In: Economics
Both, rapid economic growth and a more equitable distribution of income are not conflicting but complementary objectives.
Some points in favor of this statement include:
• If there will be equitable distribution of income, there will be more savings in the economy that would help in investments in the economy.
• Due to equal distribution of income, more people or households will have access to basic health and education facilities. This means that the country will be able to build strong human capital that would contribute more towards the development process.
• Due to equal distribution of income, there will be more demand for the locally produced necessity goods like food and clothing. This would increase the local production, employment, and local investment. Thus, nation will have to depend less on imports as domestic production gets stronger. Thus, equal distribution of income complements the economic growth.
Both, rapid economic growth and a more equitable distribution of income are conflicting objectives. Let us discuss this statement.
• If the nation tries to adopt the policies that lead to equal distribution of income, then major expenditure of the government would be directed towards achieving these objectives. This involves cost in terms of time and money. The same time and money can be directed towards improving infrastructure or exports and generating more money and thus, development and so on.
• The political power gets its financial support from the widely rich class. If income redistribution happens, then they would withdraw their support and the political stability would be at stake.
• If progressive income tax policy were adopted, then more people would get involved in unfair accounting practices. They will adopt measures that show less income, so that, less tax is paid. Thus, government major source of revenue would reduce and it will not be able to make expenditures for development.