ABSTRACT
Before looking at inequality in America, one must understand the normal workings of American business. The basic institutions of capitalism are no more and no less than human relationships. The power relationships between human beings and between different sized businesses are expressed by economists as "supply" and "demand." Effective demand means there is both the desire and the money to buy the aggregate supply of all goods and services. The largest part of aggregate demand is consumer demand. The most dramatic example of the effects of lack of demand in an economic contraction may be seen in the Great Depression. The main costs of production are: the cost of labor in the form of wages, salaries, and benefits. The struggle between wages and salaries versus profit-making determines the level of inequality in America and other capitalist countries. The ratio of profits to wages and salaries in the aggregate economy is a good indicator of inequality in the society.
