Income Inequality

by Gordon Cooper

From Broader View Weekly, January 20, 2011

There is a certain spark that glows within the heart of every human. You may call it a sense of morality, or a recognition of “oughtness” – as C.S. Lewis described it – where we realize that things “ought” to be a particular way, that people “ought” to act according to set parameters.

Our founders stood on the shoulders of great philosophers and biblical teachings to declare this spark as evidence of our equality before an omniscient and omnipotent Creator. I choose to believe we have this spark because we are created in the image of a God who is just and therefore we seek justice. You may call it what you wish, you may even believe it is the culmination of millions of years of mindless, purposeless evolution, but you must admit it is there.
It is because of the existence of this spark that we bristle at inequities and unfairness. From the first introduction of sibling rivalry, to the playground, to the executive office, we scream when we see someone getting a different amount of toys or cookies. We, at these times, fail to realize that “created equal” refers to our inalienable rights (life, liberty, individual pursuits for property and happiness) and not to our economic equality.

Many utopian dreamers have sought to fan this spark of “oughtness” into the flames of revolution and some have succeeded – for a short time (Marx, Hitler, Mao, Lenin, etc.) – but sooner or later the futility of generating true economic equality through a synthetic means has been exposed.

Nevertheless, we continue to hear new cries for economic equity whenever new statistics are published that show a greater disparity between the wealthy and the poverty-stricken in our nation.

Recent news stories have mentioned the Gini Index, which is a value given to a society’s economic equality according to how evenly the riches of that society are distributed among its inhabitants. If a nation has a Gini Index of zero, it means everyone enjoys the same level of prosperity. Conversely, a Gini Index of one means one person owns everything and everyone else is destitute. Our nation’s Gini index rose from .39 to .44 in the past 20 years, which seems to indicate a troublesome trend of the rich getting richer and the poor getting poorer.

Some have claimed that we should strive for that perfect level of zero, but is that such a good idea for the long term health of our economy? And even if it were a good idea, what mechanism is the best way to achieve that goal? To answer those questions, we can look across the globe and study the reaction of a chief rival.

China recently realized its own growing wealth gap when they achieved a Gini Index rise from .35 to .47, in only five short years of rapid economic growth. According to an article written in the Far Eastern Economic Review, there is an old Chinese proverb which states “Inequality, rather than want, is the cause of trouble” and it is belief in that proverb which has motivated Chinese leaders to begin a policy of wealth distribution to prevent growing class tension and political upheaval. The irony of this approach is that many experts believe, and other societies have proven, the drive to achieve income equalization would most likely result in decreasing innovation and entrepreneurial and labor incentives.

The next question to be answered by those who believe in income equity is: By what mechanism or method will this equality be achieved? Should we, as many have suggested, tax the rich at higher and higher rates until their income is decreased to an “acceptable” level (Obama seems to think $250,000 or less is an acceptable level)? Should we limit competition for skilled employees and executives by setting maximum wage levels?

It seems that the growing wealth gap has provided the social engineers with both the symptom and the pathogen of a threatening disease, for which they are all too eager to provide the cure. Like a fanatical pharmaceutical company that develops a drug and then searches for a sickness, these engineers found taxation and governmental control and then sought for a cause.

Wealth disparity is the symptom and the rich people are the germs. They are universally seen as corrupt, greedy and manipulative, while the poor are classified as unfortunate or disadvantaged – but seldom seen as greedy, grabby or fraudulent.
If we believe that corruption, greed and ignoble deeds only grow in the hearts of the prosperous, and that nobility, charity, and ethics only grow in the hearts of the poor, we are mistaken. You will find all of the above in the executive office as well as in the tenement slum. No class has a monopoly on any virtue or any vice.

If we think we can achieve peace and tranquility by removing economic inequities, we will be forced to learn once again the hard lessons learned by so many other utopian dreamers. The best we can hope to accomplish through wealth distribution is mediocrity, the worse we can receive will be slavery to the state.