Rigged capitalism

Rigged capitalism

Western economies have fallen short of the delivery expectations by the citizens. Contrary to the projections on economic growth, capitalism regulation has resulted into rising inequalities within the different aspects of economic growth, an occurrence which has a strong relationship to weak competition, low productivity growth and regulation framework loopholes (Martin Wolf, 2018).

The productivity growth rate has continuously been declining to advance the inequality situation and impacting on the affected state’s financial flow. Technological change and demand for highly skilled and innovative labour in production have created a gap on the employable citizens and those who don’t have the skills leading to an increase in the income for the skilled. In contrast, unskilled labour earns less or remains unemployed. The argument further suggests that this disparity in income could have contributed to the current inequalities with production declining due to the limited number of skilled labour available to support production (Martin Wolf, 2018). Besides, the focus on only the skilled labour could be missing out on potential innovative talents who would help and improve growth rate is recruited.

However, a critical analysis of the situation has revealed an interesting revelation of a strong relationship between the causes of productivity growth and inequality. Low competition and low dynamism have been identified as common causes of reduced growth and rising inequality. Rentier capitalism has highly supported this inequality with market and government policies allowing privileged individuals and businesses to benefit from everybody hence the slow income growth situation has been as a result of a decline in productivity and rise in economic inequality.

The regulatory policies in place have greatly influenced and directed the path taken by the economy. Some firms have been favoured and supported to expand while others have been suppressed to the point of exit. The frameworks have supported monopoly establishments which have continued to grow and generate massive levels of returns with the employees in these establishments being rewarded through salary increments (Jason Furman & Peter Orszag, 2018). This unhealthy competition situation has resulted in some firms to continuously lose their market share while others ending up into making loses. This has made such firms maintain salary for their staff constant with others getting laid off. This difference in earning levels has highly contributed to the citizen inequality levels. Within the successful firm establishments, job levels have also added to the inequality situation due to the salary gap between top management and middle-level workers.

Economic inequality has also been linked to globalization with imports, shift in the point of manufacturing and domestic policies in place and shift in the global division of labour being blamed for the situation. However, the author of the article finds no strong relationship between economic inequality and foreign trade and offshoring. However, the shift in labour and its division supported economies to specialize in areas where there was potential for growth leading to some economies experiencing a decline in their economic growth hence situations of income inequality.

The number of firms operating in a particular industry also shapes the market situation in the economy. When government policies only encourage few firms to dominate the industry, then there will exist discrepancy in remuneration standards with employees in high performing companies benefiting more than those in struggling firms.  Unhealthy competition tends to struggle with the economy and highly encourages economic inequality. The analysis thus supports that both the slow productivity situation and inequality issue have highly been impacted by reduced market competition and dynamism on the areas of policy choices (Jason Furman & Peter Orszag, 2018).

 

References

Jason Furman & Peter Orszag. (2018). Slower Productivity and Higher Inequality: Are they related. Peterson Institute for International Economics.

Martin Wolf. (2018). Why Rigged Capitalism is Damaging Liberal Democracy. Article One.