Question

15.After reading The Spirit Level by Wilkenson & Pickett, discuss the impacts economic inequality has on society

Answer 1

Income inequality's rising rates also correlate with economic growth. In 1979, several new programs were launched by the Chinese government to stimulate the economy. Soon thereafter, the annual growth rate of Chinese GDP increased rapidly from 5.3% in 1979 to over 15% in 1984.The growth rate rose and fell in the years that followed, but China has generally maintained one of the highest growth rates in the world since the 1980s. Economic inequality in China also increased significantly during the same period of time that China's rapid economic growth took place. Another example showing the apparent correlation between economic growth and disparity in wealth is the economic expansion experienced by the United States in the years prior to 2008. This time coincided with rising income inequality levels. During the economic recession, inequality fell between 2007 and 2008. Then, as the U.S. economy recovered from recession, income inequality rates also recovered.

A society with a marked economic inequality is more unequal than a society with a relatively equal distribution of wealth. As discussed above, unconstrained economies inevitably tend to develop pronounced economic inequalities. Therefore, economic equality generally requires the use of redistributive state policies such as progressive taxes. Basically, economic equality requires the "have's" to be taken and given to the "have not." Redistribution does not seem fair to some, particularly from the wealthy's perspective. Taxes and other redistributive policies that involuntarily take assets from individuals without an equivalent exchange in order to reduce income inequality. Although redistributive policies typically benefit all members of a society, the wealthiest segments of society bear the majority of the cost of these social benefits.

In economically unequal societies, growth is suppressed by the decreasing availability of human capital investment after a period of increased growth. Physical capital is becoming increasingly scarce, as fewer people have funds to invest in education and training. As a result, human capital demands are difficult or impossible to fulfill, and economic growth is slowing down. In addition, market demands for risky unsecured loans are rising, which raises the risk exposure of borrowers to the default of the borrower. Further market risk raises the instability of the market and the likelihood of cascading defaults like the 2008 subprime mortgage crisis

The incentive to commit crimes is increased by inequality. For the rising number of poor people living in an unequal society, fewer means of legally accessing assets are available. Even taking into account the risks of punishment, illegal methods of acquiring assets can yield better returns than legal means of obtaining resources. By reducing law enforcement spending in low-income areas, a wide gap between rich and poor tends to increase crime. Wealthy members of a community tend to focus on isolated communities, particularly as the gap between rich and poor increases.