One would have a difficult time in this day and age turning on their televisions, opening a news homepage, or even picking up a magazine without noticing some reference to the concept of “income inequality”. Most people absolutely abhor income inequality, or at least, vast income inequality. We hear day after day, time after time, the slogan of the left, “the rich are getting richer and the poor are getting poorer!” Much of this hysteria is based on one of either three things: Either plainly, factually incorrect information, such as the previous quote and therefore driven entirely on an emotional basis; falsely vilified concepts such as extremely high incomes; or poor diagnoses; as in, believing a certain problem is caused by something entirely irrelevant and therefore ignoring the true cause. Income inequality is one of the healthiest and most essential features of any prosperous society of individuals, and its vilification is arguably the most regressive theme prevalent in our world today. Also, it is not income equality or inequality that should be the go to measure of success, but consumption equality/inequality.
One of the greatest virtues that goes along with having vast income inequality, is that it naturally enables the luxurious lifestyles of the rich. Many will say that this is in fact one of the reasons that income inequality is a negative thing, because such a statement necessarily implies far greater and far more “frivolous” consumption by one class than another. However, it is important to notice that what is considered “luxurious” is highly relative, and that virtually all goods and services taken for granted today, were at one point in time just a toy for the rich. Economist, Dr. Ludwig von Mises pointed this out in his 1929 publication Liberalism, in which he wrote:
Two or three generations ago even in England an indoor bathroom was considered a luxury; today the home of every English worker of the better type contains one. Thirty-five years ago there were no automobiles; twenty years ago the possession of such a vehicle was the sign of a particularly luxurious mode of living; today in the United States even the worker has his Ford. This is the course of economic history. The luxury of today is the necessity of tomorrow. Every advance first comes into being as the luxury of a few rich people, only to become, after a time, the indispensable necessity taken for granted by everyone.
If the rich are not able to enjoy their exceptionally luxurious lifestyle, than it becomes near impossible for newer, life changing goods to assimilate into the market, and that is harmful for everybody. In fact, according to von Mises, at one point in time even the utilization of a device as commonplace as a fork was a sign of abhorrent amounts of wealth. Certainly today though, that is considered one of the most basic necessities in anyone’s home, regardless of their socioeconomic class.
Aside from fighting vigorously for a universally lower standard of living, opponents of income inequality also tend to misdiagnose the problem that they assess. For example, a common talking point of the left is a simple reference to how much more wealth is owned by one income bracket than the others. Generally, the numbers are correct, but what is extrapolated from that, i.e. that because of this, lower income earners are worse off than they otherwise would be, or were before, is highly inconsistent. Dr. Steve Horwitz, professor of economics at St. Lawrence University points out that even though the lower class’ share of total income in proportionately smaller than the upper class’ today than before, their share of absolute income has actually increased substantially. Also, that the rich people of today are not the same people as before, and in fact, anyone living in San Francisco, could sell their house right now and become a member of “the 1%”.
A study conducted by the University of Chicago indicates that of all households that were poor in the year 1975, 95% of were no longer poor by the year 1991. In fact, the consumption inequality between classes has actually decreased significantly over the past few decades. In 1918, when the average wage was less than $1 an hour, it took the average worker two and a half hours to purchase a three pound chicken. By 1997, when the average wage was $12.50 an hour, after inflation that same chicken would only take about 15 minutes to purchase.
So long as living standards are rising, it would seem, to the rational mind, that the numerical gap in income quantity would be more or less irrelevant. However, many opponents of income inequality are not such for consequential purposes, but for their own ideological ones. Very few will admit it, though some will. For example, Thomas Piketty, author of Capital in the Twenty First Century, wrote in that book, “When a government taxes a certain level of income or inheritance at a rate of 70 or 80 percent, the primary goal is obviously not to raise additional revenue (because these very high brackets never yield much). It is rather to put an end to such incomes and large estates”. Piketty, a commonly cited, modern enemy of capitalism, is being refreshingly honest in that statement. Clearly, he is under absolutely no illusion that reducing income inequality (via state intervention), will make people better off necessarily. Instead, he blatantly admits that reducing income inequality is its own intended end. To be even remotely consequential about the topic would have to involve considering the absolute position of the people after that policy has been implemented. In response to Piketty’s work, Dr. Robert Murphy; PhD economist wrote,
The most obvious problem with Piketty’s book is that he wants to make workers poorer, just so long as it will hurt rich capitalists even more. No economist denies that as the stockpile of ‘capital’—which Piketty broadly defines to include real estate and all forms of non-human wealth—expands, that the absolute wages of the workers will rise. After all, if workers have more tools, machines, and equipment augmenting their labor, they are going to be more physically productive per hour, and hence will be paid more.
Examine the data, and one will find that even though the numerical income of the poor is lesser now relative to the rich, it is still, in absolute terms, greater now than it has been before. These snapshot statistics ignore far too much important information for any reliable verdicts to be rendered from them. One in particular, is innovation. According to the Chicago school economist Milton Friedman, advancements in healthcare and transportation are the only areas of vast innovation over the past hundred years that have entirely benefited all classes; rich, poor and middle. Aside from that, areas such as entertainment, cooking, infrastructure, and more have all been to the exclusive benefit of the lower class. After all, for thousands of years, the richest of the rich have eaten the finest food, enjoyed plays put on by their servants, and have lived in the most extravagant of homes.
In conclusion, most of the luxuries enjoyed by the common man today, found their way into his possession after a period of time being only available to the filthy rich. Due to this, the poor have access to technologies, goods, and services that without the wealthiest class, would not be in circulation. Today’s poor are better off than they have ever been, and statistically, they will continue to get richer on the individual level. What’s more, and they will do so at a faster pace than those who are already rich. Those who oppose income inequality, at least, those with a worthwhile reputation, do so for their own ideological satisfaction. While deontology is not entirely pointless, and in many cases can be constructed into just as valid of an argument as any consequentialist point; should people really have to be subjected to a lower standard of living just to satisfy the emotional side of people like Thomas Piketty?
Works Cited
Horwitz, Steve. “Are the Poor Getting Poorer?” Learnliberty.org. Institute for Humane Studies, 11 Feb
2011. Web. 29 Oct 2014
Mises, Ludwig von. “The Inequality of Wealth and Income” Mises.org. Mises Daily, 1929. Web.
24 Nov 2014.
Piketty, Thomas. Capital in the Twenty-First Century. Cambridge, MA: Harvard UP, 2014.Print.
Murphy, Robert. “Thomas Piketty Wants to Keep Billions of People Poor to Stop a Few from
Becoming Rich.” Rare.us. Rare, 2014. Web. 29 Oct. 2014.
Friedman, Milton. Milton Friedman. 8 Dec. 2014. Speech.
[bitmate-author-donate]
