Relation between capitalism and inequality

This report explores the relationship between capitalism and inequality, discussing the causes of inequality in society due to capitalism and its impact on society. It also examines the political economy perspective and interactions between state activity and the underlying economy.

Relation between capitalism
and inequality

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY ..................................................................................................................................3
Relation between capitalism and inequality................................................................................3
CONCLUSION ...............................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Capitalism refers to an economic system which is based on private ownership, controls
nation's trade and industry for profit. Inequality is defined as the disparities in the dispersion of a
definite metric, that can be health, income or any other material asset (Botwinick, 2018). This
report is based on the topic “relation between capitalism and inequality” in which the causes of
inequality in society due to capitalism are defined. This project covers concept of capitalism and
inequality along with their relationship and influence on society. Apart from this, political
economy perspective and interactions between state activity and underlying economy are
discussed in the report.
MAIN BODY
Relation between capitalism and inequality
Inequality is referred as the unequal distribution of material goods, income and wealth. It
is the availability of unequal rewards and opportunities for distinct social statuses or positions
within a society or group. This results in deviations in individual endowments. Capitalism is
defined as the economic and political system in which the investment, industry, trade and
production of a country are controlled by for profit corporations and private individuals, instead
of a state. In 19th and 20th centuries, the growth and emergence of capitalism has led it to be the
dominant economic system globally. In all the competing systems like communism and
socialism, capitalism has outperformed (Braithwaite, 2013).
The shift towards capitalism at global level because of its economic freedom, potential
for high profits, reduced role of state and equality of opportunity has led to big problem of
increasing economic inequality because of ability of some groups and individuals to exploit and
get advantage or benefit of what capitalism enables them to. When most of the product
distribution occurs by markets in which for-profit companies and people trade goods, services
and contracts in order to generate profit, makes the society capitalist. Capital circulation into
new investments is allowed by markets, as invested capital is combined with power of labour to
develop products and services which are sold to earn profits that administers much capital for
further business enterprise. A cycle of increasing profit amounts is created through investors by
constantly doing this (Carvalho and Rezai, 2015). This depicts the way capital ownership in
capitalist society creates inequality to the degree as it develops further accretion by investment.

The constant running of cycle makes it difficult to raise capital in order to invest in the society
of capitalist. The figures of richest 1% own 34% and 10% own 74% of wealth in USA depicts
the economic inequality globally today. However, it is not just an issue for poor people in society
as if these figures grows constantly and inequality is not addressed properly, then the economic
insecurity and increasing inequality can develop a backlash in opposition to the capitalist system
and erode social order. In capitalist society, the inequality is often not down to deviations in skill
and talent, but it is caused due to resource and inheritance inequalities, leading to deviations in
number of opportunities exist, economic capabilities and education (Golubchikov, Badyina and
Makhrova, 2014).
Capitalism and inequality are highly interlinked or related with each other. Capitalism
incarnates and keep up an enlightenment agenda of equality and freedom. Typically equality and
freedom to trade is exist under the law, that means most adults – poor or rich – are officially
subject to similar legitimate rules and regulations. But, along with its inequalities of wealth and
power, capitalism fostering inequality in economy alongside equality under to jurisprudence or
law. Today, in United Kingdom, the wealth own by the richest 10% is 44% and richest 1% own
12%. Similarly, in United States of America, the richest 1% own 34% and 10% own 74% of
wealth. The figures in context of France are 24% and 62%, richest 1% own 35% in Switzerland,
15% in Canada and 24 percent of wealth in Sweden respectively. The patterns of inequality are
vary in other nations. Inequality develops negative outcomes by psycho social stresses created by
unequal society interactions (Sturm and De Haan, 2015). It is endemic to capitalism and large
variations are there in inequality measures in distinct major capitalist nations.
Differences in skill or talent of individual resulted in some inequality but, it can not
explains the gap among poor and rich in many capitalist nations. Wealth inequalities often leads
to deviations economic power, education and income. Capitalism develops on inequalities of
gender, ethnicity or class which are historically inherited (Kröger, 2012). By yielding more
profit generation opportunities, it may overdraw deviations because of ability or location. Waged
employees can not utilize their lifetime work capacity as collateral in order to acquire loan
money. On contrary to this, Capitalist utilize their property as a collateral to lend money, invest
and for earning profits. Unlike owned capital, to get loans for investment, free labour power can
not be utilised as collateral. In respect to this, labour and capital don't mitigate on a level field,
this imbalance is a leading driver of inequality.

As capitalism is becoming more knowledge intensive, it can develop a low paid and
unskilled underclass and further aggravate inequality, unless the measures associated with
compensate are not put into place. The another cause of inequality is inseparability of workforce
from work itself. Contrasting to this, the owners of other production factors have freedom to
trade and seek opportunities when their property yields other rewards or makes money. This is
disadvantageous for workers and have cumulative effects. Capitalism causes and maximises
education and economic inequalities which resulted to become functional to capitalist culture and
production (Merkel, 2014). From the perspective of Marxist, inequality is an inevitable and long
term consequence of capitalist economy. Education supports and reflects social inequalities of
culture of capitalist. In the replication and reproduction of capitalist social form, the education
sector is an important state apparatus which is necessary for continuance of economic inequality
and surplus value extraction. Thus, there are material relation between exploitation with
capitalist inequalities and educational inequality (Does Capitalism Inevitably Increase
Inequality?, 2019).
The inequality in the overall world is because of capitalism, by making its practitioners
wealthy. An unequal wealth distribution in the entire world is because of uneven capitalism
distribution. Inequality is a political or economic problem, precisely due to secular stagnation.
The longevity and intensity of economic crisis in nation has bought the inequality issue. It is an
inevitable result of capitalist activity. Over some last centuries, the distribution of capitalism has
developed a phenomenal leap in progress of humans which leads to unprecedented cultivation of
human potential and unimaginable maximization in material living standards (Capitalism and
Inequality, 2013). The intrinsic dynamism of capitalism, however, develops insecurity in
addition to benefits. So, its advance ever met resistance.
The growing inequality in society may leads to high level of societal issues within a
nation or region including homicides, obesity, imprisonment rates and teenage births. In unequal
society, poorest people more experience these issues and are self-directed of poverty. For a
capitalist society, it is very difficult to alleviate these problems as constant investment into health
and police services. For instance: may be relatively less effective as these issues are being
recreated in generations endlessly in the society's most deprived areas. Thus, reducing inequality
from society is the appropriate way to enhance social environment quality, the real life quality
for each one and national performance standards, as inequality is the inherent issue in society

that develops a steeper social gradient in educational and health performance areas (Reich,
2017).
The inequality developed due to capitalism, however, is not similar in entire world.
Demands for much valuable products, increasing income and inequality have generated a
emblematic nature of inequality in the more developed societies of capitalist, where the status or
identity of a product or service may be more crucial than the use of goods, leads individuals to
constantly consume in order to gain high status (Are capitalism and inequality linked?, 2017). In
the less developed societies, inequality is of distinct nature. Although, still they are impacted by
capitalist system, the scanty needs are more significant for individuals who are living in poverty
and have very less or no access to clean water or electricity. In those societies, the poorest people
are more often being exploited through richest corporations. The capitalism nature has led to
biggest issue of high gaps of increasing inequality in societies that has leads to worsening issues
which are becoming constantly more difficult to resolve.
CONCLUSION
As per the above mentioned report, it has been concluded that capitalism and inequality
are interrelated with each other and influence the societies in nations. The inequalities in wealth
leads to deviations in income level, education as well as economic power. There are various
causes of inequality in nation differences in talent and skills, education and income level,
inseparability of workforce from work etc. Unskilled and low paid underclass is developed by
capitalism as it is becoming more knowledge intensive. Thus, it can be said that the capitalist
economy is the main cause of inequalities in society.

REFERENCES
Books and Journals
Botwinick, H., 2018. Persistent inequalities: wage disparity under capitalist competition. Brill.
Braithwaite, J., 2013. Inequality, Crime and Public Policy (Routledge Revivals). Routledge.
Carvalho, L. and Rezai, A., 2015. Personal income inequality and aggregate demand. Cambridge
Journal of Economics. 40(2). pp.491-505.
Golubchikov, O., Badyina, A. and Makhrova, A., 2014. The hybrid spatialities of transition:
Capitalism, legacy and uneven urban economic restructuring. Urban Studies. 51(4).
pp.617-633.
Kröger, M., 2012. Neo-mercantilist capitalism and post-2008 cleavages in economic decision-
making power in Brazil. Third World Quarterly, 33(5), pp.887-901.
Merkel, W., 2014. Is capitalism compatible with democracy?. Zeitschrift für vergleichende
Politikwissenschaft, 8(2), pp.109-128.
Reich, M., 2017. Racial inequality: A political-economic analysis (Vol. 4883). Princeton
University Press.
Sturm, J. E. and De Haan, J., 2015. Income inequality, capitalism, and ethno-linguistic
fractionalization. American Economic Review. 105(5). pp.593-97.
Online
Does Capitalism Inevitably Increase Inequality?, 2019. [Online]. Available through:
<https://link.springer.com/chapter/10.1007/978-90-481-2652-1_3>
Capitalism and Inequality, 2013. [Online]. Available through:
<https://www.foreignaffairs.com/articles/2013-02-11/capitalism-and-inequality>
Are capitalism and inequality linked?, 2017. [Online]. Available through:
<https://webcache.googleusercontent.com/search?q=cache:zgR-bITQ77UJ:https://
sites.manchester.ac.uk/global-social-challenges/2017/05/08/are-capitalism-and-
inequality-linked/+&cd=21&hl=en&ct=clnk&gl=in>