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Economic Growth and Development

Theories, Criticisms and an Alternative Growth Model

Hasan Gürak

Mainstream economic theories today are logical, consistent and even explanatory in many ways, when their relevance is tested in real economic situations, they often fail to correctly explain normal economic transactions. Thus they are only successful in explaining a fictional world and fictional economic relations that are largely based on unrealistic assumptions. Economic Growth is a study of new and alternative theories and models to replace the parables of these mainstream ideologies and hopes to appeal to open minded economists as a constructive contribution for the further development of new economic ideas.
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Chapter 9: Growth & Income Distribution

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Unequal distribution of income has always been one of the major problem areas and often a cause of embarrassment for both economic science and economists. The problem does not refer only to income distribution and the related inequalities among individuals, households, and classes but also to global income distribution and inequalities among nations. Present global income distribution is especially disappointing when one considers it in terms of the expectations from globalization.

Traditionally “leftist” economists have always tended to emphasize the evils of income inequalities and supported the redistribution of income in favor of less favored groups in society. The conservative right wing economists, on the other hand, tended to give priority to capital accumulation rather than fair income redistribution which they believed would enlarge the cake to be shared out. As a result, the low income groups were expected to be better off.

The critical question in regard to the long-run economic interests of society is whether priority should be given to more fair income redistribution or to capital accumulation. Perhaps a combination of two policies would have a more positive impact in the long-run.

Functional income distribution, on the other hand, has been the subject to endless arguments ever since the appearance of economics as a separate discipline. Functional income distribution studies the distribution of income among two basic classes; workers receiving wages (W) and capitalists receiving profits (π) which includes interest rate and rent.

“Capital” was defined as any kind of...

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