This, by its very nature, implies that income is distributed throughout society, and in situations where it is not, it leads to economic crisis'. In the case of the United States in the 1920's, the kind of income distribution necessary to maintain a mass production economy slowly disappeared into the coffers of a few wealthy individuals. and, "as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped." (Eccles, 1951) Eccles blamed, in part, the extension of private credit, or credit that was provided outside the traditional banking system. This included mortgages, consumer installment debt, broker's loans, and foreign debt which allowed for the economy to maintain a high level of employment for a short period of time, but ultimately overextended itself. And as American citizens ran out of credit, they were forced to reduce their consumption, or spend less, which in turn led to a reduction in demand. The reduction in demand led to a situation of overproduction that brought about a significant drop in prices and employment. The downward spiral, caused by the accumulation of money in the hands of the wealthy and the lack of credit on the part of the ordinary American, continued until "one third of the entire working population was unemployed, with out national income reduced by fifty percent, [and] the aggregate debt burden greater than ever before." (Eccles, 1951) All of these problems originated with the accumulation of more and more wealth in the hands of fewer and fewer individuals. And since these individuals did not re-invest their money back into the economy, but instead hoarded their money in savings, there was less money in the general economy to fuel it. As Marriner Eccles emphasized in his memoirs, "had there been less savings by business and the higher-income groups and more income in the lower groups-- we should have had far greater stability in our economy." (Eccles, 1951) the point being that if more money had been distributed among those belonging to the lower economic class in the form of higher wages or lower prices on goods, there would have been less of a need for credit, particularly private credit, and far more economic power being generated from the bottom. This power, generated by the working class, would have been the fuel to maintain the mass production economy...
This idea would have necessarily resulted in less profits and less wealth accumulation by the well-to-do members of society, but would have been of overall benefit to the national economy and possible could have prevented, or at least minimized, the economic chaos that resulted in October of 1929. Herbert Hoover probably said it best when he stated that "The only trouble with capitalism is capitalists. They're too damn greedy." (McElvaine, 2009)
Various factors are taken into consideration when calculating the income distribution, out of which the nominal income is most common. Aside form this, attention should be given to consumption levels of both subsidy products (food, clothing, housing) as well as to luxury products and services. In addition, several social and demographic criteria of the population must be considered, such as the level of education, housing facilities (personal property or rental),
Labor Income The Labor Market and Income Inequality Studies of the labor market have long struggled to explain the relationship between supply and demand in the labor market with the income or wage levels the labor market offers. The volatility in both of these areas -- that is, volatility both in the demand for labor and in wages -- has made it all but impossible for an adequate model to be designed
Poverty and Income Inequality Introduction Poverty and income inequality draw a great deal of attention from activists, scientists, and politicians who are attempting to propose a permanent solution to these two socio-economic issues. State intervention is often anticipated in this area. There is, however, no agreement regarding the most effective instruments and techniques, as well as regarding the extent of public outlay for the sole purpose of reducing inequality and poverty. Various
Snapshot of �single dispersed actor� (Mancini 2020)Income and wealth inequality have come highly contentious and polarizing issues throughout the world today. A economic prosperity continues to grow, statistics show that more individuals are being left behind economically. The rise of income and wealth inequality is creating a large dichotomy between the �haves� and the �have nots.� Likewise, by having such as large proportion of the nation�s wealth and income within
Reuveny, Rafael, and Quan Li. "Economic Openness, Democracy, and Income Inequality: An Empirical Analysis." Comparative Political Studies 36.5 (2003): 575-601. Print. The period studied was 1960 - 1996 and the analysis included 69 countries. National income inequality is measured from a Gini coefficient data set. The authors established that democracy is able to reduce income inequality, while foreign direct investments increase income inequality. The authors note income inequality declines when there
Abstract This paper looks at the concepts of the labor market, wage growth and income inequality in the U.S. and discusses them in terms of inflation (caused by the injection of $4 trillion worth of liquidity into the financial markets by the Federal Reserve after the global economic crisis threatened to derail capitalism). It describes what has been written in three news articles in recent years and months, and discusses them
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