Understanding Inequality: What Causes Imbalance And What Can We Do About It?
In The Haves and the Have-Nots, readers gain a more nuanced understanding of inequality.
This work helps breakdown both the causes and consequences of global economic disparity, exploring how socioeconomic disparities manifest in different countries around the world.
Scholarly definitions of inequality are also discussed in this book which gives readers insight into why gaps between economic statuses exist.
The sections contained within this book offer insight into a variety of topics such as the rationale behind why inequality can be viewed as a positive thing, methods used to measure it, and why it is on an incline again.
Ultimately, these frameworks give readers a better look at inequality – allowing them to form informed perspectives instead of basing their ideas upon assumptive notions.
Can Social Arrangement Challenge Income Inequality? Pareto Vs
At first, Italian economist Vilfredo Pareto’s studies showed that regardless of a society‘s social arrangement, income distribution among individuals remained more or less unchanged.
However, this was challenged by Russian-American economist Simon Kuznets who theorized that inequality between individuals can actually change depending on developments in society.
Kuznets conducted extensive research and found that when an economy shifted from an agricultural focus to an industrial one, income inequality increased because the new industrial class earned considerably more than farmers.
However, as people became more educated and state policies changed, such as through government spending and taxes which redistributed income towards those who need it most, income inequality began to stall before eventually decreasing.
These findings demonstrate that changes in social arrangements, such as through progressive state policies, do indeed have an effect on income inequality for both individuals and classes alike.
The Relationship Between Inequality, Economic Growth And Social Justice
Inequality is intricately linked to both economic growth and economic justice.
To determine if inequality is good or bad, it’s important to consider the impact it has on a country’s economic growth.
As an analogy, you can think of inequality like cholesterol – too much of it can be bad and cause health problems, while a balanced amount can be beneficial.
For example, when inequality encourages people to work hard and strive to innovative entrepreneurial endeavors, this propping up or lifting the economy and thus can be seen as positive.
Alternatively, if it creates complacency among the population, with only a select few able attain higher positions in society and negatively impact economic growth through reduced creativity, then it is generally viewed as negative.
Inequality also plays a large role in economic justice by influencing whether certain social arrangements are accepted or not.
When injustice based on race, gender or even inherited wealth that allow for an unequal distribution of wealth is present within a society then there will likely be protest from various individuals looking for reform which speaks to their dissatisfaction with the current state of affairs.
Ultimately, this shows us how closely intertwined inequalities are with both economic growth and justice.
Measuring Income Inequality Through The Gini Coefficient
Assessing inequality in a country or continent is no easy feat.
Although there has been advancement in the techniques available to measure it, it remains one of the most difficult tasks.
For now, we have the Gini coefficient – an invention by Italian economist Corrado Gini which mainly consists of comparing the income of an individual with that of the rest of the population and then calculating the average across all people.
This calculation results in a number ranging anywhere from zero (no inequality) to one (maximum inequality).
This method can be used as a basic model for made comparisons on entire countries and continents to identify how much inequality exists in each place.
Countries like Latin America typically have higher Gini scores, showing greater levels of inequalities.
On the other hand, scandinavian countries typically score lower on this metric due to their more egalitarian measures put into place.
It’s clear that while there are ways to measure income related inequality now, doing so still remains a difficult task.
Comparing Nations’ Income Through Time With The Power Of Purchase Parity And Human Labor Purchasing Power
Comparing the wealth of different nations — and individuals — across different eras can be complicated, but it is possible using a couple of methods.
One way to compare income levels between countries at different times is to use purchasing power parity (PPP) by converting the country’s currency into an imaginary standard currency based on the US dollar.
The resulting values will show how much money can buy the same ‘basket of goods’ in each country, at any given time.
It’s also possible to make these comparisons with labor by measuring how much income a person has when compared to the amount of workers (116,000 for John D.
Rockefeller in 1937).
These methods allow us to get a better picture of global wealth inequality over time and across countries.
For example, we know that half of the world’s wealthiest one percent are made up of 29 million Americans; four million Germans; three million French, Italians and British; two million Canadians, Koreans, Japanese and Brazilians; one million Swiss, Spaniards, Australians and more.
Through this method we can clearly see that there aren’t any significant numbers from Russia or Africa, India or Eastern Europe being included in these wealthy groups.
By using PPP and labor measurements we can compare the inequalities of countries and individuals across different eras — giving us insight into where wealth is distributed today compared to yesterday.
Can Socialism Create True Equality Or Does It Just Mask Corruption?
It’s true that in comparison to capitalist systems, socialist societies are generally more egalitarian.
This is largely due to its push for the nationalization of large industrial and landowning fortunes, as opposed to privatization.
However, what many people fail to realize is that socialism can also dampen the incentive for citizens to work hard or be creative.
When everything from education to healthcare is predetermined by the state, people may not prioritize innovation or have a motivation to try something new.
Take East Germany for example – although it was considered one of the most advanced socialist countries at the time, factories were mainly producing Trabant and Wartburg cars which were inferior versions of their counterparts in West Germany.
This lack of incentive ultimately proved to be socialism’s downfall and highlights why having an equal society might not be worth it if sacrifices regarding incentives need to made.
Additionally, socialist governments are often plagued by corruption which further detracts from achieving an idealized “equality.”
The consequence is that although socialism may be more egalitarian than capitalism on a macro scale, it diminishes drive and ambition on an individual level thereby effectively defeating its own cause.
The Impact Of The Lucas Paradox: How Inequality Among Nations Increased After The Industrial Revolution
Inequality among countries has been on the rise since the start of the Industrial Revolution.
Before that time, intercountry inequality was relatively limited because most nations were still operating at a subsistence level.
But once industrialized nations had the means to produce goods and take advantage of new technology in production, they charged ahead while other countries lagged behind economically.
As a result, income disparity between wealthy industrial countries and poorer countries like Brazil or India increased significantly.
This continued until the 1950s, but then saw a period of decreased inequality.
Fast forward to today, however, and it appears that we are facing a resurgence of inequality between rich and poor nations.
Reasons for this include things like the Lucas Paradox – which refers to capital circulating mainly in from rich countries instead of from rich to poor countries – and globalized investments flowing more toward wealthy nations due to their lower risk factors.
The Place Of Your Birth Predominantly Determines Your Income Inequality
It’s no secret that financial status is determined to a great extent by where you are born and your parents’ income.
Karl Marx noted this more than a century ago, but modern times have shown us just how true it is.
Today, your place of birth contributes more to global income (over 60 percent) than any other single factor.
This means that if you were born in the US or France, the working classes there will have far greater economic standing than those born in countries such as Angola or Cambodia.
This barrier to wealth is even further compounded by family income class.
When we look at factors like gender, race, age and hard work combined with a person’s place of birth and their parent’s income class, we find that these are responsible for much more than 80 percent of overall lifetime earnings.
In short, improving your financial position through hard work alone may not be enough – first you must understand the inherent advantages given to those born into specific countries and incomes classes.
Comparing Inequality In The United States And Europe: Exploring Causes And Global Middle Class Trends
We can compare inequality among nations by taking a look at their Gini scores and understanding the middle class of each country.
Here’s what we know: when comparing the United States to other countries in the European Union, the US had a higher Gini score.
This is because rich people and poor people are dispersed throughout America, whereas the gap between different EU countries was a major factor for inequality in Europe.
If you take a look at the global middle class, you’ll find that most of them are situated in Asia with fewer amounts in Africa and Latin America.
This is as this group doesn’t even reach the poverty threshold of developed countries since they have much higher incomes than other nations across the world.
By studying Gini scores and measuring things like median income, we can effectively compare inequality among different countries.
It’s useful to understand each country’s unique position so that we can develop appropriate solutions moving forward.
Wrap Up
The Haves and the Have-Nots by Arthur C.
Brooks is a thought-provoking book that takes an insightful look at inequality worldwide.
In it, he makes the argument that there are three main types of inequality: individual or community based within a nation, between nations, and global.
Brooks argues that it’s not just individuals who suffer from inequality–countries do too.
He shows how a person’s country of origin has the greatest impact on their income and how global inequality keeps entire countries in poverty.
He stresses the need for social systems to be revised to reduce these inequalities.
Overall, The Haves and the Have-Nots is an eye-opening read that sends an important message: when it comes to tackling global inequality, no one can do it alone; we must work together as a society to create equal opportunities for all, with each nation having a critical role to play.
