Problem

Inequitable distribution of wealth


Experimental visualization of narrower problems
Other Names:
Dependence on unequal distribution of wealth
Maldistribution of wealth
Wealth disparity
Income inequality
Maldistribution of revenues
Inequitable distribution of revenues
Unequal income distribution
Economic inequality
Unequal distribution of the means of subsistence
Unequal distribution of benefits
Nature:
The unequal ownership of wealth - houses, real estate, stocks, bonds and personal possessions - remains marked, in spite of relaxation of traditional class and cultural barriers. Inherited wealth and social position play a part. Distinct differences in income and income surplus also result from several factors, including sex, age and nationality. In industrialized market economies, wage decisions determine the extent of inequalities between various categories of workers. In both developed and developing countries, income distinctions are affected by the policy decisions of employers, trade unions and governments.

The distribution of wealth in societies can be understood in many modes and manners. The form of distribution of land ownership, for example of agricultural land, was for a long time one of the main criteria for understanding equity or inequity in a given society. Income distribution in agrarian or traditional societies should be analysed principally by the way in which ownership is distributed, and, consequently, by the use of systems of personal services. In modern societies, especially at the end of the last century, it was considered that "ownership of the means of production" was the principal phenomenon and that it affected all aspects of social life and culture. Today it is not uncommonly considered that the most important factor is the way in which cultural goods, knowledge and information are distributed, and the informal networks of relationships between people. Obviously these discussions are absolutely beyond the practical scope of a study on income distribution and human rights. It is for this reason that a definition permitting a much more neutral and operational understanding of the concept has been adopted. By income distribution at the international level we mean the way in which the overall product (the sum of physical production, services and trade) is distributed between the countries of a region or a group of selected countries. Income distribution at the national level in a given society would consist in the way in which the overall product produced by the national economy within a year is distributed between the households that comprise and compose that society. Accumulated capital, properties and knowledge acquired are only taken into account in this operational definition in so far as they represent actual income for the families or households that constitute the unit of analysis.

The method of understanding distribution and income at the international level consists simply in comparing a country's annual product with the global product of the region or group of countries in question. At the national level household incomes will determine how the national product is distributed internally. This operational method, used by consensus to measure income distribution, obviously has many limitations in that it does not account for a large number of production, trading and service activities that are not included in the "national accounts" or "household accounts". Semilegal, clandestine or simply illegal and criminal lucrative activities remain outside these accounting systems and in some cases represent substantial shares of the income of both countries and individuals. Some maintain that household income accounting is simpler at the lowest income levels, while at the higher levels it is more difficult because of the complexity and tax avoidance. Thus there are many methodologists who maintain that all income distribution figures are thereby devalued and should be still more concentrated.

This operational manner of conceptualizing distribution enables it to be understood whether income is more or less concentrated in a society. The population, the indicator most often used, is divided for this purpose into five quintiles (20% of the population) and various comparisons are made between them. The most common is comparison of the top quintile with the bottom quintile. Because of its neutral and relatively objective nature, most specialists regard this as "a good indicator of equity" and it is currently the one most widely used. Because of its non-value and neutral character, it is a "relative indicator" valid only for comparative analyses. This indicator is best used with historical series in the same country. Hence it is not possible to say what is the "ideal income distribution", since this will depend on the type of society, the nature of its historical development, and a very complex series of factors.

While it is not possible to determine "ideal" income distribution, it is possible to signal when situations are occurring where the high concentration of wealth in a few hands is producing devastating social effects with consequences so serious as to threaten the "social integration" of the society in question, or at the international level, the balance of a given region. "Intolerable levels of income inequality" would arise if there were systematic growth of inequity in a society (or at the international level) with a crude concentration of product in the hands of one group or sector of society. From a human rights perspective, it is generally felt that this would entail violation of the economic, social and cultural rights of the population, incurring permanent discrimination and violation of the fundamental rights of individuals.

Background:
The latter 18th and most of the 19th centuries witnessed the flourishing of ideas that advocated no significant interference in the process of production and income distribution. In their extreme, these ideas even favoured the existence of poverty on the grounds that it was a necessary condition for ensuring incentives to work. 20th century thought and policy have tended to reject extremes of equality and inequality of incomes. Most 'egalitarian' thinkers, for example, do not advocate complete equality of incomes as an immediate aim of policy. Marx and the Marxist philosophers deferred the idea, 'from each according to his ability, to each according to his need', to a later and higher phase of socialism.

Growing inequality in the distribution of wealth and poverty are the principal social problems affecting the economic development of the contemporary world at the close of the century. The world economy is in a new cycle of expansion, generally recognized as a new wave of "globalization" of the economy. This process of expansion is rapidly transforming all societies, both developed and underdeveloped, reordering the markets for tabour, goods and services, affecting mass consumption and the customs and daily lives of millions of human beings. Production activities are tending to be moved, or "delocated", as a consequence of the pursuit of greater levels of gains. Enterprises are downsizing, and work of good quality is being replaced by work in service sectors which produces neither sufficient income nor job satisfaction for those who do it. In this process of globalization many people perceive that new and growing inequities are being produced within countries and between the countries and regions of the world. There is growing realization of this and very little capacity to respond or find alternative ways to reorient these increasingly pronounced trends. Paradoxically, the end of the century will be characterized by an expansion in the goods at the disposal of the economy and a growing degree of dissatisfaction with the use that is being made of these goods.

In the 1990s a growing interest has been perceived, among economists as well as social leaders and politicians, in understanding the effects and impacts of economic measures on social life, on politics, and especially on culture, human beings and their values. There is a growing perception that the way in which wealth (and poverty) are distributed within a society, or between different societies, fundamentally affects the values, social coexistence and life in common among people. Income distribution has effects in the first place on the economy and economic growth, but at the same time, in a deeper way, has moral, social and ethical implications. Societies are being deeply moved by the maldistribution of income. Internal rifts are occurring within them and forming seeds of violence, hatred and rancour.

Incidence:
The discrepancy in income between the wealthy and the poor is worsening. Although world income measured in real terms has increased by 700 percent since the Second World War, the wealthiest people have absorbed most of the gains. Since 1960 the richest fifth of the world's people have seen their share of the world's income increase from 70 to 85 percent. Thus one fifth of the world's population possesses much more than four fifths of the world's wealth, while the share held by all others has correspondingly fallen; that of the world's poorest 20 percent has declined from 2.3 to 1.4 percent.

In 1999, the wealth of the world's three richest people was greater than the combined GNP of the 48 least developed countries, which have 600 million inhabitants.

In 1998, the USA had the sharpest wealth disparity of any western nation. The wealth of the top one percent is greater than that of the bottom ninety percent of Americans. In 1998, the Chairman and CEO of Microsoft had a net wealth of $51 billion -- greater than the combined net worth of the poorest 40 percent of Americans (106 million people). On a worldwide plane, wealth disparities are staggering. According to the United Nations Development Program, the assets of the world's 358 billionaires were greater than the combined incomes of countries with 45 percent of the world's people (about 3 billion human beings).

Claim:
To him who hath shall be given (Matthew Principle).
Counter Claim:
1. It is important not to redistribute any wealth generated in order to improve the conditions of the poor. By helping the wealthy increase their wealth they are then encouraged to invest in such a way as to ensure economic growth from which the poor will benefit more appropriately in the longer term.

2. Ideas favouring complete equality of income have generally come to be regarded as unfeasible at least as an immediate aim of public policy. Such a distribution would imply a much less than optimum allocation of productive resources and have a serious negative effect on incentives to the acquisition of skills by workers and to the efficiency, drive and productive innovation of managers and owners; it would consequently result in a serious handicap to economic growth.

Related Problems:
Accumulation of capital
Problem Type:
C: Cross-sectoral problems
Date of last update
03.12.2017 – 17:58 CET