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Wednesday, December 9, 2009

Balancing the creation and distribution of wealth: a comparative analysis.

In liberal market economies like the United States the pursuit of wealth is fiercely competitive. The lack of government intervention has led to a grossly uneven distribution of wealth. Organizations that amass wealth, unregulated by the government, have the power to shape and influence governmental policy in their favour. The government policy literally ensures that the rich get richer, and the poor get poorer. Rich neighbourhoods receive priority to all of the governmental dividends; the poor are left without adequate service. Wealth creation and wealth distribution represent two critical tasks that all governments confront. A historical overview rationalizes the cause and effect relationships between the factors that influence how governments address wealth creation, wealth distribution, and how they balance the demands of each.

Governments must address wealth creation relative to the nature of the economy. A government is a living organism which must evolve to adapt to changing circumstance, creating policy that matches the status quo. Economic liberalism is based on the premise that commerce is mainly between individuals in agrarian market societies. In developing agrarian market societies Laissez-faire style of economic policy has proved to be an effective manner of addressing wealth creation. Mercantilists were able to take advantage of the laissez-faire doctrine in place in both the United States and Brittan in order to amass wealth, people, and thus power. Over time with the development of technology broad unregulated capitalism bred “business firms powerful enough to come to grips with the state” (L. Lipson). Areas where the wealthy reside flourished while the poor were pushed out, segregated into communities with little of the governmental support the wealthy received. This is a result of a government that evolved with principals that are intended for commerce on an individual level- instead of taking into account the repercussions of unequal wealth distribution, and properly taxing the rich.
“The presence, side by side, of rich organizations of trusts, cartels, and
monopolies; and the rise of holding companies and interlocking directorates
negated the ideal of free competition among equal individuals... business spelled
power- power in any sense: the amassing of wealth, control of people, dispensing
of social influence, and, above all, mastery of the state... In this way political considerations were subordinated to economic.” (L. Lipson)
When political considerations become subordinate to economic, we risk the exploitation of people domestic and abroad. The principal reason for government involvement in commercial policy is the need of currency, and the need for security in the contracts between employee, employer, and between both participants in commerce. Governments are continually evolving to redistribute power, and wealth as a result of the imbalance that has widened continually since the industrial revolution.

With the income the government receives it is their responsibility to distribute it about the population. It is in how they do this is a major factor determining the success or failure of the nation’s government. The Romans had to address two innate principles of wealth distribution; finding the minimum a state can provide without aggravating its citizens, and finding a balance between an individuals and the government’s responsibility to protect the wellbeing of citizens. In order to do this, the government built roads to facilitate the flow of commerce, the tax they received paid for the highways, implemented currency, and provided protection to participants in trade. Evolution of government to include the welfare of the citizens into their responsibility was marked by the use of this tax to distribute wheat at subsidized prices or for free to prevent riots among the poor. In deciding where to draw the line between an individuals and the government’s responsibility to protect the wellbeing of citizens, John Stuart Mill illustrated the significance of allowing individuals to satisfy their own needs
“In all the more advanced communities, the great majority of things are
worse done by the intervention if government than the individuals most interested in the matter would do them, or cause them to be done.”
The ability for citizens to satisfy their own needs with pure necessity as a catalyst exceeds the government’s ability to satisfy the same need. For a market to succeed participants must be self interested. As a result, inequality between domestic populations must increase to spark the concern of citizens to progress their society in a way that suits them instead of a way that suits those in power.


Finding a balance in the need to regulate commerce, redistribute wealth and provide service is a fleeting task because the needs citizens and the nature of commerce are rapidly evolving. Nations like the United States and Brittan that practice Economic liberalism try to “curb the sphere of the state” (L. Lipson) and leave the agrarian economy to regulate itself. Socialist Eastern European nations “have argued that any service or commodity which is crucial to the entire economy... should be run by the state”. This is a crucial difference in deciding how they approach wealth creation and distribution, and their theories have a major impact how the nations approach the human needs of their citizens and citizens of nations with whom they do business. In liberal market economies the growth of large organizations and thus the amassing of wealth and power have overwhelmed the ability of the government to remain nonpartisan in providing services and ensuring the fair distribution of wealth to their citizens. The proof of this imbalance is shown by “The consistent trend evident across the 100 largest metropolitan areas... is one of a shrinking proportion of families with middle incomes” (Booza, Cutslinger, and Galster). The government further neglecting to address the changing nature of the American economy is finding itself in a situation prospected in the article Where Did They Go?
“the polarization associated with the decline of middle-class neighbourhoods is likely to create greater disparities across jurisdictional boundaries that could ultimately create greater political conflict and competition for scarce resources” (Booza, Cutslinger, and Galster)
This imbalance created by the governments lack of presence in providing for its citizens is furthered by the situation illustrated in the article Life at the top in America isn’t just better, It’s Longer. The result of this is a phenomenon where essential services establish around the rich, and the poor are segregated from both these necessary services (like healthcare) and the opportunities provided. This lack of resources has created a situation where the poor are segregated from the wealthy, and there is no “in between” lifestyle to accommodate mobility through the classes. A difference between the theories of capitalists (who promote liberal market economies) and the theory of socialists is set out by L. Lipson
“capitalists argue for profit-making as the test of the success or failure
of any economic activity, socialists argue that service to the community
is the prime consideration, even if some kinds of service may not be
profitable in financial terms”
The idea that wealth created in the country is the sole factor of economic success has through the death of the middle class in America been disproven. The American government, by keeping its hand out of economic matters allowed itself to be subverted to the concerns of businessmen in the interest of personal profit. Where capitalist theory fails, socialist theory succeeds- providing necessary service to its citizens, ensuring standards of quality are met by service at a cost affordable to the citizens.. Wealth creation and distribution must be addressed with regard to the nature of the economy. As the economy grows, and changes, a government must evolve to meet its needs.

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