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New Ways of Looking at Old Issues: Inequality and Growth is an article written in the Journal of Development economic by Deininger and Squire in 1998. It analyses the relationship between inequality in resource distribution and poverty; the writers are of the opinion that if the society have an uneven distribution of resources, then the poor are not able to come out from this poverty. However, the effect of inequality has minimal impact on the rich. The paper explores the relationship between initial inequality and growth. The data analyzed comes from a wide survey of household data; the writers are keen to involve all kinds of income that households get at a particular point in time. The data also does not focus on a small group of people but has a wider perspective where it focuses on households data at national level. It aims at interpolating data from a national level and gives a full analysis of the relationship existing between inequality, growth, and poverty (Deininger & Squire 258).
The major asset considered in this paper is land; it is thought to influence the functioning and financial capability of an individual. This is where those who do not have land have limited access to loan facilities. They are also subjected to high rates of rent. This is seen to be the major cause of the never ending poverty.
On the other hand, the paper talks of how the rich are able to get financial grants from banks and financial institutions, if they have collaterals. The paper borrows ideas from other writers in the same area like Alasina and Anand; however the author refutes their observation that inequality has minimal effect on poverty in a country. The writers use primary data to proof their stand, which is satisfactory (Deininger & Squire 267).
The authors stand point is taken after a clear analysis of primary data where they used a wholesome approach by taking representative data in regards to this topic. They use not a small portion of the larger society but integrate each society and person in the picture. They go to the areas that are affected by large resources inequality especially land and compares the level of poverty in these places with those of places where there is a slight higher equality in resource distribution. From their analysis they observe that the poor tend to grow poorer and if they have to live better lives they need to acquire resources.
In developed societies, where resources are well distributed, they have enforceable laws that support the tradition of equality. In these societies women rights are recognized and are not discriminated as the case was in the traditions. The report showed a high relationship between Gini coefficient and land/resource distribution. That area which has a high Gini coefficient had a high level of resource distribution. Poverty tended to follow the rate of resource distribution with areas with high poverty rate reporting a high rate of inequality (Deininger & Squire 285). The world has become a global village with a high rate of interaction. With globalization, transport and communication, international economy has continued to grow. Countries are trading with each other; both developed and developing countries.
Through this trade, resources can be utilized to their maximum. Countries with absolute and comparative advantage position themselves in international market. The United Nations conference on trade and development (UNCTAD) issued a press release on September 1997. As par the press release since early 1980, the world economy has been going through high integration rates through market forces and at the same time, economic, and social disparities among nations has increased. UNCTAD documented that the world economy has been experiencing a decrease in the growth rates and on the other hand the levels of inequalities are becoming visible. Inequalities are threats to integration and can lead to backward economic movements.
Although women put much effort in their education as compared to their male counter parts, they always face discrimination in terms of employment. They are assumed to be incapable of performing the same duties as men. Even with the same type of employment, they are discriminated against in terms of salaries and the wage disparities continue to rise.
On the other hand, there are still large and visible gaps between the rich and the poor. The rich continue to accumulate wealth while there are people in the same republic who continue to suffer in terms of food and medical care. According to UNCTAD, economic integration is not directly related to growth and development and at the same time it does not mean that inequality can be reduced by growth and development. The existence of dominant world traders and world economies has been defined by inequality in resource distribution and poverty levels. United States is the world’s leading economy but it is noted to be among those countries with a great potential in resources and have its resources equally distributed. A country like Zimbabwe is suffering since they concentrated their resources on few individuals and thus the rate of poverty increased among its people; there is no trickle down effect on resources.
Deininger, Klaus and Squire, Lyn.
New ways of looking at old issues: inequality and growth. Journal of developmental Economies. Vol.
57, 257-287, 1998.