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Wealth, Poverty, and Systems of Economic Class

Introduction

In economics, poverty, wealth, and society’s economic stratification are interrelated concepts linked to racial, gender, and regional inequalities. Disparities in income and wealth distribution contribute to societal stratification and the emergence of social classes. In a capitalist economy such as the United States, the conflict arising from competition for scarce resources creates and maintains an unequal social order. In this context, the wealthy and powerful elite work in economic self-interest to maximize their welfare through unfair laws and societal structures. By examining wealth, poverty, and economic classes from the perspective of social justice, the socioeconomic inequalities persistent in society will become clear.

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Wealth

Conceptual Meaning

Income and wealth are often used interchangeably, but these terms are conceptually different. Rakopoulos and Rio make a basic distinction between the two concepts: income is the resource flow over a specific duration, while wealth refers to accumulated assets at a particular time (276). This conceptual difference is linked to historical and cultural ideas of material possessions and power. The industrial revolution that marked capitalist history saw land and other factors of production, including labor, become interchangeable commodities (Gregory 314). As a result, their exchange value and distribution were integrated into capital processes. Therefore, capitalism transformed the traditional fixed form of wealth into a transferrable commodity, putting it into economic circulation.

Capitalism and Wealth

Capital is viewed as a process through which wealth circulates. Its value is transient: it starts as money, converts to a commodity, and reverts to its monetary form (Muehlebach 244). While wealth awaits to enter circulation, it is a fixed capital that has some value. Therefore, although it seems static, it earns profits and boosts the national economy. Based on Marxist thinking, wealth has an anticipated higher value, making it an item of struggle (Allen 89). Cross-cultural differences exist in the expectation of the future good. In India, wealth is largely linked to children, while in European cultures, individuals and companies consider it a prospective value increment (Gregory 314). It enables people to convert wealth into inalienable items such as farmland, kinship, and fame to which they have exclusive rights now and in the future.

Accounting for inequalities, the present and future value of wealth are unequally distributed. According to Rakopoulos and Rio, the return on capital far outstrips its output under a capitalistic system (281). Unfairly amassed wealth, including land, contribute to inequalities and poverty since the value of circulating commodities or capital is inalienable. Although capitalist economies stress dynamic capital, its flow in the market leads to more accumulation by the wealthy and powerful. Hoarding capital through corruption or exploiting legal loopholes in anticipation of future value increment is unproductive and does not benefit the economy. Thus, privately accumulated wealth and related income is a foremost contributor to inequality – a large gap between the poorest and the wealthiest – in contemporary society.

Unequal Wealth Distribution

Wealth is not static; its value is relational, affecting its demand in the larger society. Capitalist states see reserve bank deposits as the guarantee of future value, while dynasties regard their farmland and assets as capital (Rakopoulos and Rio 284). In modern times, the sources of wealth include products of local skills and craftsmanship, including cultural artifacts and paintings, considered a valuable heritage for communities. These items can be viewed as fixed capital with a future market value. However, the flow of these forms of wealth is unequal, with the rich and powerful having an inalienable right to them. Elitist brands, including Ferrari, though built by ordinary engineers and technicians, are sources of wealth for big corporates and families that invest in them (Rakopoulos and Rio 289). Although the common artisans may have financial claims, the capital distribution reflects the relational power in a society.

Wealth creation depends on harnessing ordinary people’s inalienable skills and talents, but its distribution is not equal. For example, one percent of American households control fifteen times more wealth than the bottom 50% of the people combined (Wodtke 1379). Therefore, in contemporary times, wealth is intertwined with the power to control social production processes. The management of its reproduction relies not on its hoarding but on removing it from social control (Gregory 314). Exclusive groups, corporations, and countries enhance the commercial value of capital beyond the poor’s reach. These entities continue to amass riches using historical advantages, widening the inequality gap and creating socioeconomic stratification.

Poverty

A Multidimensional Phenomenon

Poverty has many faces, and multiple indicators are used to capture the different deprivations experienced by a population. This complex phenomenon is linked to economic wellbeing, capability, and social exclusion (Wagle 184). Poverty is a major moral problem because of the suffering it causes and the disadvantages conferred to some population segments. It is defined as a persistent and debilitating social condition attributed to diverse causes that affect a person’s physical, mental, and emotional wellbeing (Gweshengwe et al. 3). The complex nature of poverty means that multiple measures are used depending on a country’s priorities.

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Economic Wellbeing

Income and consumption are key quantifiable indicators of poverty in society. These variables measure economic wellbeing and contain absolute, relative, and subjective components. At the basic level is absolute poverty, which describes the lack of necessities needed for survival – shelter, clean water, and food (Wagle 184). Here, the quality of survival is an important consideration that is not quantifiable. A person may require social, cultural, economic, or political resources to survive, but these aspects cannot be measured in monetary terms. Based on the survival criteria, poverty is described as the income level necessary to obtain the least calorie intake or personal wellbeing (Gweshengwe et al. 6). Therefore, earnings or wages are connected to consumption and welfare needs, which are not quantifiable.

Determining the minimum income level that would suffice individual wellbeing is not easy. The International Monetary Fund and other agencies use a dollar-a-day expenditure as the absolute poverty line (Wagle 186). However, other organizations consider basic needs and essential services, including health, in defining poverty. In contrast, the United Nations Development Program (UNDP) distinguishes two other forms of absolute deprivation: extreme poverty (scarcity of the income needed to purchase basic food) and overall poverty that extends to non-food items (11). Given that individual incomes, consumption, and wellbeing depend on other people in society, poverty lines are variable. The lower group’s median income is used as a measure of the living standards compared to the high-income groups. This approach estimates relative poverty, where people are described as poor if their incomes are below the median level in society (Wagle 186). The economic well-being view means that poverty can be alleviated by raising median incomes and consumptive capacities of the underprivileged.

Capability Poverty

Separating the poor from the non-poor requires considering additional factors besides income, consumption, and wellbeing. The capability approach to poverty considers factors limiting one’s ability to attain a welfare status (Gweshengwe et al. 9). Variables such as health and education impact the quality of life and incomes. Capability is considered the capacity to attain full functioning, but this ability is not entirely dependent on income. The UNDP uses five metrics to measure this type of poverty: “illiteracy, malnutrition, life expectancy, poor maternal health, and preventable disease morbidity” (13). The income-capability relationship depends on age, sex, social roles, place, and wellness. A person with a low income may exhibit lower-level functioning and capability within an industrial society.

Beyond material deprivation, the freedom to exercise choice may be limited for the poor. A high-level capability is associated with greater access to resources and alternatives (Gweshengwe et al. 8). Therefore, distributive justice is required to ensure equal rights in society, such as employment, nutrition, and social inclusion. Poor nutritional status impacts health, limiting one’s ability to derive income. Additionally, morbidity and low life expectancy disproportionately affect the poor due to the deprivation of capabilities. While this approach includes dimensions beyond income-related factors, it does not consider institutional or social barriers to human wellbeing.

Social Exclusion

Another aspect of poverty is social exclusion – marginalization from economic or political processes. High-income individuals or those with considerable capabilities may still be poor if systems are designed to exclude people based on personal characteristics. Structural factors, including macroeconomic policies, may impose barriers to some groups, limiting their participation in socio-economic development. In most countries, social exclusion is based on race, gender, or regional marginalization, limiting people’s access to economic activities (UNDP 19). Socially excluded persons or groups cannot exercise their fundamental rights and freedoms, including political participation. Excluding people with a specific demographic profile from democratic processes leads to policies that do not reflect their interests and priorities, limiting their upward mobility. As a result, these individuals or groups become economically disadvantaged or poor.

Systems of Economic Class

Description

A fundamental consensus among sociologists is that society can be hierarchically ordered based on income or other characteristics. A social class is a group of individuals with comparable economic, occupational, or political statuses (Jacobs and Mariana 31). This stratification system reflects an accepted form of control with sociocultural aspects unique to a given society. In the United States, a three-tier model that comprises the upper, middle, and working classes are used (Pansini et al. 6). This stratification reflects the economic inequality in advanced capitalist economies and is dependent on the amount of wealth held. Large accumulated capital limits the need to participate in wage labor (working class). Wealthy individuals are the elites that dictate political and economic discourses in a country. Issues of race and national origin also determine one’s position in the social class system.

Economic Classes in the United States

As already stated, American society is organized into three economic classes. Expanding this three-tier system results in six strata that differ based on annual household incomes. The first category has three sub-classes, including the upper class that constitutes about 3% of the population (Wodtke 1379). The next group is the upper-upper class that comprises individuals with incomes ranging between hundreds of millions and billions annually. The top 1% of the American population falls into this economic stratum (Wodtke 1379). The third sub-class is the lower-upper class that earns millions of dollars yearly. It constitutes 2% of the people in the United States (Wodtke 1380). The elites and wealthy political families belong to this group.

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The middle class is the largest economic stratum in the United States. It comprises about 40% of the population, including the upper-middle sub-group (14%) that earn over $76,000 annually and the lower-middle sub-class (30%) whose earnings range between $19,000 and $18,000 yearly (Wodtke 1381). Lastly, the lower class is predominantly the waged labor that must work to survive. It comprises the working poor (13%) and the underclass (14%) that earn $9,000-18,000 and below $9,000 annually, respectively (Wodtke 1382). This economic class system focuses solely on income, and therefore, ignores non-economic variables that influence inequality.

Another model entails different descriptions for each economic class besides income. The upper class includes people with amassed wealth and influence on politics and economic policy. This privilege is often bequeathed from their kin, but upward mobility by some corporate elite is possible. The upper-middle-class includes educated or talented professionals with high-paying careers (Jacobs and Mazzucato 44). The innovations and intellect of top attorneys and engineers are the sources of their wealth. In contrast, the middle class is the biggest group that consists of mid-level managers and low-rank professions such as teaching. On the other hand, the working class includes the uneducated persons in menial jobs, for example, housekeeping. The latter group often lives below the poverty line and has limited opportunities for upward mobility.

Conclusion

The analysis shows that income inequality manifests as poverty, disparities in wealth distribution, and economic classes in a society. In a capitalist system, accumulated capital, though exchangeable, is concentrated in a few individuals. Similarly, household incomes below the median level and social exclusion through policy or laws deprive people of the capabilities required for upward mobility. As a result, society becomes unequal, and three basic economic groups are recognized: the upper, middle, and lower (working) classes.

Works Cited

Allen, Robert C. “Class Structure and Inequality during the Industrial Revolution: Lessons From England’s Social Tables, 1688–1867.” The Economic History Review, vol. 72, no. 1, pp. 88-125.

Gregory, Chris. “An Economic Theology of Wealth: A Perspective from Central India.” History and Anthropology vol. 29, no. 3, 2018, pp. 307-323.

Gweshengwe, Blessing, et al. “Defining the Characteristics of Poverty and Their Implications for Poverty Analysis.” Congent Social Science, vol. 6, no. 1, 2020, 1-10.

Jacobs, Michael, and Mariana Mazzucato, editors. Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth. John Wiley & Sons, 2016.

Muehlebach, Andrea. “Commonwealth: On Democracy and Dispossession in Italy.” History and Anthropology, vol. 29, no. 3, 2018, pp. 342-358.

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Pansini, Riccardo, et al. “Segregating Socioeconomic Classes Leads To an Unequal Redistribution of Wealth.” Palgrave Communications, vol. 6, no. 46, 2020, pp. 1-13.

Rakopoulos, Theodoros, and Knut Rio. “Introduction to an Anthropology of Wealth.” History and Anthropology, vol. 29, no. 3, 2018, pp. 275-291.

United Nations Development Program. “Global Multidimensional Poverty Index 2019: Illuminating Inequalities.” Web.

Wagle, Udaya. “Rethinking Poverty: Definition and Measurement.” International Social Science Journal, vol. 68, no. 227, 2018, pp. 183-193.

Wodtke, Geoffrey T. “Social Class and Income Inequality in the United States: Ownership, Authority, and Personal Income Distribution from 1980 to 2010.” American Journal of Sociology, vol. 121, no. 5, 2016, pp. 1375-1415.

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