Economic inequality has a wide variety of meaningsю In my essay I discuss income inequality and wealth inequality. Economic growth is a long-term expansion of the economy's productive potential. Common economic theory predicts that high levels of inequality will cause a decline in economic growth, while high levels of growth will cause an increase in inequality. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay First, I will discuss inequality. A certain degree of inequality is necessary for a functioning capitalist economy. It encourages competition, which leads to innovation, and facilitates the efficient distribution of resources to innovative people. Furthermore, inequality is necessary because the rich are test buyers, which stimulates investment in new products. Some argue that the problem is not economic inequality, but the number of people living in absolute poverty. Absolute poverty is defined as people's inability to satisfy basic needs, which is often extremely difficult to free themselves from. Consequently, rather than mitigating inequality with a socialist governance approach, the UK should aim to maximize growth with a free market economy, in the belief that this wealth will trickle down and help people out of poverty absolute. As demonstrated by the number of people in the world living in absolute poverty decreased by 50% between the years 2000-2012. This was achieved through minimal government intervention. This is a strong argument and should not be ignored. However, it does not consider all the negative externalities associated with high levels of economic inequality. For example, high income inequality is strongly correlated with homicide rates among men, with a correlation of 0.9. In the economic context, this entails costs for police forces, prisons, the justice system and the opportunity cost of those who can no longer work. Furthermore, high levels of income inequality can lead to an economy characterized by low social mobility, causing two main problems: first, it allows the majority of available economic resources to be concentrated at the top. This is not competitive and takes productive potential away from the economy. It leaves people who have something to contribute at the bottom, with little 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 efficient way to achieve financial success. It is for these reasons that inequality should not simply be ignored, however, this still does not mean that inequality should be prioritized over economic growth. Arguably, the most important issue that economic growth and greater equality seeks to address is absolute poverty. Absolute poverty is not only a problem due to the low standard of living it guarantees, but it can also destabilize the economy. When there are large numbers of people with no hope of financial advancement, these people are dispossessed. This serves as an incentive for crime and creates a climate in which extreme political ideas become attractive. It is a climate like this that allowed the Nazis to come to power, at enormous economic and social costs. Consequently, when deciding whether the UK should prioritize inequality, one must first decide whether a solution focused on growth or wealth redistribution would be preferable. be more efficient inreduce 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. Unquestionably, unchecked capitalism will produce rampant inequality. This is largely because the rate of return of wealth on capital is greater than the growth rate of the economy, identified by Thomas Piketty as r > g. It means that the more capital you have, the easier it will be for you to obtain more wealth. The aggregate economy can only generate a finite amount of wealth each year, so, in theory, the exponential nature of capital gains means that eventually all economic growth each year will be absorbed by those who already own the most wealth. Therefore, a completely free economy the market approach is not viable. Over time inequality increases, until it begins to undermine growth and social mobility ossifies. Evidence of this can be seen in America (which has a freer market economy than the UK), where inequality is already projected to slow real GDP growth by 2-5% per year. This amount will only increase without sufficient measures to alleviate inequality. Now I will talk about economic growth. Economic growth is the key function of an economy and is important for four main reasons: It increases a country's standard of living. It increases government tax revenues and reduces the cost of spending on social benefits: this can help stabilize the economy, reduce government debt and provide more resources to deal with economic shocks. Sustained growth leads to more jobs, this can have the effect of reducing income inequality. It can enable the financing of major new 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 should be achieved sustainably. Historically it has been proven that rapid economic growth will lead to a 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 would probably 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 long-term trend growth rate. Furthermore, the UK's rapid growth 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 several consequences. A current account deficit will reduce the value of net exports, thus reducing aggregate demand for a country. Current account deficits are also seen as an indication of an unbalanced, unsustainable and uncompetitive economy, this can lead to the risk of currency devaluation for that country. Another example of unsustainable economic growth is growth that comes from one industry. This is because such growth will only benefit the people who work in that sector (promoting.