Lately there’s been a lot of chatter from midterm-campaign-theme-starved liberals about the scourge of income inequality.
In an entry in their lugubrious “Poverty in America” series, a National Public Radio reporter recently wailed that 95 percent of the wealth recovered since the 2008 recession has gone to the top 1 percent of income earners, and that the U.S.’s middle class is no longer the wealthiest in the world.
Adding fuel to the fire, French economist Thomas Piketty recently published the English translation of his anti-capitalist exposé Capital in the Twenty-First Century. Proud neo-Marxists and their acolytes briefly sent the book to number 1 on Amazon’s digital bestsellers list. (Clearly the left is no longer miffed at tech giants who exploited the physical labor of field peasants to harvest the Internet.)
Winner of the worthless Nobel Prize in Economics Paul Krugman gave Piketty’s volume a glowing review, calling it a “magnificent, sweeping meditation on inequality.” (Whenever a New York Times reviewer calls a book a “meditation” on something, I assume that’s code for “random fact-free musings scribbled while on drugs.”)
Piketty’s central argument is that unbridled capitalism is bad for society. According to economic data he’s reanalyzed, the concentration of wealth accelerates at a faster rate than the economy grows, such that even if society is doing well, disproportionately more wealth goes to a small percentage of the population. The solution to this non-problem is—you guessed it!—government regulation, including higher taxes on the wealthy.
Liberals are agog over Piketty’s brilliance and are parading his book around as though he’s offered some blindingly new and innovative insight. But anyone who argues, as Piketty does, that unchecked wealth accumulation is bad for capitalism doesn’t understand capitalism.
Wealth generation and accumulation aren’t zero-sum games; they can expand infinitely. The existence of more billionaires doesn’t squeeze the middle and lower classes out of their chance to become billionaires. Before there were hundreds of billionaires, there were only a few billionaires; yet no one claimed that letting these few billionaires get richer would prevent other people from becoming billionaires.
Restricting wealth accumulation for some doesn’t foster wealth accumulation for others; it just allows fewer people to join the ranks of the super-rich.
In fact, NPR itself ran a story just last week on Americans’ surprising mobility in and out of the 1 percent. According to Mark Rank and Thomas Hirschl, author of the book Is it just the One Percent, or is Affluence a Normal Life Course Event?, a whopping one out of five members of the U.S. population makes it into the top two percent at some point in their lives. Eight percent of Americans make it into the top one percent and stay there for at least a year. But seven out of those eight in a hundred don’t last a decade in the top one percent, which means that foolish investment can bump one out of the upper class just as easily as hard work and wise investment can propel one into it.
Yet liberals don’t see the good life as an aspiration. They see it as the default, and if some don’t have it—well, that’s a problem the government needs to fix. The good life doesn’t need to be painstakingly created, shaped, and built via imagination, planning, and hard work. It just comes into existence, is owed everyone as a birthright, and is absent only if it’s been stolen by greedy oligarchs.
Meanwhile, conservatives don’t view society as owing anyone anything; they favor “negative rights,” in which the government merely protects us from fraud and theft. Liberals capitalize on general public recognition of this genuine, small role for government regulation by endlessly complaining that the government isn’t meeting that minimal responsibility. But their efforts result in legislation like the 14,000-page Dodd-Frank Bill, which not only uses vague language to allow future regulators to impose all kinds of restrictions on business, but doesn’t even address the problem it was supposedly designed to solve.
So why is growing inequality even an issue? What difference does it make if a CEO earns 100 times his average employee’s salary of $75,000 vs. 50 times their salary of $50,000? As Margaret Thatcher once asked, would the left rather have everyone be poorer so that the gap between rich and poor can be smaller?
The default throughout human history hasn’t been the good life; it’s been an epic, bloody struggle for survival, in which successive generations have tried, with some success, to pass on a better way of life for their children. Miraculously, this has happened in recent times, especially in the West, as a result of capitalism, and is happening in developing nations as they adopt the Western model.
Capitalists didn’t take away the good life from the masses, because the good life didn’t exist until capitalism. But the more of capitalism that liberals chip away at, the less of the good life there will be for everyone.
Previously published in modified form at Red Alert Politics
- Thomas Piketty Gets The Numbers Wrong (forbes.com)
- We Read Seven Thomas Piketty Think-Pieces For You (wnyc.org)
- The Liberals’ New Hero (city-journal.org)
- Thomas Piketty’s “Capital”, summarised in four paragraphs (economist.com)
- L’ anti-capitaliste: Thomas Piketty is the rock star economist on a mission to redistribute wealth (standard.co.uk)