Capitalism and Inequality

By Albert Duncan

This book reinforces the fact that capitalism is not the enemy and that income and wealth inequality are societys cost for economic prosperity and poverty reduction. While recognizing some of the problems associated with inequality, the author shows that inequality is tightly woven into the fabric of the market economy. This book highlights the logical connection between profit, profit motive, wealth creation, and enhanced economic well-being of citizens. It questions the economic logic and effectiveness of government policies aimed at reducing inequality while refuting the use of taxation to promote equality. Using China as an example, the book shows how capitalism has evolved into an efficient wealth-creating machine bringing prosperity to millions.

• Language: English
• Publisher: Xlibris US
• Release date: Jun 8, 2018
• ISBN: 9781984531650

Albert Duncan

About the Author Albert Duncan, PhD, is a graduate of New School University, and at present, he is an associate professor of economics with the City University of New York (CUNY). Dr. Duncan has written, presented, and produced many scholarly works on economic issues. His publications include (1) Does A-Rod Deserve So Much Money? Yes, an essay in the book Baseball and Philosophy: Thinking Outside the Batters Box (Eric Bronson [Illinois: Carus Publishing Company, 2004], p. 297); (2) Devaluation and Trade: A Case of Jamaica (Journal of International Finance and Economics 8 no. 4 [2008]); and (3) Impact of the IMFs Exchange Rate Policy on the Guyanese Economy (Journal of International Finance Studies 12 no. 4 [2012]).

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CAPITALISM AND INEQUALITY

Albert Duncan

Copyright © 2018 by Albert Duncan.

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the copyright owner.

The Holy Bible, English Standard Version (ESV) is adapted from the Revised Standard Version of the Bible, copyright Division of Christian Education of the National Council of the Churches of Christ in the U.S.A. All rights reserved.

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Rev. date: 06/07/2018

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CONTENTS

Introduction

Measuring Inequality And Poverty

Global Comparison

Inequality And Race In America

Why We Hate The Rich

Profit Motive Naturally Leads To Inequality

Inequality And Economic Prosperity: The Case Of China

Increased Inequality With Increased Socioeconomic Performance

The Evolution Of Capitalism

The New Capitalism

Economic And Moral Justification Of Inequality

Conclusion

References

LIST OF TABLES

Table 1 Selected Countries and Their GDP Per Capita

Table 2 Top Ten Countries with Their Percentages of Total Global Personal Wealth

Table 3 List of Billionaires’ Ranking

Table 4 Selected Measures of Household Income Dispersion Shares and Shares of Household Income Quintiles

Table 5 Human Development Index and Its Components (2014)

Table 6 Human Development Index (2015)

Table 7 People in Poverty by Selected Characteristics: 2015–2016

Table 8 Percentage Distribution by Ethnic Groups of Household Incomes in the US in 2016

Table 9 The Most Profitable American Companies in 2015

Table 10 Workforce Totals for Some of America’s Most Profitable Companies

Table 11 Income Tax Paid in Average Tax Bill of Individuals in Different Income Levels

Table 12 Human Development Trends, 1990-2014

Table 13 Per Capita GDP of the United States in 2016

LIST OF FIGURES

Figure 1. Ratio of Median US White Household Wealth to Black Household Wealth, (1983-2013)

Figure 2. Wealth Shares, United States (1913-2012)

Figure 3. Median Household Income in the United States in 2016 by Race or Ethnic Group

Figure 4. China and US GDP Percentage Growth Rate for 2000–2015

Figure 5. Disposable Income Growth

Figure 6. China’s Human Development Index Rise

Figure 7. U.S and China Unemployment Rate

Figure 8. China’s Life Expectancy at Birth, Total Years (1997-2014)

Figure 9. GDP Growth Rate per Capita for China and the US from 2005–2015

To my grandson, Andrew John Michael Duncan

INTRODUCTION

In modern history, the world as a whole has experienced tremendous economic growth and prosperity. However, despite such increasing wealth, there is also a notable increase in the imbalance of the distribution of wealth and income. This issue is giving rise to moral and ethical questions of economic equity, and that disparity is now of tremendous concern for many nongovernmental institutions and activists worldwide. As a result, this pressing issue has become a common subject for many researchers and scholars. The spillover effects of the widening wealth disparity are of profound political and socioeconomic concern. Furthermore, it has become a controversial issue that has been exploited by politicians, religious leaders, and activists who seek their own interests. However, there are many misconceptions associated with income and wealth inequality.

According to the United Nations (2017) report, World Economic Situation and Prospect 2017, the world has witnessed rapid progress in the reduction of poverty over the past few decades. The proportion of the world population living in extreme poverty, as defined by the international poverty line of US $1.90 a day, declined from 44.3% in 1981 to 10.7% in 2013. The world’s economic development is due to the success of capitalism. Jerry Muller (2013) stated, Over the last few centuries, the spread of capitalism has generated a phenomenal leap in human progress, leading to both previously unimaginable increases in material living standards and the unprecedented cultivation of all kinds of human potential (para. 3). Capitalism has created greater opportunities for the development of human potential, and opportunities are more equally available. Therefore, today, inequality comes less from unequal availability of opportunity and more from the unequal ability to take advantage of opportunity. That unequal ability comes from differences that are inherent in human potential and the ways families, communities, and countries enable and encourage human potential to blossom. Lampman (1967) agreed that the greatest achievements of modern economies have been the raising of the living standards of the common man and the reduction in the share of the population in poverty. Compared to a few decades ago, there has been tremendous improvement in the living conditions of people who are considered poor. In the US, for example, Tanner (2016) made the point that extreme poverty, common in the US about fifty years ago, no longer exists despite growing inequality. For example, food security is not an issue. Even though inequality has increased, people at the bottom of the income scale now have a better standard of living. However, it should be noted that apart from the huge disparity in the distribution of income within nations, there is an extreme contrast among the world economies. Todaro and Smith (2015) made the observation that output per worker in the US is ten times greater than in India and more than fifty times that of the Democratic Republic of Congo (DRC). In 2011, real income per capita in the United States was close to US $49,000, while in India, it was less than US $4,000, and it was just at US $340 in the DRC. However, as Freund (2016) discussed, it is due to the tremendous increase in the standard of living of the top 1% in advanced countries that attention is now more on inequality rather than poverty. But for the world as a whole, income inequality has declined as a result of high economic growth in poor countries.

Despite the negative perceptions associated with inequality, the fact is that wealth and income inequality are an integral and complex part of the capitalist structure and they are necessary components of economic growth. In addition, due to governments’ income-stabilizing policies and income-redistribution measures (both public and private), a tremendous reduction in inequality has been achieved, but it is not generally noticed. Government redistribution policies should not be strong enough to the extent that economic growth is stifled. The aim of government economic policies should be on wealth and income creation, not on redistribution.

MEASURING INEQUALITY AND POVERTY

Different dimensions of inequality include income, wealth, and consumption. Income is not limited to salary and wages, but it includes other forms, such as rent, gifts, profits, and interest. In the measurement of income distribution within a nation, it is a common practice to divide the population