Economic inequality has a wide variety of meanings. In my essay, I discuss income inequality and wealth inequality. Economic growth is a long-term expansion of the productive potential of the economy. Standard economic theory predicts that high levels of inequality will lead to a decline in economic growth, while high levels of growth will lead to an increase in inequality. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get the original essay First, I will discuss inequalities. A certain degree of inequality is necessary for a capitalist economy to function properly. It encourages competition, which leads to innovation, and facilitates the efficient distribution of resources to innovators. Additionally, inequality is necessary because the rich are test buyers, which stimulates investment in new products. Some argue that it is not economic inequality that is to blame, but rather the number of people living in absolute poverty. Absolute poverty is defined as people not being able to meet their basic needs and often finding it extremely difficult to get by. Therefore, instead of mitigating inequality with a socialist government approach, the UK should aim to maximize growth with a free market economy, with the belief that this wealth will trickle down and help lift people out of poverty absolute. As evidenced by the 50% drop in the number of people worldwide living in absolute poverty between 2000 and 2012. This goal was achieved through minimal government intervention. This is a strong argument that should not be ignored. However, it does not take into account all the negative externalities associated with high levels of economic inequality. For example, high income inequality is closely related to male-male homicide rates, with a correlation of 0.9. In the economic context, this results in costs for police forces, prisons, the justice system, as well as an opportunity cost for those who can no longer work. Additionally, high levels of income inequality can lead to an economy where there is little social mobility, which poses two main problems: First, it allows the majority of available economic resources to be concentrated at the top. This situation is not competitive and deprives the economy of productive potential. This leaves people who have something to contribute at the bottom, with limited access to economic resources. Second, this stagnation leads to a system that serves power rather than competence and work ethic. This allows corruption to become an effective means of achieving financial success. It is for these reasons that inequality should not simply be ignored, but this does not mean that inequality should take priority over economic growth. and the more equality seeks to combat absolute poverty. Absolute poverty is not only a problem because of the low standard of living it ensures, it can also destabilize the economy. When there are large numbers of people without hope of financial advancement, those people find themselves dispossessed. This incites crime and creates a climate in which extreme political ideas become attractive. It was a climate like this that allowed the Nazis to rise to power, at enormous economic and social costs. Therefore, deciding whether the UK should prioritize inequality requires first deciding whether a solution focused onGrowth or wealth redistribution would be more effective in reducing absolute poverty. Could we focus on growth until absolute poverty is eradicated? An optimist might say yes. However, an equally justifiable argument would be to say that we cannot ignore the negative externalities associated with high levels of economic inequality. There is no doubt that unchecked capitalism will produce endemic inequality. This is largely because the rate of return on capital is higher than the growth rate of the economy, identified by Thomas Piketty as r > g. This means that the more capital you have, the easier it is for you to acquire more wealth. The overall economy can only generate a limited amount of wealth each year. So, in theory, the exponential nature of capital gains means that eventually all of each year's economic growth will be absorbed by whoever already has the most wealth. the market approach is not viable. As time passes, inequality increases, until it begins to undermine growth and social mobility solidifies. Evidence of this can be seen in the US (which has a freer market economy than the UK) where inequality is already predicted to slow real GDP growth by 2-5% per year. This amount will only increase without sufficient measures to reduce inequalities. I will now talk about economic growth. Economic growth is the key function of an economy, it is important for four main reasons: It increases the standard of living in a country. It increases government tax revenue and reduces the cost of spending on social benefits - this can help stabilize the economy by reducing public debt and providing more resources to deal with economic shocks. Sustained growth leads to more jobs, which can have the effect of reducing income inequality. It can help finance new and important technologies, for example in the UK it could increase investment in infrastructure and renewable energy projects. Economic growth is clearly important, it is the key macroeconomic objective. However, it can also cause many problems and it is because of these problems that economic growth must be achieved in a sustainable manner. History has shown us that rapid economic growth leads to recession. For example, the rapid economic growth of the 1920s was a major cause of the Great Depression. This is because during a period of rapid growth, people become overconfident and begin to overinvest, taking unnecessary risks that they probably would not take during a period of slower economic growth. Not only is this bad in the short term, but some economists believe this cycle produces a hysteresis effect, where each recession has lasting impacts that can reduce the UK's trend growth rate in the long term. Additionally, rapid growth in the UK is known to produce a current account deficit. This is due to the UK's import-oriented economy, where disposable income created by economic growth will be spent on imports from other countries. This can have various consequences. A current account deficit will reduce the value of net exports, thereby reducing a country's overall demand. Current account deficits are also considered a sign of an unbalanced, unsustainable and uncompetitive economy, which can lead to a risk of depreciation of that country's currency. Another example of.