Effects of Income Inequalities: Society and Economy
Anomalies of the “Flagship”
Professor Emeritus, University Professor, University of Szeged, Pázmány Péter Catholic University
Published in: Public Finance Quarterly 2015/3 (p. 384-395.)
SUMMARY: Income inequalities result in unequal societies and hinder economic growth in the long-term. Inequalities are evoked by rent seeking, but are also partly provoked by the state itself. The democratic electoral process of the Unites States does not limit financial support, therefore, people representing 1 per cent of the society elect representatives who influence the legislature and community decisions in the interest of their supporters. As a result of the impact of the media, average people fail to recognise their own interests. In certain cases, poorer sections of the population even tend to refuse state interventions that would actually improve their situation. Over the past two decades, wages and salaries have stagnated, or actually declined in the US. All surplus income flowed to 1 per cent of the population. Monetary policy and bank bailouts applied to manage the recent economic crisis also contributed to rising income inequalities. Not only democracy, but the whole of the economy cries out for reforms to be introduced both in economic policy and in politics itself.
KEYWORDS: income inequality, rent seeking, bank bailout, taxation, monetary policy, financing of elections
JOURNAL OF ECONOMIC LITERATURE (JEL) KÓD: D31, G29, H 21, E63, E 58