Neoliberalism is the main cause of the difference between the rich and the poor in the states. It expanded the market efficiency by competitions between individuals, raised a gap between the rich and the poor. Rich people are becoming much richer based on their original properties while poor people are becoming poorer and suffer great economic problems in their lives. This does not only happen between individuals but also between companies. The unemployment rate increased because of neoliberalism.
So to summarize my understanding of the simplest way to describe the causes of inequality are; rent-seeking activity and the rise of The Predator State, then tax policy, macroeconomic policy, corporate governance and regulation, or lack thereof, decline in unionization, globalization, technological change, and finally, education. These are all due to the failure of government to regulate capitalism. And because of this we have a super wealthy upper
Effects of income inequality The impact of economic inequality affects a large part of the population in different ways. The most obvious effects of wealth inequality are that it creates social classes. The first subdivision that we can draw is that population is split in two categories: the rich and the poor. There are a variety of economic effects caused by income inequality. Wealthy people have a higher income and consequently spend less of each marginal dollar, which caused the economic growth to slow.
It affects the distribution of real income, people on fixed incomes suffer as the purchasing power of their incomes decrease as price levels rise. Secondly, purchasing power od households on fixed income decline, as inflation tends to result in more unequal distribution of income as those on lower incomes find their wages do not rise as quickly as those on higher incomes. In times of high inflation household tend to purchase real assets that retain their real value since their prices rise faster than the inflation rate. Finally, another negative impact is the income tax earners suffer from fiscal drag pay rises to combat inflation put them into higher marginal tax brackets. This means as employees’ nominal wages increase with inflation their real wage (purchasing power of nominal wages) may remain constant.
The first reason Obama gives to support his claim is that rising inequality and lack of upward mobility is bad for the economy. For example, in paragraph 19, he states ”One study finds that growth is more fragile and recessions are more frequent in countries with greater inequality. When families have less to spend, that means businesses have fewer customers, and households rack up greater mortgage and credit card debt…” This evidence supports the claim by illustrating that the American Dream is threatened because when families have less to spend, it creates a chain of events that end up affecting many people that work hard to achieve the American Dream. People then
Developing countries today are having a hard time to improve because of the self doubt and issues the colonization brought. In example, the wars—national and international—caused great dejection in the economies of the affected countries and some are still struggling to rise, whilst others were able to recover. However, on the other hand, one of the pro that came out of colonialism is the international trade that greatly helped countries. Although in the beginning, Europeans gained by the increased wealth through the industries and modernization, it also enabled the colonies to learn the stakes of industrialization. However, citing Amy Bhatt, who
However as it has been seen, these institutions creates and dependency relationship between them and the host country whereas in exchange for their services, they implement Structural Adjustment Programmes (SAPs) where as they alter a countries policies and economic structure, etc, in effects to “promote economic growth.” In reality they usually leave the country worse off creating higher levels of poverty and lowers the standard of living in those countries. For example the incident that occurred with Jamaica as well as Trinidad and Tobago crippling those nations (http://www.finalcall.com/artman/publish/business_amp_money_12/article_8921.shtml). Another example of the effects of neoliberalism is with the company Monsanto, which owns majority of the world’s grain. This company effectively cripples farmers as once they start using their product, they cannot stop due to terms and conditions in using it. This same company produces the herbicides and insecticides to protect the crop yet which cause the issues in the first place, therefore the farmer makes a loss, while the company keeps getting richer and the farmers become poorer
A more detrimental impact on the current minimum wage in our economy is the inflation rates and the fact that inflation tends to reduce the populations purchasing power of money. According to input by McConnell, Brue, and Flynn, inflation is caused by an excess of total spending that exceeds a firm’s production volume (McConnell Pg 206). In other words, by raising the minimum wage and creating human stimulus, businesses can reach full employment and maximum output. Minimum wage affects inflation because inflation imposes a domino effect in overall economic health and success. Increased costs reduce supply resulting in less total output and employment cuts.
Due to the way wealth is concentrated it also affects the nation’s economy. Most of the consumer spending depends on individuals who are at the bottom. Having a country which is controlled by the wealthy affects the growth of the economy. Although income inequality has many negative effects on a nation, it also is a symbol of growing success for the rich and the poor. For instance “income inequality (different incomes among different people with different skills and
Karl Marx was the founder of conflict theory. Conflict theory examines the difference between ranks or classes in material and nonmaterial resources that cause conflict. The classes, with more power use that power to exploit the weaker or powerless classes. Marx originally thought the classes would become equal with time, however, with the big push to make profit and the new technologies of America the gap between the rich and the poor is only widening. Consequently, the rich become richer and the poor become poorer.
However it does have so great major parts. To start off, America’s economic equality gap is huge, which is constantly a disturbing factor. On misconception often made about economic inequality is that “the poor are poor because the rich are rich”; this would be a false statement. The rich often own profitable business creating big enterprises. On the other hand, the poor have to go thorough circumstance, which makes their life at the economical stage it is now.
Income inequality is a global issue that need to be addressed and is a threat to the individuals or household with low income. In today’s world the rich are becoming rich while the poor are deteriorating and going below the poverty line. To me, imposing high income taxes would not bring an immediate solution only that, it accelerates the burden. Because the higher the tax rate, the higher the rate of poverty subjected to the low income individuals. Due to that, the government should provide quality education to the citizens so that they become self-reliant in the future and experience high living standards.
Problem Identification Income inequality has been said to be the main cause of the declining middle class. Many concerns exist regarding the change of pattern in the distribution of income; families that once were in the middle of the distribution have shifter upward and downwards. Economist Kuttner, Author of The Economic Illusion, argued that this shift in pattern began as well-paying jobs in the manufacturing industry and lack of unionization in growing sectors declined. Another contributing factor to the ever rising income inequality is attributed to the rise of skill-biased technology. Advancement in technology has increased the demand for highly educated and skilled workers.