What is Financial Inequality?

Financial Inequality is what occurs when there is an inequitable dispersion of wealth in an economic system. Financial inequality has been around probably since money was invented and inequality is normal in many ways, things never even out perfectly—no matter how hard you try.

Meritocracy

America prides itself on being a place where you can make it if you work hard and try hard. America has the highest level of social mobility for those who work hard and strive their utmost to succeed, that has remained true since this country opened up its borders to immigrants’ years and years ago and is still true to this day.

Welfare

The welfare system in America was setup for the purpose of helping close the income inequality gap and level the playing field. Many argue that this simply isn’t the case and that it only perpetuates an unfair distribution of tax dollars. Many consumers argue that those on the bottom rungs of the financial ladder are their because they want to take advantage of the system and that the welfare system is broken. Many also argue that the welfare system is full of waste and it doesn’t effectively make use of its money.

Free Market

The free market has a way of optimizing dollar spend in the most effective way possible. This occurs because the invisible hand of the free market is constantly guiding money towards that which is profit maximizing, leaving very little room for waste. However, profit maximizing is not always the solution for government entities that need to provide social services, etc.

A solution would be a well-run government entity that is in line with savvy business practices and is efficient in its structure and distribution of tax dollars but also still a government entity. This is sometimes easier said than done because it’s difficult to align motivation when government entities are not motivated by profits.

A Potential Solution to This Problem?

The best of both worlds. If you could mix the drive of a free market enterprise with that of a social service governmental entity you would be able to solve this issue and optimize tax dollars more effectively while still helping those in need and closing the financial inequality gap. The easiest and simplest way to do this is to pay an outside entity with government funds to create a better system. When outside entities compete for government contracts they typically are much more cost effective and the competition could prove to create the best results.

It’s not an easy problem to fix but both sides have valid points. The system in its current form isn’t aligned with the free market at all and it’s a large part of the reason why taxes are so ineffectively used in the United States.