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Opinion from a Libertarian ViewPoint

Posts Tagged ‘Inequality’

Hard Head, Soft Heart – Taki’s Magazine

Posted by M. C. on July 24, 2020

The fact is that, by whatever process they arrived at their present situation (and by no means all of them have had no chance in life), their present situation is pitiable. They do not deserve charity—it is in the nature of charity that it is given without desert—but it should at least be considered, though we often refuse it on the grounds that it will do them no good, or will even do them harm because they will use it only to repeat their foolishness. (Nothing is easier than to find a pretext not to be charitable.) What we need, then, is a soft heart but a hard head. More common among us is a soft head but a hard heart. In an age of exhibitionism, a soft head often passes for a good heart.

https://www.takimag.com/article/hard-head-soft-heart/

Theodore Dalrymple

Walking through Paris yesterday, I saw the following slogan daubed on a wall:

Coronavirus: Inequality Equals Comorbidity

I doubt that this was done by someone completely without education. Indeed, I would be prepared to place a small bet that, to the contrary, whoever did it had a university degree.

Nevertheless, what he wrote was not only inaccurate but inaccurate in a very significant way, insofar as it implied, and was intended to imply, that inequality was a factor that causes the illness occasioned by coronavirus.

It is true, of course, that the relatively poor in France, as elsewhere in the world, were more affected, and more severely affected, by it than the rich. There is nothing unusual in this: There are very few diseases, especially infectious, that strike the rich more and worse than the poor, and this is so even in countries that are rich overall.

But is the cause inequality in itself? It is, rather, the conditions in which the relatively poor live: overcrowding, poorer diet, dirtier work, and so forth. A society in which everyone was equal but lived in the conditions in which the poorest now live would not be healthier or better able to resist coronavirus than the society we actually have, rather the reverse. In other words, it would be as true to say that inequality is a precondition for health as it is to say that it is a comorbidity of coronavirus, both propositions being absurd and misleading.

The confusion is a common one. An analogous confusion is that between equity and equality, where by equality is meant equality of outcome. Medical journals are particularly prone to this confusion, or perhaps I should say (to be accurate) that I am particularly prone to notice it in them. A recent opinion piece in the Journal of the American Medical Association, written by an eminent black cardiologist in the wake of the Black Lives Matter movement, was only the latest to elide the two concepts.

Equity is the quality of fairness or justice (again, related concepts, but far from identical, it being unfair that I am not more handsome than I am, but not unjust). Equality is the identity of persons in some respect or other, and even where it is a reasonable aspiration, as in equality before the law, it is rarely fully accomplished in practice.

“Nothing is easier than to find a pretext not to be charitable.”

Furthermore, it is rarely acknowledged (though it is also perfectly obvious) that while equity and justice are desirable, they are not the only qualities that are desirable, and in some instances may actually be undesirable. We should always bear in mind Hamlet’s response to Polonius when the latter says that he will treat the actors who have come to Elsinore as well as they deserve: Use every man after his desert, and who should ’scape whipping? And if justice entails using every man after his desert, as surely it must, justice would require a universal whipping for Mankind, but few except evangelical sadomasochists would propose such an eventuality because it was in accordance with the dictates of justice.

Moreover, it is perfectly obvious that justice and equality of outcome of material conditions are completely incompatible. If of two men of very similar backgrounds one works very hard and the other is a complete idler, it would be unjust if they were rewarded with the same standard of living—an equality brought about by transferring the fruits of the labor of the first of the two men to the second.

Hamlet, having established that we should not necessarily be better off if there were universal justice (it being a common but unfounded prejudice that if there were justice in the world, we should all be better off), goes on to add:

Use them [the actors come to Elsinore] after your own honour and dignity. The less they deserve, the more is your bounty.

In other words, charity and decency have their claims as well as justice.

Walking through London as I sometimes do, I have noticed a curious fact: that the homeless sleeping in doorways are rarely from ethnic minorities, as they should be if poverty alone were the explanation of homelessness, for ethnic minorities (at least some of them, not all, the variation itself a fact of some interest and importance) are disproportionately poor.

Many of the homeless are drug-addicted or alcoholic. Investigation of their life history would reveal that they have often behaved very badly or foolishly. They will have caused misery, often a great deal of it, to others around them. But who, when asked for money by them, would reply, “You have got your just deserts, you are taking the consequences of your own conduct”?

The fact is that, by whatever process they arrived at their present situation (and by no means all of them have had no chance in life), their present situation is pitiable. They do not deserve charity—it is in the nature of charity that it is given without desert—but it should at least be considered, though we often refuse it on the grounds that it will do them no good, or will even do them harm because they will use it only to repeat their foolishness. (Nothing is easier than to find a pretext not to be charitable.) What we need, then, is a soft heart but a hard head. More common among us is a soft head but a hard heart. In an age of exhibitionism, a soft head often passes for a good heart.

All of this is but an illustration of Pascal’s great dictum that should be inscribed over the gates of every university, that we should labor to think well, for thinking well is the principle or precondition of morality. Fuzzy thought, the substitution of supposedly generous ideas for real reflection, is to be combatted not by equal but opposite sloganeering, but by rational argument. It is not only liberty the preservation of which imposes the duty of eternal vigilance: The preservation of reason imposes it as well. So far, we are not making a very good job of it.

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Inequality is Overstated—and Overrated | Mises Wire

Posted by M. C. on June 16, 2020

There are two problems with this line of thinking. The first is that net worth totals are dollar values of two different kinds of things—capital goods and consumption goods, of which capital goods make up the larger part. Capital goods can not be alchemically transformed into consumption goods. The second problem is that efforts to turn the savings of some into consumption goods for others will in the end reduce the amount of consumption goods for everyone.

https://mises.org/wire/inequality-overstated-and-overrated?utm_source=Mises+Institute+Subscriptions&utm_campaign=4ef0911661-EMAIL_CAMPAIGN_9_21_2018_9_59_COPY_01&utm_medium=email&utm_term=0_8b52b2e1c0-4ef0911661-228343965

Whining and complaining about inequality is a growth industry. Thomas Piketty’s book (or perhaps a large virtue-signaling paperweight), about how the rich are getting richer, achieved bestseller status and is now a movie.

Understanding the flaws in the wealth inequality argument is increasingly important, because the communist wing of the Democratic Party is now openly advocating a wealth tax. In this article I will explain why measures of wealth inequality overstate actual inequality in terms of the standard of living of wealthy people relative to the rest.

Some of the complaining about inequality focuses on income and some on wealth. I will first focus on why both matter and why looking at only one or the other gives an incomplete picture. Depending on where someone sits on the net worth spectrum, their consumption opportunities will depend to a lesser or greater extent on the balance between their wages, their savings, and their time preference.

Measuring Wealth vs. Measuring Income

Read the rest of this entry »

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Yes, Inequality Is a Problem — When Caused by the Government | Mises Wire

Posted by M. C. on November 27, 2019

On the other hand, government-caused inequality occurs as part of a zero-sum game in which wealth is redistributed from some groups to others — whether through inflation, regulation, or privileges handed out to certain favored groups. This is something that ought not be ignored.

For ordinary people, what really matters is that they are increasingly able to afford and access the basics of life and a decent standard of living: amenities like climate-controlled housing, easy-to-use transportation, food, and clothing.

https://mises.org/wire/yes-inequality-problem-%E2%80%94-when-caused-government

Listen to Ryan McMaken’s commentary on the Radio Rothbard podcast.

When the topic of inequality comes up, some libertarians and conservatives tend to approach the issues as something that doesn’t matter at all. “I don’t care about inequality,” they say. “Inequality occurs naturally, and its just an obsession of leftists…if anything it’s a good thing.”

Part of this appears to be a natural reaction to the fact that inequality is held up by many interventionists, socialists, and leftists of various types as something that somehow causes poverty — or is at least a grave injustice even when everyone is getting richer to various degrees.

Indeed, the issue of inequality has become so intertwined with poverty, that many perceive an increase in inequality to be more or less the same thing as an increase in poverty.

For example, even when empirical data shows that a country’s population is becoming wealthier, we nevertheless are sure to hear about how this is nothing to celebrate because inequality is increasing too. This is a common tactic when discussing the South American nation of Chile. Chile is clearly the most prosperous and stable country in Latin America, and if one is going to be poor in Latin America, it’s better to be poor in Chile. But, we are told what really matters is that income inequality in Chile is high.

Thus, Even if everyone is getting richer, we are told, things are actually getting worse because some people are getting richer faster than others. This is then emphasized by including graphs with downward sloping curves showing that a group’s “share” of income is decreasing. This, of course, has nothing to do with the actual improvements in wealth and standards of living that some groups — groups such as populations in the developing world — are experiencing. What really matters, we are told, is that things aren’t improving fast enough compared to others.

This, of course, is a terrible way of looking at things. For ordinary people, what really matters is that they are increasingly able to afford and access the basics of life and a decent standard of living: amenities like climate-controlled housing, easy-to-use transportation, food, and clothing. Increases in inequality are not an impediment to this. In fact, we often find that societies with a rapidly rising standard of living overall often have more increasing inequality as well.

Inequality Is Sometimes the Byproduct of Economic Progress

This is because a relatively-free economic system is not a zero-sum game. As Ludwig von Mises pointed out, those who are most skilled at providing affordable goods and services to a large number of people are often those who receive the most rewards economically. It only makes sense that as standards of living increase, those who foster that increase the most might also get richer faster.

Nor are purported measures of inequality — like the Gini index — helpful in understanding the conditions of poverty within a country. For example, the Gini index value is nearly identical for the United States, El Salvador, Morocco, and Madagascar . Yet, to claim that poverty in the United States is anything at all like poverty in the latter three countries wouldn’t even pass the laugh test.

In other words, there is no cause and effect relationship between a high or growing inequality, and a low or declining standards of living. In many cases, as in Chile, the opposite is true. Inequality increases as living standards for the poor also increase.

When Government Causes Inequality

But rising inequality isn’t necessarily the doing of the marketplace.

In a world of “third-way” regimes, government intervention is a cause of inequality at least as much as is the market. There are a number of ways that governments increase inequality, primarily through government regulations and through monetary policy.

Government regulation as a means of increasing inequality has a long history. Historically, favoring some groups over others via government regulation has been called mercantilism, corporatism, crony capitalism, and other names. Its role in inequality has long been a motivating factor for those who opposed it, such as the American Revolutionaries and other radical laissez-faire liberal groups of the eighteenth and nineteenth centuries.  They sought to overturn policies that favored some well-connected government-favored groups at the expense of everyone else. These regulations included government restrictions on trade, government corporations founded to exercise monopolies, private firms receiving subsidies, and government restrictions on private businesses. The effect of all of these policies has always been to increase the wealth and privilege of some groups at the expense of others. In Britain, Richard Cobden’s Anti-Corn-Law League was one of the most successful free-trade movements in history. Cobden explicitly pointed out how government policy, through tariffs, drove up food prices in order to benefit wealthy land owners at the expense of workers. Needless to say, this was a cause of income inequality.

These sorts of regulations, of course, persist today. Any law or regulation that limits competition, limits trade, or subsidizes a group or industry naturally increases inequality and benefits some more than others. More often than not, these laws are written and enforced in ways that favor the politically powerful.

In the wake of the 2008 financial crisis, for example, federal banking regulation has likely been responsible for a decline in small community banks while huge banks prosper and consolidate market share…

Why Inequality Still Matters

Given all of this, it is clearly not the case that inequality is simply a byproduct of beneficial market processes, or that there’s no point in taking a closer look at it. The real challenge of studying inequality lies in identifying what is attributable to beneficial market freedom, and what is attributable to government intervention in the marketplace. Market-based inequality tends to occur alongside economic progress for everyone — even if some benefit to a greater degree than others. On the other hand, government-caused inequality occurs as part of a zero-sum game in which wealth is redistributed from some groups to others — whether through inflation, regulation, or privileges handed out to certain favored groups. This is something that ought not be ignored.

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Government-Mandated Inequality ⋆ The Old School Patriot

 

 

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EconomicPolicyJournal.com: Three Big Problems with How Most Look at Inequality

Posted by M. C. on November 24, 2019

http://www.economicpolicyjournal.com/2018/10/three-big-problems-with-how-most-look.html

By Arkadiusz Sieroń

The issue of income and wealth inequality has gained public awareness recently, becoming an important economic problem in our time. Unfortunately, the quality of the public debate about this topic remains very poor. In this piece, I would like to point out three main shortcomings of the problem at hand.

Good and Bad Inequality

First, people do not differentiate between good and bad inequality. There is nothing inherently bad about inequality, since it’s, after all, only a formal characteristic of the relationship between certain values, like incomes of different people. What really matters is the reason of the inequality. Inequality that results from “rent seeking” and lobbying the government to implement beneficial regulations for the influential and already wealthy interest groups (you may think of banks “too big to fail”, farmers demanding subsidies or domestic industries supporting import tariffs) is obviously bad. Inequality caused by the quantitative easing programs, which increased prices of financial assets held by a relatively small number of wealthy individuals, is also not worthy of praise.
However, inequality resulting from economic progress does not deserve to be condemned, does it? During the Industrial Revolution, workers moved gradually from agriculture to manufacturing, which initially widened the inequality. But this is how the progress happens – it never occurs smoothly, as not all people take advantage of new market opportunities to increase their productivity at the same time. The current upswing in inequality also seems to be driven by technological progress, inter-sectoral reallocation of labour (from manufacturing to services), and globalization. The question whether we should oppose it equals to question whether we should be against progress itself. I hope it’s clear now that inequality may be either positive or negative, depending on its causes, and that the bad ones are not necessarily driven by the free-market capitalism, the favorite whipping boy for all the misery of the world. Instead, it’s crucial to understand that the rise in inequality observed recently in some western countries may result from many causes, including the global economic growth lifting people out of poverty all over the world.

Are People Sinophobic?

This leads us to the second weakness of the public debate about the inequality: many people adopt too narrow, Western-oriented perspective. Just look at the chart below.
Chart 1: Change in real income from 1988 to 2008 among percentiles of global income distribution
sieron1.png
As one can see, almost the entire bottom 75 percent has seen its real income rise between 1988 and 2008 – and some percentiles made really significant gains. Although it clearly shows that globalization benefited enormous number of people, intellectuals and the press are focusing on the working class in the West, whose real income relatively stagnated. It’s an unpleasant fact for these people, for sure. However, the funny thing is that they are between the 75th and the 90th percentile of the global income distribution, which mean that they belong to a global upper-middle class. From the global perspective, the current buzz about rising inequality is not a sign of concern about the poor at all – it is a worry about the income of an elite disturbed by the increased supply of low-skilled workers from developing countries. Surely, one can criticize the rise in inequality due to globalization – but it implies an assumption that the relative economic situation of the working class in developed countries is more important that the absolute increase in real incomes of Chinese or Indians. It turns out that the authors of Oxfam’s reports and other people who supposedly take care of human misery actually suffer from sinophobia.

Inequality or Poverty?

This is connected to the third cardinal sin of the contemporary debate about the income inequality, perhaps the most important one. People often confuse inequality with poverty, although these terms mean something different. The former occurs when people have different incomes, while the latter is when people do not receive enough money. Many people criticize the inequality, but what is really disturbing is not the fact that some have lower income than others, but rather that some has very little.
Fortunately, this is where capitalism enters the scene. Let’s see the chart below, which paints the spectacular reduction in the global extreme poverty over the last few decades.
Chart 2: The percentage share of the world population living in extreme poverty, from 1820 to 2015.
sieron2.png
As one can see, in 1820 almost all people in the world struggled for less than $1.90 per day. One hundred and fifty years later, still 60 percent of the global population lived in extreme poverty. Since then, the ratio declined to 9.6 percent. It means that billions of people have been taken out of extreme poverty. This progress is mind-blowing, especially for people who blame capitalism and ‘neoliberalism’ for the rise in inequality, although it is hardly surprising for economists who know that free markets enable economies to grow. Indeed, poverty was the default state of the humanity. What enabled for its reduction was simply to let poor people get richer by protecting property rights, liberalizing markets, and freeing trade.
This is how capitalism works: it generates wealth through free exchanges and accumulation of capital which increases the labour productivity. Therefore, the call for the greater economic equality for its own sake not only diverts us from the issue of poverty, which is the real problem, but it may be even counterproductive and hamper the economic growth — the only genuine means of eradicating poverty.
Arkadiusz Sieroń (sieron.arkadiusz@gmail.com) is a Ph.D. candidate at University of Wrocław, Poland. He is a 2018 Research Fellow at the Mises Institute, and winner of the 2018 Lawrence W. Fertig Prize.
The above originally appeared at Mises.org.

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Escaping Poverty — Not Inequality — Is What Matters | Mises Wire

Posted by M. C. on June 29, 2019

https://mises.org/wire/escaping-poverty-%E2%80%94-not-inequality-%E2%80%94-what-matters

Egalitarian ethics are pervasive in our society, despite a multitude of logical problems. So popular is the idea that an inequality of wealth is a problem, that politicians such as Bernie Sanders have — ironically and hypocritically — become millionaires by appealing to these ideas. The phrases “income gap” and “wealth distribution” have gained wide currency in political parlance.

The notion that differences in wealth are inherently problematic is laughably easy to refute. If one person earns $20,000 a year, and another person earns $50,000 a year, they have an “income gap” of $30,000. Should both of their incomes double, their new income gap would be $60,000. Instead of celebrating the fact that both people are economically better off, the media will run headlines about the “growing income gap.”

Even John Rawls, the egalitarian par excellence added his famous proviso (which is to say, in this case, a philosophical inconsistency) that allowed non-egalitarian outcomes in cases where the poor are made better off, but his ethics still suggest that making the rich less wealthy would be a moral good even if nobody is made better off in the process. Most egalitarians (including Rawls, in another proviso) are inherently nationalistic as well, concerning themselves only with the “poor” in the United States — despite their being among the richest people globally. Even Bernie Sanders rejected policies that might lift the world’s poor out of poverty at the expense of the far-less-poor in the United States…

Even for those egalitarians who do care about the global poor, many objections to market reforms — if you can believe the absurdity of the argument — is that they would help the “most able” poor more than the “less able” poor. This is the objection to the efforts by Peruvian economist Hernando de Soto to help the poor gain legal titles to the land they have occupied for generations. Similar criticisms have been levied against Muhammad Yunus’s strategy of providing microloans to the working poor in Third World countries. Yunus started by providing small loans out of his own pocket to Bangladeshi women who made bamboo furniture for a living. His critics have complained that only the “more talented” women have the ability to run their own business and become financially independent.1

In the toxic philosophy of egalitarianism, it is literally considered better for all of the poor to remain destitute than for only some of the poor to become better off. The dangers of such a philosophy were demonstrated with Vladimir’s Lenin’s introduction of the kulaki — a term to describe the “bourgeois” peasants who were mildly better off than the rest of Russia’s poor. This division between the extremely poor and slightly less poor was the basis for the Soviet war against the peasantry, in which millions of rural Russians were murdered or shipped off to forced-labor camps…

As England industrialized, steam power made cotton textiles more affordable (and comfortable) than previous materials, such as wool. This raised demand for dyes, which led to further innovations from entrepreneurs seeking to profit from the textile boom. The cochineal, an insect found on Mexican cacti, was used to produce a red dye. Meanwhile, a woman in South Carolina, Eliza Pinckney, developed a way to grow indigo in the colony, which produced a blue dye. Manufactures mixed the dyes together, and the British aristocracy suddenly found themselves surrounding by working class people wearing the “color of kings.”

Clothing dye may seem like an odd example of something that lifts the poor closer to the status of the wealthy, but in the aristocratic culture of seventeenth-century England, the change was tremendous. The poor not only had cheaper access to more comfortable clothing, but they could buy it in such a variety of colors that clothing largely ceased to be a demarcation of status.

The reason this insight is easy for people to overlook is because it usually involves items that seem rather banal. But the banality is precisely the point. What once was a luxury became an everyday item, consumed by the rich and poor alike. Most people give little thought to a photo of Warren Buffet drinking a Coca-Cola, but the idea that one of the richest men in the world would drink the same beverage consumed by the average person (and even the global poor) is an entirely modern phenomenon.

The same can be said for items that have a more undeniable impact on the improvement of conditions. We all know that Henry Ford is not famous for inventing the automobile. He gained his wealth by finding a way to make cars affordable for working class people. Even today, while there are still “luxury cars” that only the rich own, the qualities that make them “luxury” have become increasingly narrow. It is not only the rich who have once-luxury features such as air conditioning, stereos, power windows, and seat warmers.

Cell phones, of course, are another go-to example of commonplace luxuries. It was not that many years ago when cell phones — which were bulky and only had a single function — were little more than pricey status symbols for corporate executives and the political elite. Today, it is not enough to say that the average person has a cell phone that is wildly superior to the earlier models; we should also recognize how significant it is that they have the same cell phone as the wealthiest people in the country.

It is easy to find any number of items that follow the pattern of purple dyes, soft drinks, cars, and cell phones. If we measure wealth disparities in dollar terms, it does seem like inequality increases under capitalism. Although advocates of free trade are correct to identify the logical problems of egalitarian ethics, we often miss the opportunity to point out that when we consider the increasing material similarities between the rich and poor that accompany economic progress, it is really quite absurd to say that capitalism increases the inequality of wealth at all.

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