The Rich Getting Richer and the Poor Getting Poorer

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TheRich Getting Richer and the Poor Getting Poorer

TheRich Getting Richer and the Poor Getting Poorer

ProblemDefinition

The term, &quotthe rich getting richer while the poor gettingpoorer,&quot has been used to represent the widening gap betweenwealthy individuals and needy people. Proponents of this ideologystill believe that the trend still occurs in the contemporary societybecause of the retrogressive policies which the governments of manynations allowed to happen more than fifty years ago. They believethat the government has always colluded with powerful individuals tomaintain the status quo through retrogressive processes which providefavors, artificial competitive advantage, and subsidies with the aimof gaining financial favors.

Theyimpose entry and growth barriers on emerging businesses throughregulations and bureaucratic procedures that are difficult toovercome, yet gives the large companies unmerited competitiveadvantage. Systems are in place that subject poor people to increasedpoverty with the aim of suppressing their work ethics and making themdependent on the rich. The advocates of these notions believe thatthe government contributes to the problem by implementingunpredictable monetary policies to compromise the capacity ofindividuals to save and their chances of upward mobility.

However,the cynics of the notion portray it as a conspiracy theory, at leastone that is not valid today. They assert that it is unrealistic toclaim that the poor are still getting poorer whereas the majority ofthem have always increased their national income shares every year. While it is true that the rich have continued to get richer, otherpeople have equally continued to amass relatively more wealth thanwas possible fifty years ago. Additionally, they claim that theprotagonists of the opinion fail to understand that the creation ofresources has taken precedence over equal distribution of wealth,because it facilitates the expansion of the economy in a way thateven the poor can benefit. Social justice advocates tend to push forthe division of the wealth on equal terms. The greatest error is thefact that most people perceive wealth as a static ecosystem. Itsgrowth is facilitated by individuals` production incentives. Anindividual`s share in the wealth is determined by his or her hardwork, merit, and the ability to create value for others.

Theabove analysis underlines the controversy that exists in thecommunity regarding whether the rich are still getting richer whilethe poverty levels of low-income earners persists. It is important toset the records straight to provide a realistic framework which canbe used to redress the challenge if at all it exists. Therefore, thispaper seeks to answer whether the rich are still getting richer atthe expense of the poor. It will delve into the deeper aspect of thedebate by analyzing the relevant economic theories and the existingevidence.

EconomicTheories

MalthusianTheory

Inthe article, &quotEssay on the Principle of Population,&quot ThomasRobert Malthus asserted that population growth is exponential whilefood production is arithmetic (Eltis, 2009). It implied thatunchecked increase in birth rate would facilitate poverty in thecommunity as it would overwhelm the available incomes, especiallyland. Neo-Malthusianism has used this opinion to advocate forpopulace control as a means of restoring economic balance.

Theassumptions of this theory are that food is a critical element ofhuman survival and individuals have an inherent need to reproduce(Eltis, 2009). Moreover, the reproduction power exceeds theenvironment`s ability to sustain everyone, thus leading to increasedshortage of resources. Likewise, he asserted that death, diseases,and famine were the Earth’s way of restoring equilibrium.Additionally, individuals practice celibacy, delayed marriages, andabortion because they are subconsciously motivated to facilitaterationality.

TheTheory of Economic Development

Thistheory can be understood within the context of its seven assumptions.Firstly, the natural law asserts that individuals can maximize theiroutput if they pursue economic activities autonomously (Eltis, 2009).Secondly, it emphasizes the relevance of lack of governmentalrestrictions on economic development. Wealth is created through labordivisions, market expansion, and people`s capacity to save (Eltis,2009). Thirdly, labor, land, and capital are the most essentialfactors of production and fiscal development. Fourthly, the rate andextent of financial expansion is facilitated by labor division aswell as their level of their output. Fifthly, capital accumulationexplains the importance of investment rates in the creation of wealthand jobs. The sixth element talks about farmers, businesspeople, andproducers as the important facilitators of the development of theeconomy. Lastly, economic growth is a process that can be equated toa tree. It is prone to external disturbances and primarily depends onthe activities of the community.

MarxianTheory of Economic Development

Thistheory states that economic development alone is insufficient inlifting people out of poverty because the low socioeconomic tiers aresubjected to a system that compromises their ability to benefit fromany improvement (Eltis, 2009). In contrast, the members of the upperstatuses benefit from government’s policies. The assumption of thismodel is that the increase in resources in capitalist systemsrequires minimum wage laws, the elimination of dual labor markets,and antidiscrimination on individuals’ diversities (Eltis, 2009).It argues that unequal distribution of wealth is one of the leadingcauses if wealth disparities in the society as well as the wideninggap between the poor and rich. Lastly, it emphasizes on groups ratherthan individual activities. Therefore, a person’s productivitycapacity is dependent on his or her class.

Analysis

Argumentsfor the Notion

Inan attempt to understand how systems which promote inequality existwithin the community, Bratanova, Loughnan, Klein &amp Wood (2016)established that people`s socioeconomic classes tend to influencetheir mindset and activities. Individuals who occupy the wealthiersocioeconomic tier tend to advance their self-interests and supportpolicies and systems which maintain the status quo. On the otherhand, low-class members pursue fairness and the restoration ofequality in the community (Bratanova et al., 2016).

Theseopinions are consistent with the Marxian theory which state thatconflicts have been facilitated by the struggles between the wealthyand poor persons. Those who experience increased poverty, especiallyin the capitalist nations, are incapable of orchestrating theirupward mobility even if there is an improvement in the economy. Thisassertion is driven by the concept of the poverty trap, anothernotion that was invented to describe a situation where those withoutadequate resources continue to get poor because they lack aneffective mechanism to promote success (Kraay &amp McKenzie, 2014).Therefore, they need help to acquire critical mass of capital toescape poverty.

Acritical mass of capital in this case refers to substantial resourceswhich can help a person to achieve self-sustenance. Poverty trapexists because of three categories of reasons, including barriers toprogress, paying people to remain poor, and rigging the system insupport of the wealthy and those who are politically connected. Forinstance, the government imposes obstacles to progress by enforcingminimum wage policies, thus causing a massive loss of employmentamong unskilled laborers.

Higherremunerations increase production costs, hence inflating prices ofcommodities. Consequently, only a small section of the market,particularly the segment consisting of high income earners, canafford to buy goods and services. In the end, companies are bound toreduce their expenses by retrenching a large of number of unskilledworkers to remain relevant in the market. The concept of minimum wagecan be perceived as reducing the demand for products, thus limitingcorporations’ profitability. In this context, the joblessindividuals lack the resources to facilitate their trainings orestablish enterprises for self-sustenance.

Acritical analysis of external environment of most corporationsreveals that the government imposes barriers to the entrance ofvarious industries with the aim of protecting the economic interestsof existing companies (Heger &amp Kraft, 2008). The justification isthat such firms sustain the economy of the country by paying heftytaxes, providing a lot of employment opportunities, investmentprospects, and facilitating the progress of businesses. Emergingenterprises are usually seen as threats to the survival of the mainplayers in each industry.

Therefore,the government adopts policies which would enhance startup costs withthe aim of discouraging small investors. In some cases, thegovernment makes deliberate decisions to prevent further investmentinto particular sectors such airline to facilitate monitoring andevaluation (Heger &amp Kraft, 2008). One of the adverse effects ofsuch practices is the stifled investment. Small and mediumenterprises experience difficulty in growing and expanding, thuslimiting their profit margins and the capacity to reinvestaccumulated capital in other areas.

Suchtactics also reduce the rate of employment. Critics of trade barriersargue that the government is misguided in thinking that protectingthe interests of few corporations would enhance employment. In fact,SMEs provide more job opportunities compared with large companiesbecause they are many. The cumulative number of work chances theycreate is relatively more compared to large establishments. Thegovernment is aware of the potential positive impacts of SMEs on theeconomy, a fact which proves the existence of conspiracy between thegovernment and wealthy people.

Oneof the most indisputable evidence is the wealthy individuals’obsession with financing campaigns of their preferred candidatesduring presidential and gubernatorial elections. They supportcontenders whose manifestos tend to align with their economic andsocial interests (Powell, 2013). As a result, when such people winelections, they tend to reciprocate the financial favors theyreceived from investors. Moreover, some of the politicians areprominent stakeholders in most of the corporations by the virtue ofshareholding. It becomes a conflict of interest when they vie forpublic offices because they are likely to propose and vote forpolicies which would benefit their organizations rather than thecommunity.

Inthe end, these measures make it easy for the wealthy to own andcontrol production processes in ways that makes it difficult forpeople with inadequate resources to escape poverty and becomeindependent. The theory of economic development maintains that laboris one of the significant elements of wealth creation. The objectiveof controlling production processes is to limit poor people`scapacity to amass resources necessary for the establishment ofinvestments. Labor demand is bound to increase when a lot ofindividuals become self-reliant, thus enhancing the cost ofoperation. Larger corporations cannot allow it to happen because theyhave been benefitting unfairly from the cheap labor provided by poorindividuals. Low income earners do not have a choice but to abide bythe rules imposed by investors because they have an insignificantleverage to exert their influence on corporations.

TheMalthusian theory explains that a rapid population increase is likelyto facilitate poverty because food production is arithmetic ratherthan exponential. This model can be applied to a wider context ofresource availability versus the number of people in need. Thegovernment’s intention for conducting census is to facilitateplanning and budgeting. This way, they are able to trigger processeswhich would promote economic development and collection of resourcesto be used to meet the needs of a broad populace. Therefore, it seemsunrealistic that the government still uses measures which would onlybenefit few people whereas it is aware of the significant number ofindividuals who are in need. The argument is that since the rate ofreproduction cannot be controlled, it is realistic to facilitate theproduction of resources by providing subsidies and competitiveadvantage to low-income earners to alleviate poverty in thecommunity.

Thegovernment can lower interest and taxation rates for SMEs tofacilitate the creation of more employment opportunities to helppeople with fewer resources to escape poverty trap rather than imposeentry barriers to emerging businesses. Instead, legislators, whohappen to have interests in corporations, have enacted and enforcedtrade policies which allow companies to outsource labor. Forinstance, establishments such as Nike Company contracted factories inSingapore and Vietnam among other places to carry out theirproduction process.

Theargument is that labor costs in such regions are relatively smallcompared to the United States, thus providing an opportunity for suchcorporations to minimize the cost of production and increase theirprofit margin (Mankiw &amp Swagel, 2006). One would imagine that thesame advantage is distributed along the supply chain to benefitconsumers through reduced product prices. However, they still chargehigh prices for goods and services despite having a chance to reducethe prices of items. This analysis shows that they are relativelyconcentrated on making massive profits at the expense of providingvalues to customers. In such a case, it is not realistic for them tooutsource labor because it only results in the reduction ofemployment opportunities in the countries where they are based(Mankiw &amp Swagel, 2006).

Argumentsagainst the Notion

Ina swift rejoinder, the skeptics of the idea that &quotthe rich arecontinuing to get richer while the poor are getting poorer&quotexplains that there is an error in the perception of what isimportant and how people can escape poverty. Firstly, theyacknowledge that the rich have gotten richer because they havemanaged to create a lot of wealth. However, they maintain that thepoor have equally become more productive owing to the chances createdand increase in resources. Opinions suggest that the national incomeshare of the top fifth income earners has improved significantly inthe past fifty years, thus facilitating an upward mobility as well ascreating work opportunities for a large number of people. Theresulting spaces have promoted the escalation in the share of otherquintiles. The public hardly notices these changes because they arefocused on unrealistic issues.

Thetotal national income has been equated to a pie where each person issupposed to get a piece. Detractors claim that the poor only have asmall portion of the cake, but fail to notice that it is relativelylarger than it was fifty years ago. Having 10% of $10 billion isbetter than having the same percentage of $10 million. Therefore,what happens is that those who used to be poor are now well off evenwhen it means that the 1% is extremely wealthy rather than havingeveryone poor. These analogies emphasize the importance of focusingon wealth creation rather than the equal distribution of resources.The only practical method of helping low-income earners to escapepoverty is by enhancing the economy through wealth creation toprovide employment opportunities with relatively better pay comparedto fifty years ago.

In this context, the large gap between the wealthy and poor in thecontemporary society is a myth. The notion still lingers becausepeople have become fixed minded on the Marxists arguments which wereadvanced in the past, but do not fit in the modern contexts (Attwood,2009). As a result, people still claim that the rich continue toamass wealth by taking all the resources, thereby denying low-classmembers the chance to advance their interests. The ability to gatherresources depends on a person’s hard work. Several countries haveembraced the concept of a free society which allows people to do whatthey want as long as they take responsibility for their actions. Theidea of land transfer and redistribution as insinuated to be capableof facilitating equality is untested and is limited in data, thuscannot be used to make a bolder claim.

Conclusion

Overwhelmingevidence, as analyzed in the previous section, underlines that therich are getting richer while the poor are trapped in poverty despitethe counterarguments. The analysis of the government’s policies,systems, and political landscape reveal that it is impossible forpeople to escape poverty. As pointed out by the modern theory ofdevelopment, factors such as labor, land, capital, market expansion,the capacity to save, and autonomy in investment processes facilitateeconomic growth. Apparently, these factors are manipulated andcontrolled by the rich individuals because they have political andsocial connections. Their aim has always been to maintain the systemthat has unfairly benefitted them at the expense of other people.

Therefore,it is the position of this paper that that the best remedy to thesituation is adopting a policy approach to facilitate the entry ofnew businesses into the industry. Corporations should also be forcedto create a particular percentage of jobs depending on their size todiscourage outsourcing of labor. For instance, the policy establishedby the government on wage mobility has facilitated the increase inpeople’s income level and the reduction of poverty gap. Similarly,the introduction of Working Families Tax Credit in 1999 seemed tohave enhanced employment rate and job retention. Correspondingly, theanti-discrimination policy has created jobs for women, elderlypeople, and minority races and tribes. These examples prove thateffective policies would help people with few resources to escape thepoverty trap.

References

Attwood,D. W., Apte, M. L., Baviskar, B. S., Beals, A. R., Eames, E.,Ferreira, J. V., … &amp Lele, J. K. (2009). Why Some of the PoorGet Richer: Economic Change and Mobility in Rural Western India [andComments]. CurrentAnthropology,495-516.

Bratanova,B., Loughnan, S., Klein, O., &amp Wood, R. (2016). The rich getricher, the poor get even: Perceived socioeconomic positioninfluences micro‐socialdistributions of wealth. Scandinavianjournal of psychology,57(3),243-249.

Dabla-Norris,M. E., Kochhar, M. K., Suphaphiphat, M. N., Ricka, M. F., &ampTsounta, E. (2015). Causesand consequences of income inequality: a global perspective.International Monetary Fund.

Eltis,W. (2009). Theclassical theory of economic growth.Houndmills, Basingstoke, Hampshire: Palgrave.

Heger,D., &amp Kraft, K. (2008). Barriers to entry and profitability.ZEW-Centrefor European Economic Research Discussion Paper,(08-071).

Kraay,A., &amp McKenzie, D. (2014). Do poverty traps exist? Assessing theevidence. TheJournal of Economic Perspectives,28(3),127-148.

Mankiw,N. G., &amp Swagel, P. (2006). The politics and economics ofoffshore outsourcing. Journalof monetary Economics,53(5),1027-1056.

Powell,L. W. (2013, October). The Influence of Campaign Contributions onLegislative Policy. In TheForum(Vol. 11, No. 3, pp. 339-355).

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