What rising inequality means

News: COVID Pandemic has exposed the inequality present globally. 

The middle 40% has 40% of the share in income. This distribution shows the tendency of a rising middle class with lower disparity in income. But it also shows that the status of the poor is worsening day by day. 

The menace of inequality needs to be controlled as it has led to an increase in the number of billionaires in the world while billions don’t have the means for a decent life.

Education and similar such domains have the capacity to break the cycle of inequality.  

What is the actual reason for this inequality?

Inequality is actually a result of poor redistributive policies and lack of discouragement of accumulation by governments. 

The Kuznets theory presents the view that the average level of income is indicative of inequality. But this seems to be false as high-income countries such as the U.S. have higher levels of inequality as against countries such as Sweden, which have moderate levels of inequality. 

Also, Inequality is sometimes understood to be an outcome of rising levels of income in the post-liberalization era. But this preposition also appears to be false as the rise in inequalities in the U.S. and India is higher against a moderate rise in China. 

What are the implications of rising inequality?

Rising inequality leads to rich nations but poor countries. As inequality rises, resources gradually move into private hands and governments become poor and resource deficient. This may result in the following outcomes:

Firstly, Governments will have a limited capacity to act on measures required to tackle inequality. 

Secondly, distributional fairness of wealth will be compromised due to private interests.  

Source: This post is based on the article “What rising inequality means” published in The Hindu on 21th Dec 2021.