This morning, The Economist led with an interesting article about global income inequality. The article discusses the prevalent view that income inequality is bad for society. This view is broken down into the following three theories:
1. Countries with greater disparities of income fare worse on all manner of social indicators, from higher murder rates to lower life expectancy.
2. Inequality was a root cause of the financial crisis [because] politicians tried to counter the growing gap between rich and poor by encouraging poorer folk to take on more credit.
3. Inequality perverts politics, with Wall Street’s influence in Washington often cited as exhibit A of the unhealthy clout of a plutocratic elite.
The authors (correctly) identified these theories as wrong. By calling them “sloppy thinking,” they came short of calling this mindset what it deserves to be called — ignorant and, at time, willfully misleading.
One of their proposals is that,
Governments need to keep their focus on pushing up the bottom and middle rather than dragging down the top: investing in (and removing barriers to) education, abolishing rules that prevent the able from getting ahead and refocusing government spending on those that need it most.
While the idea of raising the floor instead of lowering the ceiling is on the right track, there is virtually no manner of government spending through which that can be achieved. The same government programs that work to artificially “push” the bottom up, through regulation and spending, simultaneously “drag” the top down, and vise versa. The only way for the income floor to rise is by allowing the free market to function naturally.
But, the critics argue, if you allow the market to function naturally, we end up with significant income inequality and we are back to the original problems (see the above three theories).
The real problem, however, is that these critics are teaching people to look at the differences between their income and the ceiling and be envious of those at the top, instead of looking at the difference between their income and the floor and be grateful. Class envy has historically been a greater social ill than anything these critics have complained about.
Why would anyone wish class envy upon our society, instead of fostering a free market economy where hard work propels one to the top? Well, they really should not.
Income inequity is not a sin, but envy is. In fact, it’s a deadly one.