In principle democracy is the best form of govt. and most effective in reducing inequality and poverty. Democracy accomodates differences among citizens. Since democratic govt. is elected by people, it is more accountable and responsive than other non-democratic regimes. Hence democratic govts take steps to reduce economic inequality and poverty e.g. If we compare India during colonial rule and India after independence, we can see how economic inequalities have considerably reduced. Freedom and opprtunities are not guaranteed in a non-democratic regime. Although it is argued that democracy has not been able to reduce economic inequalities(it is a challenge to be overcomed), it can still be said that democracy is THE most effective way to reduce economic inequalities(as compared to non-democratic regimes)