American Economic System Demonstrates the “Rich Get Richer” Dynamic
Bloomberg recently reported that the top 1% wealthiest of the American population owns as much wealth as the entire middle class. Although yearly earnings for the American demographic has increased for most people, the rate of this growth is highly unequal. Data shows that the top fifth wealthiest Americans hold 88% of the entire country’s wealth, and the number of citizens who qualify for food stamps has only increased. The reason behind this immense disparity of income is mainly due to the investment value of money. Because the rich have more money to fall back on, they are more likely to put their money into risky investments which may provide a greater return, only increasing their wealth even further. On the other hand, those with lower incomes may only have the ability to leave their money in the bank, earning interest at rates so low that they cannot keep up with inflation.
This cycle contributes to the “rich get richer” dynamic. Those with greater wealth have more opportunities and resources to put into stocks, hedge funds, etc. These investments can provide great returns, and as their wealth grows, their increasing resources only give them more and more opportunities to continue to increase their income. This tendency also suggests that the distribution of income in America likely follows a power law. Only a very small fraction of the population holds an extremely large wealth whereas there are many people who are in a lower economic class. Power laws are represented by f(k) = a/(k^c) in which a and c are constants, and as this inequality grows, this will be reflected by a larger c to indicate a greater disparity in wealth.
https://www.forbes.com/sites/jackkelly/2019/11/12/the-1-owns-almost-as-much-wealth-as-the-middle-class-will-the-rich-keep-getting-richer/#6a711c694323