ECONOMIC INEQUALITY AS A FACTOR LIMITING THE ECONOMIC GROWTH OF THE UNITED STATES OF AMERICA

Andrea Matijević

Abstract

Starting from different theories of economic growth, the author aims to show that the growth of economic inequality is one of the significant factors influencing economic growth. There are numerous studies that analyse the impact of economic growth on economic inequality. Relatively less attention is devoted to the analysis of the relationship of these two phenomena in the opposite direction. The basic assumption from which the author starts is that, if we look at the impact of economic inequality on economic growth, this relationship cannot be so simply determined and given as final.Therefore, the paper tries to examine which are the channels of the impact of inequality growth on economic growth, whether this impact is direct or indirect. On the example of the United States, the author discusses the causes of the growth of inequality, as well as the causes of the slowdown in economic growth. The paper tries to prove that economic inequality is a factor limiting the economic growth of the United States. The paper shows that, generally speaking, the existence of conflicting views on the impact of economic inequality on economic growth is a consequence of different results if this relationship is observed in the short (5-10 years) and long period (25-30 years). Regarding the case of the U.S. starting from the analysis of the causes of growing inequality and, for that cause, identifying the main consequences of the politics of deregulation and liberalization, the author summarizes the conclusions of the studies conducted in the U.S. about the relationship of economic inequalities and economic growth and provides the analysis of statistical data about percentage changes of the Gini coefficient for the period 1974-2016 and the growth in BDP per capita for the period 1974-2019. in the U.S. The author concludes with emphasizing that despite of tax cuts and market reforms, the U.S. did not reach high levels of economic growth during the 1980s, nor in the later period. The quality of life of lower-income citizens is threatened by the reduction of welfare state costs and infrastructure costs. The overall result was an increase in inequality and a slowdown in economic growth, i.e. keeping the economic growth rate low.

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