Causes and Effects of Social Inequality

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In Joseph Stiglitz, The Price of Inequality, he explains a series of truths regarding the consequences of unequal income and the distribution of wealth. He deepens his argument by saying that the deregulation and minimalizing government is not a good choice for our economy. Stiglitz starts off his book with explaining the psychological importance of how different generations, both young and old interprets what is fair and just, and vice versa. In addition, Stiglitz does an effortless job in showing the causes and effect of inequality.

The economy, our institutions, and the countries politics is in a dangerous state because of high levels economic inequality. Stiglitz explains the United States economy of today is like that of the past events of the 1930’s and 2009. (p.89) Stiglitz’s also share the concerns of others: Between growth and inequality, there’s a trade-off-result- you may have faster growth but not without a mass inequality. Evidence proves that countries that are not unequal are not fortunate to grow or do well. They are less stable.

Which is why, amid the Great Depression, inequality was once again at its peak just as it was years prior to the Great Recession. Therefore, growth is destroyed by inequality. For instance, opportunity, the U.S. has become the country with the least opportunity in comparison to any other advanced industrial countries. This entitles poor children to their parent’s low-income status. Which shows that the opportunity is not equal neither is it fair. Stiglitz goes on to add how America works far better for the top 1 percent than for the bottom 99 percent, which is the topic of “The Price of Inequality”.

Today those who wish to preserve societies’ inequalities actively seek to shape perceptions and beliefs to make such inequalities more acceptable. They have the knowledge, the tools, the resources, and the incentives to do so. The fact that those at the top can shape perceptions represents an important caveat to the idea that no one controls the evolution of ideas. Control can happen in several ways. (pg. 159-60) One of these ways is by using preferential access to educational curricula and the public media. A second way is by creating a social distance between those whose ideas are to be disparaged and the rest of society.

This limits the influence of those whose ideas are not welcomed by the elite. A third way is by deliberately distorting public information so that it appears to confirm the views preferred by the elite. Stiglitz cites the examples of the tobacco companies that for a long time successfully argued that smoking bore no risks. He notes the similarity to today’s energy companies that argue global warming is not a threat and is only based upon flawed “science” and flawed data.

Stiglitz feels that when these unfair rules or policies are implemented and enforced, then legal justice may be served but not social justice. Furthermore, a good functioning economy is one in which the returns on inputs are equal to the benefits reaped by society. So, fairly, those who bring more benefits to more people, earn more. Versus, rent seeking where no value is added yet the price of a good is artificially high because of market practices that governments allow. Such as, businesses creating barriers to entry in a market, which creates virtual monopolies, or business schools teaching students how to get around government regulations.

These behaviors shrink the economy or create a ‘negative sum’ situation where those at the top benefit but less than they would had the economy been allowed to grow. People in the middle and the bottom suffer more for they have less to dole out for food, shelter, healthcare or entertainment because of artificially high prices. This practice leaves everyone with less than was possible if the market were fair. On the negative side of fairness, redistributing wealth risks removing the incentive or reward for trying. Stiglitz counters this argument by stating that for the same 10 year period, Sweden taxed its citizens at a higher rate than the U.S. but grew at a rate that was greater than the U.S., 2.3% vs 1.85%.

In chapter four Stiglitz offers an extensive critique of those in the political Right who argue that the economic productivity and efficiency always require “incentives” that in turn require the conditions that lead to high levels of inequality. Stiglitz responds by saying, “The right has in mind a perfectly competitive economy with private rewards equal to social returns: However, we see an economy marked by rent-seeking and other distortions. The right underestimate the need for public action to correct the persuasive market failures. It overestimates the importance of financial incentives. And, because of all these mistakes, the Right overestimates the cost and underestimates the benefits of progressive taxation.” (pg.107)

Stiglitz mentions his prescriptions for reversing the dangerous levels of inequality that’s destined to an ongoing increase in America and other places. This prescription offers the assurance of an economy less subject to recessions, to bursting bubbles, and inflation. An improved democracy effective in making American society fair and sustainable. Many of these prescriptions will be difficult to fulfill, but, over time they will each be important for accomplishing the economic political and social goals. In conclusion, one can tell that Stiglitz puts too much emphasis on his personal experiences which can easily stifle a great debate on the causes of inequality.


Cite this paper

Causes and Effects of Social Inequality. (2021, Apr 15). Retrieved from https://samploon.com/causes-and-effects-of-social-inequality/



What are the causes of inequality in society?
Inequality in society is caused by a complex interplay of factors including economic, social, and political structures, discrimination based on race, gender, sexuality, and other identities, as well as historical and cultural legacies of privilege and oppression. Addressing these causes requires a comprehensive and intersectional approach that tackles systemic issues and promotes equity and justice for all.
What are the effects of social inequality?
The effects of social inequality are felt by everyone in society, not just those who are on the lower end of the economic spectrum. This can lead to a feeling of powerlessness, and a belief that the system is rigged against them. This can result in social unrest and, in extreme cases, revolution.
What are the worst effects of inequality in a society?
The worst effects of inequality in a society are that it leads to division and conflict between social groups, and it makes it difficult for people to access the resources they need to improve their lives.
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