- Question
Is there a correlation between capitalism and income inequality?
The political debate around whether capitalism and the tenets of free market socioeconomic modeling are beneficial for society has been raging for hundreds of years. Within a modern context, the topic of income inequality (especially within largely capitalistic countries like the United States and, to an extent, the UK) has emerged alongside the effects of the free market on the world economy. So, a big question within both the economic and political realm asks: Is there a correlation between capitalism and income inequality?
No, capitalism does not cause inequality
Income inequality is a byproduct of every society, no matter what economic system under which that society functions. Capitalism, by nature, does not encourage or catalyze the inequality already in place.
Yes, capitalism causes inequality
This position holds that capitalism causes income inequality. It argues that capitalism is structurally designed to concentrate wealth among a few at the top, and that much modern inequality flows from the 'superstar effect', in which a handful of winners capture outsized rewards.
Income Inequality exists outside the realm of capitalism.
Income Inequality, broadly defined, has existed since before capitalism was adopted as an economic model.