Is Capitalism a Friend or Foe?

The Great Income and Wealth gap in America: Is Capitalism a Friend or Foe?

Abby McGowan

Issues in Capitalism T/TH 9:25-10:40

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Table of Contents

Abstract ............................................................................................................................... 3

The Great Income and Wealth gap in America: Is Capitalism a Friend or Foe? ................ 4

Industrial Revolution .......................................................................................................... 5

Class Status ....................................................................Error! Bookmark not defined.

Education .................................................................................................................... 6

References ......................................................................................................................... 12
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Abstract

In classes leading up to this paper we have had discussions about the wealth gap and income

inequality. Is the income inequality in the United States fair or unfair? Should something be done

to make it more equal or should the gaps remain the same? These are the questions I have asked

myself while completing my research. While completing my research, I have come to the

conclusion that without income inequality the United States would be worse off. The United

States is a capitalistic society which allows people to be innovative and give them the right to

make money off of their products. If there was no inequality everyone would be equal and we

would not have the fancy technological products that we use every day such as cell phones, cars,

televisions.
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The Great Income and Wealth gap in America: Is Capitalism a Friend or Foe?

The idea of income inequality and the wealth gap has been a pressing issue in the United

States and other places around the world. There are groups of people who agree with how wealth

is distributed and other groups who want the distribution to be more equal. Income inequality is

“the extent to which income is distributed in an uneven manner among a population” (Income

Inequality). Considering that the United States is a capitalistic country, capitalism goes hand in

hand with the idea of income inequality. Capitalism is “an economic system in which investment

in and ownership of the means of production, distribution, and exchange of wealth is made and

maintained chiefly by private individuals or corporations” (Dictionary).

There are many different factors that affect the income equality distribution. Those

factors include: education, wage inequality, what social class you are placed in, work ethic and

mentality. The type of education you receive determines what type of job you will have in the

future. It is sad to say but it is true because the bottom percent of the income inequality scale can

simply not afford to put themselves or their children through a four-year college without putting

themselves into more debt when they already make so little. Education goes hand in hand with

wage inequality, class status and work ethic. People who work the blue collar jobs are either

barely getting paid minimum wage or below it. If you aren’t making enough money to support

yourself or your family, you are considered to be below the poverty line. Those who are below

the poverty line tend to not have a very strong work ethic because they rely on government

assistance. Income inequality is not necessarily a bad thing to have but it should be redistributed

to a certain extent considering the people in poverty have a very slim chance to even make it up

into the middle class.

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Industrial Revolution

The idea of income inequality began in the 1850s during the Industrial Revolution. The

Industrial Revolution began with the creation of railroads, steel and textiles. One of the first

railroads to be completed was in 1869 which connected California to the Midwest and made

traveling easier and faster. “This was a classic case of state capitalism, maybe even crony

capitalism, because a number of politically influential wealthy individuals benefited great from

the government’s largesse” (“The 2nd Industrial Revolution). The completion of one of the first

railroads from California to the Midwest is a great example of how income inequality began.

New inventions were targeted to the rich because many of them were privately owned and that is

when family fortunes started to be created. Since the rich were becoming richer faster from the

incomes generated from new inventions the middle class that was beginning to be created could

not keep up. Income inequality from the industrial revolution still has not been resolved to this

day. The rich continue to get richer and the middle class and bottom classes are barely able to

make ends meet.

Class Status

Your ranking in the class structure of the United States or anywhere around the world for

a matter of fact plays an important role in the income inequality distribution. Social classes are

broken up into groups of individuals. These groups of individuals are based on multiple

attributes such as: wealth, education, occupation, income, and social networks (“The Class

Structure in the U.S”). Most of the time the social classes are known as the upper, middle, and

lower or working class. Each class can also be broken up into multiple parts that such as the

upper-upper class or a lower-upper class for example. Knowing who is placed in what social
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class and why they are placed there will help give a better understanding of income inequality

and how it is distributed.

Upper class members obtain a net worth of $1 million or more. The upper class members

obtain their wealth through investing in things such as real estate or stock and they earn an

annual salary instead of an hourly wage. The middle class in broken up into the upper middle

class and lower middle class. Individuals in both the upper middle class and lower middle class

have white collared jobs, which are professional jobs that receive a salary. The lower-middle

class contains the largest amount of individuals. This is the class in the income inequality

distribution where the individuals are stuck and cannot move up in class rank. The last class is

the lower class or also known as the working class. These individuals usually have only obtained

a high school diploma. Many do not get a college education. Individuals in the working class

work the blue collared jobs, which require manual labor and are usually paid by hourly wage

(“The Class Structure in the U.S”).

Education

While completing my research, a particular quote caught my eye. “Smart poor kids are

less likely to graduate from college now than dumb rich kids. That’s not because of the schools,

that’s because of all the advantages to rich kids” (The Harvard Gazette 2017). After reading this

quote I came to the conclusion that the advantages that rich kids have are their parent’s large sum

of incomes. College nowadays is very expensive. The price of college continues to increase each

year. As a college student now I know how expensive it is and how much my scholarships help

out my parents. During this day in age you are expected to have at least a bachelor’s degree and

even some places want you to have your masters as well. Kids who come from low income
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families may be extremely smart and cannot afford to go to a four-year college or any college for

that matter. Those are the kids who are stuck working the blue collared jobs that pay minimum

wage or less and require manual labor. Meanwhile the rich kids are handed an education on a

silver platter. The rich kids are the ones who either end up working a white collared 9-5 office

job or come into a huge inheritance from their family. I think income inequality is unfair when it

comes to education. A kid from a low income family could very well be more qualified than the

kid who came from a rich family. Your experience and qualifications should matter more than if

you could afford a high quality education or not.

Global Inequality

Income inequality is a main concern in the United States but it is not the only country

affected by it. On a global scale of income equality, the United States was ranked 10th as of the

year 2013 while Ireland was ranked number 1 (DeSilver 2013). The chart below shows income

equality globally before taxes were taken out and after taxes were taken out. After taxes were

taken out the United States and Ireland were ranked differently. Ireland ended up dropping down

to the 10th spot in the ranking while the United States jumped up to the number 2 spot. The chart
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is a great representation of how countries use taxation to close the gaps between the wealthy and

the poor e (DeSilver 2013).

Even though taxation helps Ireland close the gaps between the rich and the poor, they are still

considered a very unequal country. During the 2008 economic crash the rich continued to get
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richer while the poor were suffering from debt, stagnant wages, and austerity. “The top 10 per

cent have increased their proportion of net wealth from 42 per cent to 54 per cent, while the

share of net wealth held by the bottom 50 per cent has halved” (DeSilver 2013). Since the rich

are continuing to grow their wealth Irish children are living in a household where they

experience deprivation of either food, new clothes, or heat. Children who suffered through the

austerity period were less likely to have a high education. Just like in the United States children

who have low quality education are less likely to make it out of poverty and will end up working

for minimum wage or else than that in their future.

Income inequality fair or unfair?

A common question is asked when the topic of income inequality is brought up. Is

income inequality fair or unfair?

(Income Inequality in America: Red Herrings and Wealth Envy 2013)

As seen above income inequality is viewed three different ways: what people would like it to be,

what Americans think it is, and the actual distribution of wealth. I think this chart is a useful tool
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to help answer the question of is income inequality fair or unfair? The chart should be a

motivational tool for those who are a part of the bottom and fourth 20%. I know if I was a part of

the bottom 20% I would want to work as hard as I could to move up in my class status. I would

not only want to make a better life for myself but also for my family and stop depending on the

government for help. It should not be the governments job to provide for the able bodied people

who do not choose to work. It is one thing to need help to get back on your feet after being laid

off or on disability for an injury. One of the main reasons why many people do not make it out of

the bottom 20% or fourth 20% is because they are okay with the bare minimum help they receive

from the government. They know that as long as they stay below the poverty level they will be

handed the necessities they need on a silver platter.

A political economy editor at Forbes said in an article that without income inequality we

would all be worse off (Larino 2015). I agree that income inequality is important to have because

if there was no inequality every person would be exactly the same. We would not have all the

innovative gadgets that we use on a daily basis now. A great example is the mobile phone. Back

in the 1980’s the mobile phone cost around two thousand dollars and it was targeted for the rich

to purchase. Now just about everybody rich or poor owns some type of mobile phone and most

of those mobile phones are iPhones created by Steve Jobs. Going back to the idea of work ethic,

people are motivated to become rich. Without the people who have the drive to want to become

rich this world would not be as exciting. There would be no social media to share memories, no

television sets to entertain you in the comfort or your own home, no cars to make getting from

one place to another easier.

Income inequality continues to be a growing issue in not only the United States but

around the world. It has been a growing issue since the beginning of the industrial revolution.
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Yes, when you look at charts of income inequality it does look unfair to the middle class and

lower class. The wealthy are about 80 percent of the income distribution. If you want to obtain

wealth and move up in class status you need to put in the time and effort. Individuals need to

stop putting the blame on the government and take responsibility for their own actions. If you

continue to be lazy and wait for handout you are not going to get anywhere in life. Your life will

be stagnant. If individuals are okay with being stagnant and getting by with the bare minimum

good for them but they should not complain about the rich. There are rich people who gained

their wealth easily like being born into an already wealthy family. Celebrities are a great example

of how children will grow up in the upper class. Their parents make millions of dollars and the

child is known about publicly from the day they are born. You do have the rich individuals who

worked hard to get where they are today. At the end of the day it all comes down to your work

ethic. If life throws challenges at you are you going to be the person who lets it define you or are

you going to overcome it? The unequal income distribution is just another challenge that life is

throwing at you. You either let it defeat you and live your life getting by with the bare minimum.

Or you can overcome it and achieve a higher class rank and live life more comfortably.

Complaining about the unequal distribution is no longer an excuse, you either want to be wealthy

or you do not.
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References

Boundless Sociology. (n.d.). Retrieved April 11, 2018, from

https://courses.lumenlearning.com/boundless-sociology/chapter/the-class-structure-in

the-u-s/

Capitalism. (n.d.). Retrieved April 11, 2018, from http://www.dictionary.com/browse/capitalism

DeSilver, D. (2013, December 19). Global inequality: How the U.S. compares. Retrieved April

11, 2018, from http://www.pewresearch.org/fact-tank/2013/12/19/global-inequality-how

the-u-s-compares/

Hearne, R. (2016, August 24). Despite recovery, Ireland remains a hugely unequal society.

Retrieved April 11, 2018, from https://www.irishtimes.com/opinion/despite-recovery

ireland-remains-a-hugely-unequal-society-1.2766053

Income Inequality. (n.d.). Retrieved April 11, 2018, from https://inequality.org/facts/income

inequality/

Income Inequality in America: Red Herrings and Wealth Envy. (2013, March 07). Retrieved

April 11, 2018, from http://wondergressive.com/income-inequality-in-america-whats-the-

big-deal/

Larino, J. (2015, April 21). Is income inequality a good thing? Author argues benefits of

disparity at Isidore Newman talk. Retrieved April 11, 2018, from

http://www.nola.com/business/index.ssf/2015/04/tamny_income_inequality_good.html

The 2nd Industrial Revolution, the Gilded Age, Laissez-Faire Capitalism & Social Darwinism.

(n.d.). Retrieved April 11, 2018, from

https://www.dailykos.com/stories/2014/8/11/1320673/-The-2nd-Industrial-Revolution

the-Gilded-Age-Laissez-Faire-Capitalism-Social-Darwinism
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The costs of inequality: Increasingly, it's the rich and the rest. (2017, December 20). Retrieved

April 11, 2018, from https://news.harvard.edu/gazette/story/2016/02/the-costs-of

inequality-increasingly-its-the-rich-and-the-rest/