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The Rich Get Richer and the Poor Get Poorer

In: Business and Management

Submitted By omcconkie
Words 319
Pages 2
The Rich Get Richer and the Poor Get Poorer? I do believe that capitalism does cause the poor to become poorer. Capitalism is described as an economic system in which the trade of a country is controlled by private owners for a profit. According to Hernando de Soto’s research, the lack of formal property rights limits growth, and without this growth the poor remain poor. For example, most poor people informally own their residence. Because this kind of resident doesn’t have any property rights they also don’t have access to loans to improve their living environment. It’s an ongoing cycle of ugly. No property rights equals no money to improve your poverty stricken life. The same rights apply to businesses. A lot of businesses refuse to legalize because of business corruptions such as excessive regulations and bribery. Because these businesses are considered illegal they must remain small to stay out from under the government’s radar. And because they have no property rights they don’t have access to business loans in order to develop and grow. Anything that contributes to growth is a capital, and in the Classical growth model growth is emphasized on capital. So I don’t really feel that a poor person’s income would increase or decrease because in the classical growth model it’s all about saving. Saving leads to investments which increases capital and eventually leads to growth. It is, however, much harder for a poor person to save in the first place. They are too focused on scraping by not investing. The same goes for societies. A society can’t afford to invest if they can’t afford to save. Technology also plays a major role because it requires investment and is embedded in capital. According to my research the poor seem to be stuck in a rut. They don’t have property rights in a capitalist society and they can’t afford to save their money and invest.

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