What are the workable solutions for countries where economic inequality is very severe? 

Intro to economic inequality 

Economic inequality, the gap between rich and poor. This is an issue that every single country is now facing, no matter how rich or poor the country is. As our community and economy developed, economic inequality deteriorated over time. According to the statistics below from Wikipedia, we can see that the share of income of the top 1% has risen a lot over time, telling us that economic inequality surely did deteriorate over time. Therefore, we must look for solutions that will possibly reduce the gap between the rich and the poor and to make a better world.

Factors and causes of economic inequality 

Before we jump right into the solutions, we must know why economic inequality a negative thing and how it is affecting us. Fundamentally, we have a limited number of resources except for sun energy, wind energy etc. But resources like provisions, water and shelters are all used up by the rich people leaving just a little bit for the poor people  to access ,which leads to poverty and famine etc.  According to CNN, “The top 10% holds up 76% of the global wealth which is a substantial number. If we compare India and America, India’s top 10% holds up 74.3% of the national wealth while America’s top 10% holds only 69.4% which is a small number.” In this quote, we can clearly see by the statistics and quantitative datasets that the rich people, the top 10% are eating up most of the national wealth of countries and that India has a bigger gap between rich and poor than other countries. Another problem is that as the gap between rich and poor gets bigger, the crime rate grows as well.

In order for the poverty to survive, they commit crimes that will let them stay alive, leading to increase of crime rate. According to an expert American economist, Gaby Becker, said “Increase in income inequality has a big and robust effect of increasing crime rates.” How this works is that as economic inequality deteriorates the number of resources left for the poor people to access decreases, leaving a conclusion of poverty worsening. Because poverty and the poor people have no shelter, water, or provisions to survive, they must rob people to survive, and these crimes sometimes do not end up well. We have India, Mexico, and Brazil as an example for countries who has a high crime rate and also  severe economic inequality. If we compare a European country Norway and India, based on Macrotrends, Norway crime rate & statistics for 2018 was 0.47 while India’s was 3.08 which approximately 6.5 times higher. This piece of evidence absolutely justifies the claim, “We have India, Mexico, and Brazil as an example for countries who has a high crime rate and also severe economic inequality than the other countries.” Now, let us jump straight into some solutions. 

The first solution, taxation 

One of the solutions for economic inequality is taxing the rich people and reinforcing the laws of taxation. This is a solution for both the local and global level. Governments and organizations should especially focus on taxation in real estate because real estate is one of the largest consumptions and the amount of money is put in by the rich people. We can redistribute the taxes that are claimed and make more public places where both rich and poor people can access to, and we can support poverty financially or with food. According to Investopedia, Elon Musk has 268 billion dollars (about $820 per person in the US) of net worth, which surely is a great amount of money. He will not be affected as much if he gives out a million dollars. Elon Musk will still live a peaceful life with a modern house and a fancy car, but those million dollars will save hundreds and thousands of lives but those rich people out there do not seem to be liking donations.  According to Foxbusiness,  a report from The Chronicle in August 2012 found people who make between $50,000 and $75,000 give an average of 7.6%  of their discretionary income to charity, compared to an average of 4.2% for those making $100,000 or more.  This quote shows that the relatively poorer people donate a bigger portion of their income than the rich people. The only legal way to make that possible is taxation, which is done by the government.  People might think that this solution is easy to happen if the government just taxes them but there are obstacles blocking this solution. According to an expert economist Mr. Jun, in an interview, in short, the top 5-10% of population of every single country always includes politicians who have a crucial role in the government which is the source that can legally take rich people’s money with a process called ‘taxation’. In reinforcing taxation, the government takes a significant role. According to Investopedia, in summary, the top 10% has a $173,176 of average wage and the top 5% has a $342,987 of average wage. And based on Thoughtco, “The top elected officials in Detroit, Houston, Atlanta, and New York City each earn between $183,000 and $202,000 a year,” telling us that the major politicians are included in the top 5-10%.  As I just mentioned , the top 5-10% includes politicians or government related people, and they are defending against the leftover 90-95% of the population from reinforcing the law of taxation. This is the major reason the government cannot blindly tax the rich people. 

The second solution, donation 

Due to these reasons, reinforcing the law of taxation is impossible, but we still have another solution. The second solution is for rich or high-class people to share their money by their own decisions, by themselves. This is a solution for both the local and global level solutions. Such as donating to NGOs (non-governmental organizations) that can help the poor people or just directly donating to them food, shelters, and medical care. This is a solution for both the local and global level solutions. Based on Conversation’s research about the amount of donations rich people made in millions, in short, Bill Gates, who is one of the richest people around the world donated 15,000 dollars in millions, which saved millions of lives. This is one of the finest ways of leftover money of rich people is used. To save lives. Another way that money can go to is IMF (International Monetary Fund). This is an organization that gives monetary support to countries that has a financial unbalance or monetary support, such as India, South Africa, Uganda etc. This can reduce not just the gap between rich people and poor people but the gap between rich countries and poor countries. This solution is not the most sustainable way, because all of it is in the people’s hands and no one can force them to donate their money otherwise it is illegal. The rich or the top 5-10%’s money is the solution itself for economic inequality when used wisely and efficiently. So, basically, it all depends on how rich people use them.  

Conclusion 

In conclusion, economic inequality is a big problem, because it will worsen in the future since the world and economy all around the world are still developing. It is a crucial problem because there is a limited number of resources available, but the rich people are taking most of them leaving just a few quantities for the poor people to have access to, leading to poverty, famine etc. Since the poor people have nothing to eat or to live in, they commit crime to survive, leading to increase in the crime rate. The two solutions are taxation and donation. Taxation is sustainable and a perfect solution, but there this can’t happen, because the people who have a crucial role in adjusting law and constitutions are the rich people. So if they reinforce the law of taxation, themselves will be damaged, so they will not even think about reinforcing the law of taxation for their own benefits. The second solution is for the rich people themselves to donate funds and organizations that help the poor. These solutions are on a global and a local level and can be done by every single country. For donation, even you can do it.  Therefore, I shall, we shall and the world will stand up for economic inequality.

Email alex.jun@student.isb.bj.edu.cn for more information 

References:

‘Norway Crime Rate&statistics 1990-2022’ author unknown. Date published unknown.

https://www.macrotrends.net/countries/NOR/norway/crime-rate-statistics#:~:text=Individuals%20or%20small%20groups%20usually%20commit%20homicide%2C%20whereas,2018%20was%200.47%2C%20a%2011.42%25%20decline%20from%202017. 

‘India Crime Rate&statistics 1990-2022’ author unknown. Date published unknown.

 https://www.macrotrends.net/countries/IND/india/crime-rate-statistics#:~:text=Individuals%20or%20small%20groups%20usually%20commit%20homicide%2C%20whereas,2018%20was%203.08%2C%20a%201.46%25%20decline%20from%202017. 

‘Economic Inequality’ Wikipedia, 26 May 2022

 https://en.wikipedia.org/w/index.php?search=Economic%20inequality&title=Special%3ASearch&ns0=1 

Maitreesh Ghatak, ‘India’s Inequality Problems’ The Indian Forum, 2021, June 29

https://www.theindiaforum.in/article/does-india-have-inequality-problem#:~:text=Comparing%20the%20wealth%20inequality%20in%20India%20with%20that,data%20is%20obtained%20from%20the%20Wealth%20Inequality%20Database. 

‘The richest 10% holds 76% of the wealth’ CNN Money, New York, August 16, 2016

https://money.cnn.com/2016/08/18/pf/wealth-inequality/index.html 

‘Income Inequality in India’ BYJU’s exam prep, Date published unknown.

https://byjus.com/free-ias-prep/income-inequality-in-india-upsc-notes/#:~:text=One%20of%20the%20main%20causes%20of%20income%20inequality,low%20productivity.%20This%20ultimately%20leads%20to%20income%20inequality. 

Joe Myres, ‘These Charts show the growing income inequality between the world’s richest and poorest’  World Economic Forum, 10 December 2021.

https://www.weforum.org/agenda/2021/12/global-income-inequality-gap-report-rich-poor/ 

Julia Kagan, ‘How much income puts you in the top 1%, 5%,10%?’ April 26, 2022, Investopedia

https://www.investopedia.com/personal-finance/how-much-income-puts-you-top-1-5-10/

Tom Nurse, ‘Politician salaries in the United States’ Thoughtco, February 04, 2021

https://www.thoughtco.com/how-much-do-politicians-earn-3367616