Question

Create a reflection paper about PATTERN OF WEALTH DISTRIBUTION AND THE GROWTH OF INEQUALITY IN RECENT DECADES

Answer 1

When the wealth of a nation is distributed unequally, it causes wealth inequality. In the short story of Scott Fitzgerald in 1926, 'The Rich Boy', the first sentence of the story is 'Let me tell you about the very rich. They are different from you and me." This was said in the previous century, but now after nearly 100 years, the difference between rich and poor hasn't changed much. Though economic development and technological changes have been there, but income inequality still exists.

Im USA, before the second world war, 18% of total national income was going to the top 1% of total population, but in the 1980s the share of top 1% had dropped a little and after 1980s, the inequality again started to increase. In the 1980s, 10% of the world's richest population earned 7 times more than 10% of the poorest. And now they earn 10 times more.

High income countries mostly have lower inequality compared to other countries. According to the reports of 2016, income inequality varied in western countries. It was seen that Europe had the least inequality and the Middle East had the highest. The share of national income going to the top 10% of these countries were nearly, 37% in Europe, 47% in USA - Canada, 55% in Sub Sahara Africa, India, 41% in China and 61% in the Middle East.

There are various causes for increase in the wealth inequality like one sided technological growth, globalization, financial development, increasing unemployment, etc. The pattern of wealth distribution has been wrong and biased from centuries leading to more and more inequality which leads to poverty.

The governments of respective countries take steps to reduce this inequality by taking different levels of taxes. But it doesn't make the situation any better. This situation can be improved if the wages and returns are increased, by providing affordable and quality education, encouraging more entrepreneurship, investing more in agriculture and trying to uplift poor farmers, etc.

After analysing the entire situation, according to me, the ideal wealth distribution should be where top 20% gets nearly 30% of total wealth and the rest divided equally amongst the others. This would be much better than the current situation where the top 20% get 60-70% of total wealth.

Hence, equal wealth distribution can be a solution to a lot of major economic challenges faced by countries. Mainly in developing countries, if the by any way there are even slight changes made to the old wealth distribution system, then most of its problems can be solved easily.