guterman_inequality_r2

Written by: Albert Nelmapius

When I was young, my parents taught me that whenever things are confusing or don’t make sense, go back to the basics. Look up the actual definition of the words and most of the time things start making sense again.

Equality

Dictionary.com: noun, plural equalities.

the state or quality of being equal; correspondence in quantity, degree, value, rank, or ability:

Eg. “promoting equality of opportunity in the workplace.”

Egalitarianism (philosophy of everybody being equal) is a fairly recent philosophical thought. For thousands of years it was just accepted to be preposterous to believe. I defy anybody to bring me one example of two human beings being equal in any facet of their lives. In order to be equal, they have to be the same person. If they are not the same person, they are not equal, even if only for the fact that the occupy different spaces.

Since then it has evolved into at least two distinct definitions. Political egalitarianism is a healthy philosophy that developed out of rebellion to kings and dictators and religious leaders with “divine rights”. It holds that all people should be treated as equals with respect for equal human rights. Economic egalitarianism is a social philosophy espousing removal of all economic inequality amongst people – closely associated with socialism.

Few words have had as much influence on modern day history as this word “equality.” It is quoted quite often from historical documents like the Declaration of Independence written by Thomas Jefferson:

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness”.

And during the French Revolution: Liberté, égalité, fraternité are ascribed to a speech made by Robespierre translated as “liberty, equality, fraternity”.

A fundamental document of the French Revolution was “the Declaration of the Rights of Man and of the Citizen” of 1789. It defined equality in terms of judicial equality and merit-based entry to government (art. 6):

“[The law] must be the same for all, whether it protects or punishes. All citizens, being equal in its eyes, shall be equally eligible to all high offices, public positions and employments, according to their ability, and without other distinction than that of their virtues and talents.”

However even (maybe especially) in France, a more socialist definition developed during the Jacobin period, when equality was redefined by François-Noël Babeuf, as equality of results, and not only judicial equality of rights.

To this day, these two opposing views continue. Classical liberals and libertarians believe that liberty is the most important concept, regardless of individual outcome, and that equality of outcome cannot be reached without interference by the state at the cost of liberty (the socialist solution). Liberty and Equality in this sense are incompatible and mutually exclusive. Income equality requires a form of state coercion to exist.

Now right on the surface no human being can seriously believe that all humans on earth are born equally beautiful, or equally tall, or equally intelligent, or equally healthy, or equally sane, or equally physically capable. Nor would they believe it is possible for somebody to appear on the scene and summarily declare such. Nobody is going around writing books and giving speeches on how the “gap” between the world’s tallest person and the world’s shortest person is getting bigger. How unfair it is that some of us just look so much uglier than the supermodels these days. That every year, new world records are set in all forms of sport, making it impossible for the non-athlete to ever reach such goals (“the ‘gap’ is getting too big, oh my!” ). That some people catch colds and get cancer and some people never do.

Secondly, even if they decided that it was just bad luck or fate that created these inequities, and that somehow a government can be tasked to “fix” these inequalities, how exactly would they do it? They cannot just write a law that decrees all people in future should be borne with equal outcomes in everything. It is a near impossibility to raise everybody to the highest standard, you can only lower standards to become more equal. Yes you can get the Gestapo to go around with baseball bats and break the legs of all people over 6 feet in height, but you cannot practically add 3 feet to any of the world’s shortest people. You can improve brain capacity a little with education, but you cannot educate everybody into becoming Einsteins. So your only option would be to do lobotomies on all highly intelligent people. The “intelligence gap” could be reduced, but you will only end up with a vastly more stupid population on average.

Now clearly, there will always be some people on earth in poverty or those with zero or very little income. Everybody is born penniless. And as productivity and technology improves, there will forever be those that keep breaking profit and income records. It is a natural phenomenon for the “gap” to be increasing forever. But luckily for us, there is not a finite amount of intelligence to choose from. A smart entrepreneur or smart inventor can use his power to benefit ALL of mankind as well as himself, without depleting the access to worldwide intelligence. It makes the world as a whole a richer experience at no cost to anybody else.

So obviously all these socialist pundits like Thomas Piketty (Capital in the 21st Century) spewing all these equality slogans, are talking about “income inequality”. Of all the thousands of characteristics, in which indisputably man was never supposed to be equal, they choose income as an example of the claim that: “had it not been for bad fate or bad luck” all humans would earn equal income. They never give citations of where this law comes from. Strangely enough the “solution” always involves higher taxes on the rich (more socialism). Just like with the other examples above, should they choose to intervene, their socialist system has no ability to raise the income of all citizens in the world to the highest levels. They can only cut the legs off the highest producers in the world and make everybody equally poor (and unproductive). They want to set back civilization by a few hundred years.

They keep repeating slogans like “the top 1% is continually getting richer” – are they implying there will be a time when there is no top 1% or even a bottom 1%? Also the top 1% changes membership all the time. They try to imply that it always is and always will be the same people forever.

“CEO salaries keep going up” – yes but only to the extent that corporate incomes went up because of those same CEOs. In the long run, during the entire history of man, productivity and incomes have gone up – except in socialist countries. During the recession, many, many CEOs lost their jobs and corporations went bankrupt.

“Real wages have remained stagnant since the 1970s” – really? And why do you not correlate that with the harm done by your taxes and your government regulations and your socialist monetary policies that have mushroomed since the 1970s? Why would punishing the productive class improve that? The argument goes that it is the modern day businessman whose greed has just gotten out of hand. Are you saying that greed never existed before and it was instituted in 1970?

There are some other inequalities that are obvious and very pertinent in producing these income inequalities, but they are never mentioned. Inequality in hours worked. Successful businessmen and CEOs work more than double the hours of regular workers, allowing them to compound their incomes. Inequality of risk-taking and suffering losses. Businessmen who are willing to risk their own money and income in exchange for the possibility of future success, also suffer far more bankruptcies and failures in the process than average workers. Inequality in guaranteed income. Many famous businessmen started in their garage and lived in their cars while their businesses opened. They drew no salary for a while yet they paid their employees a guaranteed salary before paying themselves. Inequality of savings. What if two people have the same abilities, the same education and live in the same town and do the same job for the same salary (no income inequality)? What if person A spends all his money as fast as he makes it on a higher standard of living but person B lives within his means and saves 20% of his money for a rainy day? After 50 years, person B will have a sizably bigger net value than person A. He could then choose to spend his money on luxuries or even better, invest his money wisely and retire while living on the income generated by his savings. Piketty would now say these two people have a large income inequality. Is it then incumbent on the government to punish person B, the saver, with extra taxes to benefit person A the spendthrift? If they choose to do it anyway, could their actions cause fewer people to save and increase poverty in the future?

Each one of these egalitarianists have it within their power to reduce the income inequality. They can choose to live at the same level as the poorest person in their country and donate 100% of their income to reduce this inequality. How many of them have actually done that? Or does this philosophy only apply to other people’s money?

In today’s politically correct statist society, it astounds me that nobody has yet jumped on the idea to create legislation that mandates that ALL lottery tickets be winning tickets! Wouldn’t that solve your problem instantly? Mathematical and practical impossibility has never deterred these pie in the sky philosophers before.

For a much longer and more scholarly article, read “Egalitarianism and the Elites” by Murray Rothbard in Review of Austrian Economics, Volume 8, No. 2 (Summer 1995).

Author: Albert Nelmapius is a businessman and amateur economist currently residing in Florida, USA.

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