One, if not the most popular subject among op-ed writers during the past several years has to be inequality, and in particular inequality of income. How many times have we read such as the following:
CEO pay now averages some 200 times the pay of the typical worker, and the richest 1% take home some 20% of the country’s total income? To some extent such repetition dulls the mind and most of us probably no longer react to these numbers.
But there are many who continue to react and they fall broadly into one of two camps, that of Thomas Sowell and that of Robert Reich.
For Sowell the inequality mantra is nothing more than a bogeyman, an imaginary monster intended perhaps to frighten us into corrective action, but we might better just push it away or ignore it. For Reich the inequality is not imaginary but all too real and ought at the very least shame us into taking action, such as getting behind higher taxes on the top or richest 1% thereby permitting greater transfer payments to those on the bottom.
Sowell argues convincingly that we are, while belonging to the very same species, very unequal in what we are able to do. We are better at some things and worse at others. This inequality is with us as we come into the world, and never goes away. And ultimately these real differences between us will make huge differences in what we do, in how we live, and in particular how we are able to contribute to the well-being of others. First our nature, and then our nurture, not government, will create the few at the top and the many at the bottom.
But, as as Darwin noted, we are lucky to have it that way, lucky in our differences, lucky that the differences exist, for our being all the same or equal would not have brought us to where we are today, enjoying seemingly limitless material wealth when compared to our hunter and gatherer ancestors.
Sowell says that those who are troubled by the present admittedly huge wealth disparity seem to be oblivious as to how that wealth came into existence. According to Sowell even more important than income differences are the even vaster differences in productivity —that which is far more fundamental to everyone’s well-being. And again according to Sowell much like the goose that lays the golden egg the producers to some extent have to be protected, or at least not obstructed by excessive taxes and regulations.
Furthermore, as Sowell reminds us, money itself is not wealth. For “otherwise the government could make us all wealthy just by printing more of it…. money is just an artificial device to give us incentives to produce real things — that is, goods and services, goods and services being the real ‘wealth of nations.”
He cites the example of John D. Rockefeller, whose great wealth was created by the millions of people who would buy what the man was selling. Why would the people buy? Because in each instance as he grew his business, say the sale of a gallon of kerosene, Rockefeller would have brought down the cost and thereby have profoundly changed for the better the lives of millions of working people. Before the arrival of his cheap kerosene there was little that these millions could do after dark except go to bed.
And hasn’t this sort of free market exchange happened over and over again as a relatively few individuals have discovered ways of making real wealth available to the many, and sure, enriching themselves in the process?
Similarly Edison, Ford, the Wright brothers, and innumerable others also created unprecedented expansions of the lives of ordinary people. And always their individual fortunes represented only a fraction of the new wealth created.
According to Sowell more important than inequality of income are the inequalities of particular skills and talents that ultimately have enabled the few to grow the store of our wealth which more than transfer payments will have brought real benefits to everyone.
Here I’ll give this last word to Thomas Sowell himself:
Too many discussions of large fortunes attribute the existence of those fortunes to “greed” — as if wanting a lot of money is enough to cause other people to hand it over to you. It is a childish idea when you stop and think about it — but who stops and thinks these days?
Now is there another side to all this? Yes according to Robert Reich, and he is by no means alone. His argument is not just that there is great disparity of wealth, of income, but that the disparity is growing, and that people now have much less than he did, for example, when he was growing up in an earlier America.
“Do you recall,” he asks, “a time in America when the income of a single school teacher or baker or salesman or mechanic was enough to buy a home, have two cars, and raise a family?” Well he says that that time is over. People are now worse off.
And yes, as Sowell says, Reich is among those looking at income, not at the sources of our wealth. Reich points out that for a time after World War II both the economy and the earnings of the typical worker grew rapidly, but that over the past 30 years or so, while the size of the economy has doubled the earnings of the typical worker have gone nowhere.
And other forms of worker wealth during the same period are declining or deteriorating, those such as a collapsing infrastructure of roads and bridges, a failing public school system, unaffordable higher education.
Yes for a time after WWII the economy and the people prospered together. But that is no longer the case. Some 30 years ago, as Reich describes it, there happened the great u-turn. Sure, he says, there may have been culprits, things to blame for this, —globalization, the disappearance of our manufacturing core industries, routine jobs being replaced by automated machinery, software, robotics.
But he asks the question why, with all the new wealth from globalization and technological advances, didn’t we share it more broadly? If there is a legitimate response to Sowell, this has to be it. Wealth production is not enough, for somehow the wealth of nations, the new and yes much larger world wide store of goods and services, is not being equally shared by all. Or rather the rich are getting richer and the middle classes, not just the poor, as in past times, are not.
So yes there are two legitimate camps. There are those, mostly conservatives, who would protect the producers and there are those, mostly liberals, who would increase the earned benefits of the consumers. While Sowell argues convincingly that the producers need to be encouraged, supported, and on occasion protected, as they are the source of our wealth, Reich is no less convincing that there are too many people now being left out of a desirable and equitable sharing of the country’s wealth.
Like most divisions between us this one too is not one of kind but of degree. There has to be a ground in the middle where we should always be standing. Have we gone too far to one side or the other? Perhaps Reich is correct and we have gone too far to the side of wealth creation and need to turn back a bit to the middle, and to making sure that the benefits of our great wealth are more equally shared.