Question

Bill Gates made the following statement: "Yes, some level of inequality is built into capitalism.... It is inherent to the system. The question is, what level of inequality is acceptable? And when does inequality start doing more harm than good?"

Answer 1

Inequality is concerned with disparities in the distribution of wealth, social status , education etc. It may arise between individuals or societies and in its wider sense, between nations. We cannot say which one is the worst, but all of these have a negative aspect in the development of the economy.

Every human being needs some minimum items like food, clothing, housing, education and health to live. Poverty is the inability to secure these. WHAT causes poverty?? The ultimate answer is inequality.It may be social, economic or political. There are poor people both in urban and rural areas. Low income, lack of assets, unemployment, population explosion all these are the causes of poverty. Keeping this in mind, it will be interesting to find out the logic behind Bill Gates' statement: "some level of inequality is built into capitalism..."

He admits that high level of inequality is a problem, but it should not be ignored.By explaining Piketty's theory he says that we should consider not only wealth and income but also consumption pattern of the society. Consumption data represents the goods and services that people buy, which include food, housing, health etc. He re reiterates that consumption data may be more important for understanding human welfare. Other things being equal, faster economic growth will diminish the importance of wealth in a society, whereas slower growth will increase it.

Is inequality acceptable? If so, what is the Morality in Economics? A "Right Amount" of inequality is good for the society, most economists say. For some of them it is the natural result of freedom, a free market economy and capitalism. for others, inequality is the potential drag on economy. Some inequality may be necessary to incentives for work and investment. But some equality is necessary if markets are to be created that support the investment." Sometimes a rise in inequality is perfectly compatible with healthy growth and prosperity, and in other cases the rise has gone way too far", says Jonathan Ostry.