Economic Inequality: The Gap Between The Rich and The Poor

Introduction

Economic inequality is an existing phenomenon in the economy, which refers to the gap between the rich and the poor. Like dividing a cake, every piece of cake held by people is not equal, so inequality occurs in this process. It is easy to find that the reason for this unfairness is unfair distribution, which means the individuals who distribute the cake have selfish motives for the recipients who are related to them in some dimensions or even for themselves, making fair outcomes difficult to achieve.

The Role of Power and Selfishness in Economic Inequality

The individuals who divide the cake (dividers) often have selfish intentions, aligning with those in positions of power to make profits and supply others with substantial power in secrecy. Those with significant power use their positions to acquire items and money they desire, often leveraging their influence by collaborating with others who share mutual benefits, ensuring a steady withdrawal from public resources. This clandestine cooperation continues to progress, despite the lack of apparent fairness. The collaboration between selfish dividers and self-interested beneficiaries is one of the reasons for economic inequality, which undermines institutions.

Good Money vs. Bad Money

Assuming the money obtained through the dealings between selfish power holders and beneficiaries is termed 'bad money' (Anonymous, 2010), and the income obtained through labor and fair means is 'good money'. According to the logical outcome of the expulsion between 'good money' and 'bad money': If bad money is equivalent to good money, and the existing institutions do not penalize those holding bad money, society will enter a vicious cycle of corruption and attack on fair distribution.

Influence of Tax Systems and Social Welfare

Beyond corruption between some dividers and holders, factors influencing economic inequality include the tax system, social welfare, and location. A significant inadequacy of the tax system is evident. The wealthy, often featured in magazines like Forbes, are not pioneers in tax rankings; they strive to avoid taxes rather than pay them. Therefore, the lack of a reasonable and necessary 'limit height' for high-income groups has widened the gap between the rich and the poor. Consequently, a comprehensive tax system can effectively alleviate this gap.

Social Security Systems

In addition to a reasonable tax system, a robust social security system can also mitigate the gap between rich and poor to some extent. However, compared to the level of economic development, social security initiatives and social transfer payments clearly lag. This, combined with an incomplete tax system, results in significant delays. In this context, farmers, urban retirees, unemployed individuals in towns and cities, and their families are most likely to become impoverished due to a lack of timely and adequate security, further widening the societal gap between rich and poor.

Impact on Economic Development

The income gap is too large, and wealth is too concentrated. Both factors pose a considerable threat to economic development. The contrast between South Korea and the Philippines serves as a classic example. Around 1960, many economic indices in both countries varied considerably, including population, GDP per capita, urbanization, primary and lower secondary school attendance. Although starting from the same point, after half a century, South Korea's economy quadrupled, becoming one of the 'Four Asian Tigers', while the Philippine economy stagnated, resulting in social unrest. The primary reason is that South Korea had more equitable income and land distribution than the Philippines, with a Gini index difference of 0.2. Some economists also believe that Latin America's slow economic development is due to excessive wealth concentration.

Social Consequences of Economic Inequality

Additionally, inadequate living conditions for the poor cause them to lose motivation to work and reduce productivity, while social injustice and inequality gradually erode national cohesion. The idleness of a large portion of population resources leads to serious social problems and threatens long-term societal stability.

Conclusion

As far as I am concerned, we should first take action to establish a complete social security system, which is fundamental to constructing a harmonious society. It relates not only to the ability of millions to live and work but also to the stability of families and society. Secondly, we need to strengthen the legal system and use the law to dismantle lawlessness, power, money trading, and other evil phenomena, effectively addressing the disparity between the rich and the poor. Additionally, we need to establish laws to encourage the wealthy to assume more social responsibilities, such as education, philanthropy, or infrastructure improvement. Finally, we should enhance the function of tax regulation to ensure social equity. The government should raise the starting point of personal income tax for the wealthy and refine the tax system for vehicle purchase and usage, along with creating conditions for introducing social security taxes. Moreover, we should meticulously schedule our national budget and utilize every amount wisely to strengthen the national economy, ensuring that people experience a prosperous and fulfilling life rather than poverty.

References

Anonymous. (2010). Gresham's Law. EH.net Encyclopedia. Retrieved from http://eh.net/encyclopedia/article/selgin.gresham.law

Liang, F. (2017). How does Britain use taxes to regulate the gap between the rich and the poor in society? Retrieved from http://views.ce.cn/view/ent/201712/05/t20171205_27102102.shtml

Lyu, S. (2017). Philippines: The mystery of the sinking of Asia's second richest country. Retrieved from https://zhuanlan.zhihu.com/p/30299683