Why The Rich Get Richer And The Poor Get Poorer

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1. Introduction The poor get poorer as the rich get richer is a phrase used often in describing economic inequality between countries. The phrase is synonymous to the Bible verse Matthew 13 vs. 12. The issue of inequality and poverty is central in answering the differences in development between countries, it also useful in knowing why some countries have had economic growth and why others have not and how the world has been divided between the countries that are considered developed and the countries that are said to be developing. This paper will discuss who the poor are and who the rich are, the differences between the two and what can be done to close the income gap. In writing this paper I used the internet and books on Economic Development and inequality to gather information. 2. Differences between the rich and the poor 2.1 Who are the poor and who are the rich The poor are defined as those who lack command over basic consumption needs, including food and non-food components. The poor are those whose expenditure (or income) falls below a poverty line. The poverty line may be thought of as the minimum expenditure required by an individual to fulfil his or her basic food and non-food needs (World Bank 2005). The World Bank has set the poverty line at $1.25; those who spend below this line are classified as poor. The poor are said to be living in the Third world countries (Africa, Asia and Latin America) also known as the developing countries. The poor countries are often characterised as fragile; they suffer weak governance, often with a history of conflict, and with resultant limited government ability to administer effective policies. They are subject to one or often more of four traps: conflict; mismanaged dependency on natural resources; weak governance in small countries; and being landlocked (Collier 2007). The rich are those living in the First
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