You Want More Equality? Support More Capitalism

By David Harsanyi
Wednesday, November 02, 2011

A person can't go but a few clicks on the Internet these days without tripping over some shocking item about the "explosion" of income inequality that has, like the dark smog of capitalistic excess, been choking the life out of this unjust nation. And when it comes to inequality, there is certainly only one vital question we must ask ourselves: Who cares?

If the wealthy get wealthier, no one has to become one penny poorer. This childish idea that the economy is a zero-sum game might appeal to the populist sentiments of the so-called 99 percent -- or to the envious nature of some others or to the emotions of many struggling through this terrible economy -- but in the end, it doesn't stand up to the most rudimentary inspection.

Not to mention, tales of runaway income disparity destroying the American middle class have been repeatedly debunked. James Pethokoukis at the American Enterprise Institute recently pointed out that new Congressional Budget Office "data show real median after-tax household income (half of all households have income below the median, and half have income above it) grew by 35 percent over the past three decades."

Over the past half-century, in fact, the wages of the middle class have captured a remarkably consistent share of gross domestic product. And the most important fact that eludes protesters and progressives is that the poorest 5 percent of Americans are still richer than nearly 70 percent of the world -- with a lot more opportunity to change that situation.

But let's concede that, thank goodness, some inequity will exist and will as long as we remain a largely meritocratic society. But even if corrosive disparity is tormenting us, as so many journalists would have you believe, how are we to fix it? Are Americans prepared to take on a massive social engineering project that entails politicians, commissars and czars making biased and arbitrary assessments about who deserves what and who doesn't? That sort of endeavor has been attempted to varying degrees of real economic tragedy. It's the sort of behavior that got us here.

What we should be worrying about is economic mobility. And we do well there, too. A 2007 Treasury Department study showed that 58 percent of households that were in the bottom quintile in 1996 moved to a higher level by 2005, and of households in the top 1 percent during the same time, more than 57 percent dropped to a lower income group. And economist Shikha Dalmia recently pointed to a study by the University of Chicago's Steven Kaplan that "shows that, despite government bailouts, in 2008 and 2009 the adjusted gross income of the top 1 percent -- a disproportionate number of whom work in the financial industry -- fell to 1997 levels."

These numbers show great mobility, upward and downward, and it's why "class" as a political wedge issue hasn't typically held traction -- though the Obama administration is doing its best to change that dynamic.

No doubt, the recent recession -- and "stimulus"-induced extension of that recession -- and structural and technological changes that often occur in the job market mean that every so often, we will have some painful times. Taking a snapshot of "inequality" when emotions are exacerbated by a recession is only meant to distort reality for political gain. And every time capitalism is hijacked by technocrats and bureaucrats, it seems there is a cry from other technocrats and bureaucrats (and their fellow travelers) to institute more of the top-down control that stifles mobility.

You will notice that the Occupy Wall Street crowds -- and the progressives who support them -- focus on bringing the wealthy down to earth rather than lifting the 99 percent. They have a nearly religious belief that too much wealth is fundamentally immoral and unhealthy for society. The economic systems they cheer on would coerce downward mobility for the sake of equality but ignore prosperity for the people they claim to represent.

If progressive were interested in mitigating inequality, they would support the dynamism of free markets to allow the merit of ideas, products and services to win the day rather than stifle companies and pick winners in the name of imagined "progress." Yes, "too big to fail" means banks, but it also means union-backed bureaucracies, political parties, car companies and green energy -- and more.

If they were interested in spreading wealth, they would support lifting barriers that inhibit markets and make life difficult for entrepreneurs and businesses rather than spreading the destructive notion that life can only be "fair" if we rely on dependency and entitlement and tear down those who have more.