cornerstone of their economies. Thus, metropolization drastically boosted economic disparities between regions, therefore, creating socioeconomic inequality.

On the other hand, the ‘relational view’ advocates for a more sophisticated and contemporary analysis able to better explain modern egalitarian social movements. For example, feminists seek reproductive autonomy for women, there is no request for an equal distribution of goods, but it still is a request for equality. This is because the relational view is concerned with equality in social relations and considers equality in distributions as a consequence of it. It prioritizes normative demands arising from the newfound consciousness of objectionable inequalities based on age, sexuality, disability, and membership in less developed states. Therefore, it can be said that on the relational view, the only comparisons that fundamentally matter are among those who stand in social relations with one another and in which the goods of equality are essentially relations of equal (symmetrical and reciprocal) authority, recognition, and standing. As such, the ‘relational view’ of inequality is no longer focused on legal formalisms, claims of civic equality, or equal career opportunities, but rather it has evolved towards more contemporary egalitarian social policies such as equal opportunities of education and equal distribution of wealth, income, and public goods. Under this perspective of inequality, to identify what causes it, we need to look at the social interactions between habitants of the countries of Eastern Europe. Crucially, the stasis of regional structures could be observed, a process which was accompanied by increasing spatial polarisation, mostly driven by the development of metropolitan regions on the one hand and the stagnation of the least developed agricultural regions on the other. This has meant that while the more dynamic metropolitan centers attracted and developed highly educated and internationally successful professionals and entrepreneurs, the peripherical regions faced a high share of employment in agriculture and the collapse of the pre-existent economic base which worked as development barriers, therefore, resulting in persistent poverty and social exclusion. Furthermore, the presence of such highly qualified human capital and, at the same time, cheap labor, compared to the investor’s homeland, in metropolitan centers attracted inward capital investments. Such process developed and diversified metropolitan economies to the detriment of rural areas, hence further deepening imbalances between modern professional workers in the cities on one side and poor farmers in more rural regions on the other. Because social relations between individuals are empirically inaccessible, social polarisation can only be noticed when we compare the change in population employed in agriculture between 2000 and 2008 and the change in GDP per capita in the same years, assuming that a higher GDP per capita implies, on average, better social circumstances for the population. Therefore, we can see how countries such as Bulgaria or Lithuania, which respectively reduced agricultural unemployment by 21.1% and 7.8%, experienced a GDP per capita growth as high as 17.1% and 11.3, while countries like Poland and Latvia, which increased the agricultural share of employment by 7.6% and 1.1%, respectively experienced insignificant growth of 0.9% in the case of Poland or even negative growth of -4.4% in the case of Latvia (Eurostat, 2012). Thus, if inequality is understood through social relations parity between people, we can conclude that the economic transformation following the EU accession caused inequality in the post-communist East European countries since they mostly benefitted metropolitan centers, where habitants developed into modern professionals, to the detriment of rural areas, were farmers were socially excluded and left unable to modernize.

Even if, whether adopting a ‘relational view’ or a ‘distributive conception’, the main drivers of inequality can be identified, the problem lies in the fact that egalitarians have always been better at criticizing inequality than at devising a coherent and successful conception of a society of equals. Indeed, conceptions of social equality have often been utopian and unable to provide valid alternatives to the Western conception of social freedom and, as a result, inequality. A clear example can be the socialist project of a centralized state-controlled economy failing to develop a valid alternative to the free market prices’ role in determining an efficient allocation of scarce resources. It has even been argued that egalitarian policies are so inconsistent that egalitarian programs addressing one type of inequality sometimes reinforce inequality in the other. The result is that most modern states, CEE included, reverted to a capitalistic civilization, which, however, as I will now try to show, always leads to inequality. This can both be explained philosophically and empirically. The conceptual explanation of why inequality is a constant feature of capitalism can be attributed to Rousseau (1761). Indeed, he believes that the first who, having enclosed some land, thought to assert ‘this is mine’ was the true founder of civil society”. This means that when men get into contact, an infinite chain of desires starts as comparison takes the place of compassion or, in Rousseau’s words, ‘amour prope’, a sentiment characterized by egoism, futility, and vanity, overcomes his concept of ‘amour the soi’, characterized by empathy and freedom. Central to Rousseau’s argument is the belief in the corrupting force of private property since it steers men towards greed, inequality, and war, creating a civilization where men fight each other to get the maximum material possession, regardless of sustainability and compassion. Consequently, desires become needs creating a total dependency on material possessions. A negative society is therefore formed as bogus social contracts, which sacrifice human’s intrinsic benevolent freedom for the security of private property, are signed, and, hence, human life is now grounded on a property which is itself a construction of human greed. Under this perspective, it is evident how, since private property is the cornerstone of capitalism, inequality is a permanent feature of a capitalistic mentality. Empirically speaking, we can observe that whether we observe economic growth or economic recession, the outcome in a capitalistic system is always inequality. Indeed, because of the rapid structural changes following 1991, according to the literature, such countries face tensions between national and regional development. New, higher value-added activities tend to concentrate initially in particular regions so that regional disparities increase along with national growth. More generally, increasing social polarisation is particularly visible in periods of accelerated growth because fast economic growth boosts the metropolization process, which consequently broadens regional divergences. Capitalistic growth has produced socioeconomic inequality in the CEE regions in recent years as the development dynamics of the remaining regions, mostly problem regions, is visibly lower when compared with metropolitan areas. Indeed, after 2000, all the CEE countries, except for Latvia and particularly in Bulgaria, Romania, and Lithuania, experienced economic growth as measured by GDP per capita, however, there were many regions with dynamics lower than 90% of the country’s average, particularly in Bulgaria, Romania, Hungary, Lithuania and Czechia, and the fastest growth rates were mainly focused around capital cities and surroundings. On the other hand, also the 2008 financial crisis boosted socioeconomic inequality. Indeed, the crises were felt everywhere, adding to the long-term challenges of growth and recovery of the most rural regions of Europe, and undermining previous sources of growth. However, metropolitan regions, with the most diversified economies, suffered significantly less than other regions, particularly those with an underdeveloped model of economics, which got considerably more exposed to the symptoms of the crisis. Therefore, these empirical observations demonstrate how, whether capitalism properly functions and the economies grow, or whether it crashes, such as in 2008, the outcome is always increased socioeconomic inequality.

To conclude, segregation is a linchpin of socioeconomic inequality, and integration is required to create a more democratic and tolerant culture.