short report 1800-1
S.SHARON
WangSR.docxShort Report
On 26th January 2018, the Dow Jones Industrial Average reached the new historical level by 26,616.71 (FINANCE, 2018). Even though the whole economic pie is growing, the gap between the rich and the poor is widening. In the United States, from 1983 to 2013 the total net worth of the top 20% increased 7.6% (Domhoff, 2014). The inequitable wealth distribution enables the rich even richer. In fact, the rich also have extraordinary incomes; however, the most part of income is not come from the works but from the return on capital. “In 2008, only 19% of the income reported by the 13,480 individuals or families making over $10 million came from wages and salaries” (Domhoff, 2014). In other words, return on capital is more efficient than return on works for the top 20 percent. What’s worse, the society should confront the truth that the rate of return on capital exceeds the rate of the growth of the economy. The social mobility declines, people lacks ambitions, deficits grow, wages stagnate, workers buy less, companies downsize, tax revenues decrease, government cuts programs, workers receive poor education, unemployment rises (Kornbluth, 2013). The vicious cycle formed; therefore, the poor realized it more difficult to climb the economic ladder.
The ability of earning wealth for the top 20 percent and the last 80 percent is unequal. “If affluence results from inner aptitudes, it might seem futile to try reining in the rich” (Hacker, 2012). For the top 20 percent, most of their income does not come from wages but come from their return on capital. The economy faces a fundamental problem. The rate of return on capital beats the rate of the growth of the economy. The expect return on capital reach roughly 5 percent on their investments, with minimal taxation; meanwhile economic growth was only around one percent” (Krugman, 2014). Even though the gross domestic product is growing, the wealth of the rich is growing much quicker than the economic growth. Therefore, the top 20 percent ensure that they can enhance their economic position.
Low social mobility is another essential problem in the US. “Economic data gathered since the early 2000s have shown conclusively that American social mobility is low and has been so for half a century” (Madrick, 2014). When the poor realize it almost impossible to climb the economic ladder, they loss their ambition which triggered the vicious cycle. People lacks ambitions, deficits grow, wages stagnate, workers buy less, companies downsize, tax revenues decrease, government cuts programs, workers receive poor education, unemployment rises (Kornbluth, 2013). What’ worse, the poor find they cannot afford expensive educational fees for their children, so their children cannot access the advanced education, and more difficult to find a good job. Besides, the poor lack of a valuable network of people. In society, the resources of a social network become significant. It controls all kinds of resources. The rich take advantage of this privilege to increase their influence. Therefore, with the passage of time, social mobility will become slow, then the social mobility will directly lead to the closure of social structures. Comment by Joseph Conlin: lack Comment by Joseph Conlin: ambition, deficits grow,…
The inequitable distribution of wealth also impacts socially. Inheritance of wealth challenges the social morality. When inheritance of wealth becomes the most efficient way to turn into the rich, people lack motivations in the work because they find that no matter how hard they work, they cannot enter top 20 percent. “when the rate of return on capital greatly exceeds the rate of economic growth, ‘the past tends to devour the future’: society inexorably tends toward dominance by inherited wealth” (Krugman, 2014). When the rich died, the wealth passed to their heirs with the least tax. This inherited wealth only belongs to the few.
The tax system, the second largest distributor of the wealth, makes the gap between the rich and the poor even bigger. “Taxes are progressive for the bottom 80%. But if we break the top 20% down into smaller chunks, we find that progressivity starts to slow down, then it stops, and then it slips backwards for the top 1%” (Domhoff, 2014). People willing to think that if the rich receives more money on tax return, they would create more jobs, and promotes the economic growth. However, there is no certain connection. The rich may invest more money on the business or may not when they receive more tax return. The rich usually consider which investment could earn higher return. In general, the top one percent prefer to enjoy the money because they already have the stable customer. Compare with the new brand, people prefer to buy famous brand (Hacker, 2012). Therefore, the top one percent occupied stable income.
Inequitable distribution of wealth triggered health problem. “Unequal societies not only bear ‘diseases of poverty,’ but also ‘diseases of affluence.’ (Hacker, 2012). People get nervous easily, and sensitive to the pain. The poor more likely eating crazily to seek comfort for their heart. The poor want to be the rich. People have the rights to pursuit the happiness; however, when the unchangeable fact in front of the face, people trend to release themselves with intense way.
How to ease the inequitable distribution of income? The government should spend more investment on the education field. For the poor, education is not the only way they can change their destiny but the most efficient way to rebuilt the bright future for themselves because the poor student get the chance to access the people who have valuable social resources such as well-know professor, smart classmates. Invest on education improving people itself; therefore, the poor see and access more opportunities.
How to increase social mobility? Decrease the influence of the last generation to the new generation. The government needs to pay more attention to the educational field and provides more educational chance and options for the 80%. Today the tuitions of the advanced education cost roughly half percent annual income of the middle class. Then increase the human capital investment and provide relatively equitable distribution system. Relatively equitable distribution occurs with meaning because equitable distribution means no differences between the hard work and doing nothing. Relatively equitable distribution can promote the willing of move forward such as innovation and hardworking. What’s more, improve the estate tax reform, and decline the influence of the heritage wealth.
How to break this solid social structure? Change the way of the wealth distribution. In other words, promotes the wealth distribution reform. However, the wealth can affect power, just like the power can affect wealth. “Those who control a government can use their position to feather their own nests, whether that means a favorable land deal for relatives at the local level or a huge federal government contract for a new corporation run by friends who will hire you when you leave government” (Domhoff, 2014). People who have power can use this privilege to exchange the wealth. Since the power and class appear in the human society, corruption also appears. Wealth, as an extremely useful resource for the power always affects politics. To avoid this kind of situation, the classes need to flow, to have mobility, so the society has more energy.
When the social mobility increases, the gap between the rich and the poor declines. The society enables steps into the moral cycle where wages increase, productivity grows, economy expands, workers educated well, government invests more, tax revenues increase, companies hire more, worker buy more, and wages increase (Kornbluth, 2013). In the virtuous cycle, each side promotes each other. The issue of inequitable distribution of wealth involves all aspects of economy and society.
The United States should not eliminate inequality, because a certain degree of inequality is the inevitable result of health risk innovation and market competition. Where is the market distorted? The biggest distortion of the U.S. economy may be in the financial sector, where small numbers of people use cheap credit to speculate on real estate and financial derivatives that have little impact on economic growth and job creation, but the personal gains are surprising.
Inequitable distribution of wealth has always existed, the widening gap between the rich and the poor may have a more dangerous impact on the society of the United States. A healthy society should have strong social mobility. When the social structure become solid, they may lead to the rigidification of resource flows, and it triggered more social problems such as people lack ambitions which block the development of the society. What’s worse, inequitably distribution of wealth is shifting wealth to the top 20%. The society could go into a vicious cycle, and the social class becomes more stable and solid. So, the poor find more difficult to climb the economic ladder.
Works Cited Domhoff, G. W. (2014, June 17). Wealth, Income, and Power. Retrieved from Who Rules America?: http://whorulesamerica.net/power/wealth.html FINANCE, Y. (2018, Jan. 26). Dow Jones Industrial Average. Retrieved from YAHOO! FINANCE: https://finance.yahoo.com/quote/%5EDJI?p=^DJI Hacker, A. (2012, Feb. 23). We’re More Unequal Than You Think. Retrieved from New York Review of Books: http://www.nybooks.com/articles/archives/2012/feb/23/were-more-unequalyou-think/?insrc=rel Kornbluth, J. (Director). (2013). Inequality For All [Motion Picture]. Krugman, P. (2014, May 8). Why We’re in a New Gilded Age. Retrieved from The New York Review of Books: http://www.nybooks.com/articles/archives/2014/may/08/thomas-piketty-new-gilded-age/ Madrick, J. (2014, May 27). INEQUALITY IS NOT THE PROBLEM. Retrieved from New York Review of Books: http://www.nybooks.com/blogs/nyrblog/2014/apr/24/inequalitynot-problem/?insrc=rel
Great work. Practice eliminating the defining (yellow). Fix the capitalization in the Works Cited apge. Grade: A. Revise.
