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  • Economic Inequality: Does Unequal Wealth Cause Hardship for the Poor?

    In my last post, I challenged a common assumption about equality and justice—that inequality per se is inherently unjust, and therefore that the gap between rich and poor is as well.  In what follows I contest another popular notion touted by redistributionists—that unequal wealth as such causes hardship for the poor.

    As I argue in my recent National Affairs article,

    [T]he implicit assumption behind the case for the injustice of income inequality is that the wealthy are the reason why the poor are poor, or at least why they cannot escape their poverty.  If this claim were true, it would be much easier to connect income inequality with injustice, and so to justify a redistributionist agenda.  Yet this assumption rests on another economic premise that itself is highly dubious: the idea that income is a zero-sum game.

    In a functioning market economy, however, the total amount of income is decidedly not static.  Societies can generate new income.  If someone’s slice of the economic pie gets bigger, therefore, that doesn’t mean another person’s slice gets smaller.  In my article I point to studies that show that, on average, those in the highest and lowest income categories have seen their economic conditions improve over the past several decades, albeit at different rates.

    These findings undercut the primary argument for treating income inequality as evidence of injustice.  It’s simply not true that the success of the rich harms the poor or prevents the poor from escaping poverty.

    Obsessing about economic inequality also distracts from the legitimate goal of helping those who need extra help to thrive.

    [Such a focus] identifies justice with looking over one’s shoulder at how others are doing. But viewing our neighbors as rivals not only reinforces the false notion that income is a zero-sum game, it also subtly cultivates a desire that those neighbors not perform better than we do. This is not just or conducive to a healthy civic spirit. It’s mere envy.

    Moreover, if the size of the income gap is really the central moral issue in our economic life, the attempt to close the gap through redistribution would require decreasing the           amount of income at the top.  But what would we think of a doctor who aimed to narrow the “health gap” between his sick and healthy patients — by making his healthy patients a little less healthy.  Not only would we refrain from calling such a scheme just, we            would condemn it as morally perverse. …

    Just as we don’t help the sick by injuring the fit, we don’t help the poor by soaking the rich. … We should be focusing on improving the prosperity and well-being of all—with special attention to helping those in poverty escape it.

    When it comes to income, inequality is largely a distraction.  We need to shift moral attention back where it belongs: to helping those in need overcome the sources of true material deprivation (such as failing schools, family breakdown, and government corruption).  In 2012, may our economic debates move beyond the gap between rich and poor to questions of growth, mobility, and enduring prosperity.  With that focus we can better nurture conditions that allow everyone the opportunity to rise and flourish.

    Posted in Culture [slideshow_deploy]

    14 Responses to Economic Inequality: Does Unequal Wealth Cause Hardship for the Poor?

    1. Drvisionaider says:

      I wrote a longer reply that wouldn't fit. It is summed here: http://drvisionaider.tumblr.com/post/16980483068/

      • You ask whether people that earn more really need a Range Rover when a Ford would be the more cost effective choice. You the same question in regards to the size of a home. You pose these points in an effort to show that people only need the minimal to get by so why not limit income to the minimum to bring everyone to the same levels. How we choose to spend our income also impacts how we accrue wealth. Poor financial decisions often lead to unmanageable debt. Should we help the poor make better decisions so they can stay out of debt and increase their chances of accruing wealth? Should society weigh income versus expenses before allowing people to purchase homes, rental of housing, vehicles, cell phone plans, cable/sat television, jewelry, liquor sales, tattoos, shoes, clothing. Families of virtually identical earning power can have vastly different rates of wealth accrual based on the decisions they make in the management of their day to day budget. Do you trade and purchase a new vehicle every 18 months or do you drive the same vehicles for 10 years? Do you pay for cable/sat with 3 premium channel packages or do you hoist an antenna and watch free TV? Do you pay for cell phones with full data packages for every family member while maintaining a home phone or do you go with a minimal plan? If you want to minimize wealth by controlling the people that make good decisions and enjoy the fruit of those decisions will you also want to control the decisions of those that don't make such good decisions? At what point will this controlled decision making begin to negatively impact the basic machinery of our market economy? At what point will this control rot the motivation for success?

      • Alan says:

        For all your words, your argument still boils down to the liberal perspective. Life will never be completely fair and for any government to try and make life completly fair will result in social and economic failure. As stated in the discussion, the focus needs to shift to failing schools, family breakdown and government corruption. One thing discussed by Heraldo Rivera recently to help kids born into bad situations is to require a fathers name be included on all birth certificates. This certainly won't solve all problems but I think it will help. Spending more on public schools is not the answer either. We already spend more than any country but Switzerland and results continue to degrade. Not all kids should go to college. Some should go to Vocational schools thereby saving money. We send too many kids to expensive colleges driving up tuition. Public sector folks need to help outwith therehealth care and pensions. Most new hires in the private sector don't have pensions offered. The affordable health care act is a disaster and will makeall of our healthcare costs rise and heathcare in general to degrade.

        Nice try though whoever you are.

    2. NickF says:

      "Moreover, if the size of the income gap is really the central moral issue in our economic life, the attempt to close the gap through redistribution would require decreasing the amount of income at the top. But what would we think of a doctor who aimed to narrow the “health gap” between his sick and healthy patients — by making his healthy patients a little less healthy. Not only would we refrain from calling such a scheme just, we would condemn it as morally perverse. …"

      Outstanding analogy…

    3. Wendell Fitzgerald says:

      The issue is not income inequality. The issue is whether income is earned or unearned. The Marxists, socialists and leftists in general have not understood this. It is for this reason why they have not made it clear why the system is not working for the general benefit of all as was promised or why it is tearing up the environment in the process.

      Capital is not the problem unless it is monopolized and most capital is not monopolized. When capital is monopolized the anti market effects can be ameliorated by appropriate regulation. Such laws are on the books if they would only be enforced. The capitalist who invests in the real economy where real goods and services are produced EARNS his or her reward. Marx and leftists in general do not understand this and attributed the dysfunction of monopolized capital to all capital.

      On the other hand private ownership of land and natural resources is the problem because 100% of the incomes, actual or imputed, from such ownership are unearned. They are unearned because the land "owner" does not create the value of the land or resources he "owns". The community of all people create the economic value of land. All economists generally agree. They just do not talk about it because to do so reveals the great vulnerability of the monopoly owners of the earth itself. Private collection of the value of land and natural resources is an unearned and undeserved subsidy given by most of our communities to individuals who per se do not create those values. Even Adam Smith pointed this out.

      It is not private "ownership" of land and natural resources oer se that are the problem because private access to land is absolutely necessary for individuals to have a place on whihc and from which to be productive. It is the private collection of massive $trillion per year of community created land value that is the problem. We can keep the institution of private ownership of land for USE and we an easily require land and resource owners to turn over value of land in a yearly land value tax.

      So what Marx and leftists say of capital is wholly true of land and mostly not true of real capital. They do not even understand this distinctio so entrenched in their misunderstanding just like fundamentalist religionists they revile.

      The gross inequality of wealth is caused by the fact that at least 20-33% of GNP is unearned income from assets the value of which is created by the community. No one would complain if everyone actually earned their wealth but even though most people do not understand the mechanism they are correct in complaining of the result.

      And even if I am totally in error I ask you what is the point of those who do not participate in the abundance caused by modern technological advances in production of wealth supporting a system that they do not benefit from. Everyone must share or the whole thing must come down. Sharing the value the community of all people give to land and natural resources via appropriate taxation (land value taxation) seems to me the best way to accomplish this. By doing this we can completely untax the earned incomes from labor and real capital investment in the real economy which is what you are calling for isn't i?. isn't it?

    4. Stirling says:

      Being "poor" is a label essentially that government has put on people (based on income levels which they have pre-determined.) This does not reflect them personally and their ability to succeed, but for the political class they have put people into boxes of classes to control and devide us.. Some people buy into the propaganda while others do not.. Unfortunately this is what society can degrage into when the media continues to fill people's heads with ideas that can easily be proven wrong if people think for themselves, and take responsibility for their own lives.. The more we start pointing out (like this article does) that we are not in a zero sum game of outcomes, but a limitless one, the better off we all will be.. Working together rather then being devided.

    5. VanceW says:

      Really a choice of two world views, I'm thankful to be created by a God with infinite resources and not a product of evolution that has to compete for resources in a zero-sum world. Thanks for the article

    6. concern50 says:

      It is not the wealthy that are at fault. It is not the distribution that is at fault. It is when those elected officials allow the rich to set policies and provide legislation to implement in the local, state, and federal government that only benefits the rich. The idea that the rich – those making over a million a year should not pay even 30% in taxes and capital gains, takes money away from the Middle Class. When these rich people make laws – Right to Work – Union Busting – no Women's health care… our country is being stripped by them and they then take their jobs and money overseas with no consideration or loyalty to the USA. And since they choose to donate more money to congress then to charities that serve the people, their ethics and morals are truly in question. The Republicans are the worst and they continue to lie to the American people. This will be the downside of the Republican party.

      • Greg says:

        Are you realy this stupid? Or, are you just ignorant?, which means there is hope for you.

    7. I agree that we need to focus on what needs to change to raise up the impoverished. Education at the primary school and high school level, family values, and strong work ethic have a greater influence on economic status than the income gap.

    8. Lisa Borbi says:

      I never heard the words "wealth envy" until a couple years ago. I thought, why would someone be envious? Why can't they be happy for them? In our society, just about every time we hear about the poor, we automatically start calling out the rich. Why? Class warfare that divides. But in truth, the wealthy help the poor by creating jobs. Good paying jobs. Listen closely next time you are in a discussion about the poor. It will quickly turn into a discussion about the rich. In realistic actuality, unequal wealth causes no hardship for the poor. Much the opposite.

    9. Bryce says:

      Unequal wealth *does* cause hardships for the poor. Let me count the ways:

      * Simply seeing another person leading a more lavish lifestyle tends to make a person less satisfied with their own lifestyle. You can argue whether it's rational to feel that way, but humans aren't rational, and this sort of envy is the most natural emotion in the world.

      * Even if you're perfectly comfortable making a third the income of the people around you, I guarantee your kids are going to ask you (over and over) why their friend Sally's parents can afford to send her on the trip abroad, and why other kids have nicer clothes, or cooler shoes, or shoes that haven't already been worn by two other siblings. And how come Roger's house is so much cleaner (hint: Roger's family can afford a maid). And how come Margo has been to Egypt, the Bahamas, France, and Cancun, while your family just drives sixty miles to go camping. To be poor is to feel constantly judged. And yes, simply taking money from the wealth and flushing it down the toilet would do something to counter that.

      * A dissatisfied child is a source of stress. Feeling that people are judging you for the clothes you wear, the car you drive, the job you hold, etc., is a source of stress. Feeling that you're not giving your kids the same advantages that other parents are giving their kids is a source of stress. Feeling that you can't afford to buy things that most people take for granted is a source of stress. Being poor is stressful. http://motherjones.com/kevin-drum/2009/04/poverty

      * People who have excessive wealth usually devote at least a fraction of that wealth to ensuring the growth and continuation of that wealth, and to passing their advantages on to their children. This includes actions that most people not similarly advantaged find revolting. Like ensuring that your kid gets a place at a good college, ahead of more brain-rich, cash-poor applicants. Like buying legislation that repeals the regulations that keep you from exploiting your workers. Like lobbying for tax advantages for the investments that make up the bulk of your portfolio.

      * Being at the bottom of a steep income curve has been shown to be bad for your health, regardless of your absolute income. In fact, being *anywhere* on a steep income curve is bad for your health. But it hits the poor the hardest.

      * Being constantly stressed out is bad for your health, destroys a person's willpower, impairs your ability to learn and solve problems. These findings hold in the United States, where conservative commentators claim that even the poor have a very high material standard of living. So it's not a lack of the immediate necessities of life that causes it. It has much more to do with self evaluation and perceptions of how others judge you.

      According to your analysis, the important thing isn't how people feel about themselves and their place in society, but their ability to afford some predefined basket of goods. That's a sensible approach to take when dealing with a society of autistic Vulcans. Humans? No.

      • Bobbie says:

        Bryce,
        Unequal wealth *does* cause hardships for the poor according to manipulators. Let us count the ways:

        * "Simply seeing another person leading a more lavish lifestyle tends to make a person less satisfied with their own lifestyle?" Why? Why wouldn't it inspire a higher goal, higher potential or a potential period? If that person can do it so can I attitude?

        Humans are rational by nature or they wouldn't survive, you government tool, you.

        Proper upbringing teaches children to appreciate what they have without resentment toward anyone. Those who put down children that don't have the same, are those not worth hanging around. Nicer clothes, cooler shoes, ain't the story. Tolerance and acceptance is. How is it kids worked for what they wanted or accept they didn't have it where today social engineering teaches them they should have it without having to work for it?

        Why wouldn't any kid have the attitude how cool it is that roger's mom and dad can afford to employ a maid? Or how cool it is that their mom is able to clean house without help or being paid? Lots of positive ways to look but look your way to envy and jealousy. uncharacteristic of good will and once properly discouraged in America.

        Why shouldn't Margo go anywhere inspirational her family can afford? Like camping! To be poor in this country is to be emulated by democratic label. The constant judgment has been on the wealthy for quite some time as your comment clearly states. Flushing money down the toilet isn't going to help anyone.

        Inspiration builds motivation.

        * A dissatisfied child for the reasons you mentioned is a taught feeling through government education of social indoctrination! A child is more easy to accept their surroundings than to teach not to as the expense of public education shows. Concerned with assumptions of someone's judgment that may or may not exist regarding personal issues is a paranoia wrongfully influenced by government agenda through public education and programs. Sources of self perpetuated stress and inferiority.

        * People who have wealth devote a tremendous portion without deduction but out of pocket to charitable causes of good faith and to people of limited means. Passing their hard earned money onto their children is the good wealth does to keep the economy going. Lots of brain rich poor kids take the challenge to earn a place in a good college of equal opportunity without paying the equal expense the rich kids pay. Children are able to achieve equal or unfair opportunities according to their choice of honest private or dishonest government resources. Why do you refuse to appreciate the poor worked without depending on government but by challenging their own abilities to become the rich they are today and appreciate people have more the ability to take the necessary challenges to assume the same regardless of absolute income? And know that nothing starts from the top down, everything grows up!!

        Learning how to personally deal with situations expands ones minds ability using ones minds sense of reasoning regardless of absolute income. It's proven to strengthen the poor the most.

        With no reason to learn or solve problems as the democratic party demonstrates with their demeaning irrationality of handouts for the humiliating with no ideas but repetitive ones, destroys personal will power and personal dignity.

        These findings hold true in the governing of the United States democratic party whose actions have commenced against the will of the people with disrespect to personal humanity while manipulating the poor to believe material standard of living is just as important as necessities to survive.

        So it's not a lack of the immediate necessities of life that causes it, it's the wrongful manipulation to label the poor and force them to accept it. It has much more to do with deliberately holding oneself back wasting time spent assuming how others may or may not judge you by your favor of perception and not the reality of truth. According to your analysis, low life promotes low life. You're disgusting!

      • Greg says:

        What you describe is envy (self-inflicted) and not "wealth inequality". You whole argument is based on a lot of BS. It seems you have NO clue to how much the "wealthy" are really paying in taxes, I suggest you go look it up. If you can't do any real research, I suggest you find a school that can teach it to you. It will do wonders for your ability to accrue wealth.

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