By Jared Meyer
Sunday, March 27, 2016
Rather than proving to be a fleeting political movement,
the perception that the top 1% of income earners are gaining at the expense of
the other 99% has inspired a full-fledged crusade to combat income inequality.
Politicians in both parties argue that the middle-class is shrinking, average
Americans’ incomes have stagnated, and today’s economic system is rigged
against the little guy.
But the reality is not as simple as blaming billionaires.
Equal Is Unfair: America’s Misguided
Fight Against Income Inequality, a new book by Don Watkins and Yaron Brook
that will be published by St. Martin’s Press on March 29, argues that today’s
“inequality narrative” is more about bringing down people at the top of the
income scale rather than helping those at the bottom. Here Watkins explains
what drives the war against income inequality and how policymakers can restore
the American Dream.
Jared Meyer:
You write, “ the forces that have made modern life possible go hand in hand
with enormous economic inequality. ” Please explain.
Don Watkins:
We have seen an amazing increase in our standard of living over the last
hundred fifty years or so, and any economic discussion has to start by asking:
What made that possible? It was not physical labor. Marx’s arguments to the
contrary notwithstanding, muscles did not make Manhattan.
What transformed human life was the intellectual efforts
of inventors, entrepreneurs and financiers who used their minds to discover and
implement new technologies and productive processes.
It started in the 19th century and only in the West
because people had an unprecedented amount of freedom to put ideas into action,
and to profit from their efforts. Free societies become rich because they
liberate human ability and reward achievement.
And ability and achievement are far from equal.
Individuals create vastly different amounts of economic value. My wife is a
very good teacher, but she provides value to a few dozen children each year.
She is inevitably going to make less than Jeff Bezos, who provides value to
millions of people through his efforts at Amazon. But so what if he earns more
income? Bezos is not taking anything away from her—on the contrary, he is
making her life better.
JM: Some
income inequality warriors seem to ignore the major role that increased
production has in providing widely-shared economic progress. Do you think this
hostility towards innovation and productivity gains comes from a
misunderstanding of economics, an assumption that there will be no more
progress, or a militant devotion to economic equality—even if it makes everyone
worse off?
DW: I do not
think you can make any universal statements here. Some critics of inequality,
such as journalist Naomi Klein, object to progress as such. But most at least
pay lip service to the value of progress. In their view, however, economic
progress does not benefit everyone unless the government intervenes to regulate
successful individuals and to redistribute wealth to less successful
individuals.
Now, this is manifestly untrue. As just one piece of
evidence, I recommend people read Robert Gordon’s recent book The Rise and Fall of American Growth. He
is a critic of economic inequality, and I do not agree with everything in his
book, but he shows that economic progress led to widespread prosperity long
before the government started regulating business and redistributing wealth in
any serious way.
At root, inequality critics are opposed to economic
inequality on moral grounds. They view economic equality as a moral ideal, and
so they gravitate toward economic theories that are consistent with that
ideal—theories that tell us widespread prosperity depends on the government
pursuing an equalizing agenda rather than a freedom agenda.
JM: How can
anyone argue that average—or even poor—Americans are worse off now than they
were in the so-called “golden age” of economic equality that stretched from the
1950s to the 1970s?
DW: What the
inequality critics do is conflate statistical categories with individual human
beings. When we hear that “the middle class has stagnated since 1979,” we are
led to envision millions of people working for thirty plus years without a
raise. But the inequality critics know that is not what happened.
You cannot draw conclusions about individuals by looking
at statistical categories. Anyone who merely points to some statistic and says,
“Look, we’re stagnating,” is misusing statistics. In our book, we dig into the
data but also look at other big picture evidence of living standards. What we
show is that the vast majority of individual Americans has enjoyed a
significant increase in its standard of living since the 1970s.
JM: The idea
of the American Dream (and its impending death) is animating political
campaigns on both sides of the spectrum. How do you define the American Dream?
And is it dying?
DW: We quote
James Truslow Adams, who coined the phrase, “that dream of a land in which life
should be better and richer and fuller for everyone, with opportunity for each
according to ability or achievement.” The American Dream is about
opportunity—an open road for producers, who are free to rise as high as their
ambitions and abilities will take them.
What makes the American Dream possible is not economic
equality but political equality . Political equality means that government
protects our equal rights to life, liberty and the pursuit of happiness. No one
gets special privileges, no one faces special penalties. That was the American
ideal, in contrast to Europe, where aristocracy and government insiders enjoyed
special privileges from the state at the expense of everyone else. (I say
political equality was an ideal in America because we obviously and tragically
did not fully live up to it.)
Today, the American Dream is not dead, but it definitely
is not fully alive because of rising political inequality. On the special
privileges side, for example, you have cronyism and sundry wealth
redistribution schemes, and on the special penalties side you have occupational
licensing laws, the minimum wage, anti-trust—the list is truly endless.
A less obvious example of political inequality, but maybe
the most destructive, is government schooling. The government has long
monopolized the field of education, virtually preventing innovators from
entering the field, and forcing all but the most affluent to send their children
to schools that all too often do not educate.
What this all adds up to is that it is becoming harder to
rise by means of your own effort and ability (especially if you are starting at
the bottom), and it is becoming easier to live off the effort and ability of
others.
JM: You argue
that restoring economic opportunity—not combating income inequality—is the
defining challenge of our time. Why do you want to shift the opportunity debate
away from promoting economic mobility, which is a goal that many conservatives
have signed on to?
DW: I am all
for mobility, if that means the freedom to be able to rise from rags to riches
by means of your own productive ability. What I am against is the idea that we
should value mobility as such—people moving up, not by means of their
productive achievements, but by means of handouts paid for by the achievements
of others.
Take an analogy. I think it is desirable that teachers
strive to see all their students improve their grades—to rise from F students
to C students and from D students to A students. But I do not think it is a
moral achievement to redistribute test scores so that we lift up D students by
taking points away from A students. That is obviously unfair, and yet many of
the proposals we hear for increasing mobility amount to just that.
But let me come back to the first part of your question.
The inequality critics see the world in zero-sum terms. The only way to lift up
those at the bottom is equalize society by pulling down those at the top. And
since that, too, is obviously immoral, they first go to great lengths to
demonize those at the top. But does anyone really believe that we can revive
the American Dream by vilifying those who epitomize the American Dream?
If we reject the zero-sum view of the world and recognize
that all individuals have the power to lift themselves up through their own
productive efforts, then we are led to a different ideal: opportunity. Remove
the barriers that prevent people from rising—namely government intervention—and
we can have a society where we are each free to make the best of our own lives.
That is the choice we face. The future of this country
will depend on which ideal we pursue.
JM: There is
obviously much more to say on the complex questions of economic inequality and
mobility. However, it is important to highlight that everyone cares about
promoting opportunity, but simply cutting down those at the top of the income
scale in the name of equality will do nothing to help those at the bottom rise
up.
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