Income Inequality: another Inconvenient Truth
Income inequality is a fact that lies at the very core of capitalism. It is an economic situation where some individuals, normally the minority, owns much wealth in an economy while the majority lags behind with minimal wealth or poor (Betti & Achille p143). One can fail to comprehend how people within a common economic set-up can live at both extremes of poverty and wealth. Inequality for All: another Inconvenient Truth is a documentary created by Robert Reich, an American Economist and Academician to attest that American capitalism has abandoned or neglected the low and middle-class people while empowering the super-rich by making them even richer. The controversial documentary has extensively drawn critics as well as creating awareness among the American people, a country that for ages has lived by and supported capitalism at all costs. Whereas Robert Reich provides ample evidence that capitalism is the root source of unfair income inequality, studies presented by economic analysts and quantitative sociologists convince me that there are other more influential economic forces within the American economy that contribute to income inequality.
Capitalism provides a system where individuals own and have full right to the economic benefits of their property without limits of ownership and usage. One can own a city in such economic set-ups and have full economic rights over it without pressure from the government to allocate some share to the less advantage. It is an economic system prone to most democratic systems of governments. Naturally, people must work to earn a living and in this scenario, there are two kinds of people: the one who owns the production tool (property or capital), and the one who is employed to work on the capital in order to earn a living (Betti & Achille p175). The less fortunate people in an economy can hardly own capital and are therefore the mostly employed persons. In other terms, the poor serve the rich and this is enhanced by capitalism. The whole set-up results in a vicious cycle of wealth and poverty among the rich and the poor respectively; conforming to the fact presented by Robert Reich that the rich get richer, and the poor get poorer.
Though I concede to the fact that it is proper to own private property without limits as long as it is attained through the right means to discourage laziness and enhance hard-work, I still think that measures should be taken to regulate the rate of which the rich can acquire such property (Madden p96). This is because when the rich are completely allowed to acquire excessive property at a very fast rate, economic oppressions would ensue and the possibility of the socially feared totalitarian form of leadership attested in George Owen’s book 1984 would become a reality. Totalitarianism is an oppressive form of inequality that combines wealth and power to critically dangerous extremes; subjecting the less fortunate members of society to slavery, oppression and poverty.
According to Robert Reich, the rich have the potential to invest and create more wealth, which can be further utilized to make more investments for creating extreme wealth. The poor however lack the capital to invest and therefore will always be a subject to the wealth accumulation of the rich (Ryscavage p376). As far as everybody should be entitled to the fruits of their hard-work, some people have extreme potential of acquiring wealth and should be regulated in wealth acquisition to maintain a stable economic balance. Of course many will disagree to this point on grounds that the economic crème de la crème are the fundamental part of wealth creation in an economy and should be allowed to invest what they have in this respect, but with increasing poor individuals and oppressed middleclass persons can adversely affect an economy. In fact, economic growth is normally empirically measured by the standards of living as exhibited by all persons – a fact that is unrealistically presented by income per capita estimations (Madden p106).
In contrary, capitalism cannot be totally held responsible for the prevailing income inequality in America, but there are some aspects of economics and commerce that influences it as well. For instance, historical factors have largely contributed to income inequality. Following the history of individuals or groups of individuals; some that run far before capitalism existed, people differed in possessions and some even served others instead. Historical trends have a peculiar way of lasting through ages (Madden p82).
Another argument against Robert Reich’s claims that income inequality is a subject of capitalism is the fact that behavioral orientations have a great deal to do with income inequality. People existing within a common economic set-up can be subjected to same amounts of income, but the difference in economic levels can still be witnessed and confirmed on grounds that people behave differently when it comes to spending. Their consumption (expenditure) behavior affects the domains of their investment and future income at large. In this case, capitalism cannot be blamed for the difference (Aguiar & Mark p282).
As much as capitalism favors the rich, market situations and structures play a role in the controversial state of income inequality. Market structures like monopoly enables the producer to discriminate in many forms since their products are inelastic to demand determinants like price. The poor being the majority, they have the power to manipulate the price of a product through the free market or perfect competition market (supported by the principles of capitalism) to their advantage by lowering the prices of the products they majorly consume, hence reducing the capital gains of the rich who make a substantial part of the producers (Ryscavage p338).
Yet it is necessarily true that capitalism contributes to income inequality as suggested by Reich, it is realistic, as I have been suggesting, that historical, government application/allocation of national income, legal and product market factors have a role to play in it all together. As much as the rich should be protected and entitled to their wealth, policies regulating their wealth acquisitions should be laid to control the gap between the rich and the poor; which can be very adverse to the national economy at large (Betti & Achille p127). A state of balance is necessary for equity in economic growth and development. However, the state of economic equality is ideal and not supportive in terms of economic growth. When everybody is rich, there is no relative difference and nobody will be willing to participate in production processes which realistically must involve a wealthier person or the capital owner (Aguiar & Mark p254).
Aguiar, Mark, and Mark Bils. Has consumption inequality mirrored income inequality?. Cambridge, Mass.: National Bureau of Economic Research, 2011. Print.
Betti, Gianni, and Achille Lemmi. Advances on income inequality and concentration measures. Abingdon: Routledge, 2008. Print.
Madden, Janice Fanning. Changes in income inequality within U.S. metropolitan areas. Kalamazoo, Mich.: W.E. Upjohn Institute for Employment Research, 2000. Print.
Ryscavage, Paul. Income inequality in America an analysis of trends. Armonk, N.Y.: M.E. Sharpe, 1999. Print.