ACCOUNTING FOR THE SHARING OF THE ECONOMIC PIE 2

Even a just system of income taxes, where the higher income brackets (whether personal or corporate) are levied a higher percentage, will not be able to do much by way of re-distributing abundance to give the lower income brackets a fair share –if the economic pie (gross domestic product, in economic-ese) does not grow. This will always happen in a stagnant economy (especially in a third world less developed economy) because the rich have more opportunities for grabbing a bigger share of the pie, i.e., “money begets money.”

A robust economy provides social mobility; i.e., the poor have opportunities to move up to the middle class and the middle class to the higher income brackets. Adam Smith (the invisible hand) theorizes that this is most effectively and efficiently achieved in a free and democratic economy. However, he also posited that there should be strong moral norms underlying the workings of the invisible hand. Without strong moral norms in individuals, societies and nations, the invisible hand leads to poverty and unequal distribution of wealth.

image from Microsoft Clipart