GS Paper III Issue 1, December 9, 2019. Issue: Redistribution of wealth, welfare state and role of capitalism
For any democracy, redistribution of wealth is an important issue. If wealth is allowed to be created, and it is not distributed properly, then inequality will persist. It will be hard to lift people out of poverty. But, some economists suggest that business houses/corporate sectors/private companies should be incentivized properly by the government to create wealth. If enough wealth is not created, then what wealth will be distributed. Hence, instead of leaning towards welfare state, government should support wealth creators.
Let us discuss the merits of this argument:
- We have had enough evidences that suggest that wealth creators after accumulating wealth thanks to government incentives, have failed to redistribute wealth.
- The Government can’t keep investing taxpayers’ money on those corporate houses in the hope that they redistribute it in future.
- It is better, Government utilise this money on health, education and other social infrastructure.
- So-called wealth creators across the world, including India, has misused government’s incentives and accumulate larger and larger wealth in their hands. This situation is more severe in India, where income inequality has reached historically unprecedented levels.
- If there is no redistribution and the growing wealth inequality is allowed to become more accentuated, then how democracy can survive meaningfully also remains a mystery.
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