Inequality

Let us assume, for now, that wealth inequality is by itself undesirable.  OK therefore if Bill Gates moves to Ethiopia tomorrow, it would be a bad thing. The Gini coefficient would shoot through the roof! Wait no.... Where is the actual harm? To make it clearer assume all his investments and charity are unchanged globally, he just wants to live there.  Does his presence make people worse off? No probably not, on the contrary. Certainly all the people who would sell him goods and services are happy. And who knows what else. Yet clearly inequality has increased. So what is the real problem?


This the point where your typical lefty friend is stumped.  And then your righty friend jumps in and says: aha, yes this shows that most importantly we want total wealth to increase.  A rising tide lifts all boats etc. And then your lefty friend says: well if it wasn't for evil capitalists  then the Ethiopians wouldn't be poor in the first place!  To which, righty says: No, not evil, wealth creator! And lefty: No, what about the monopoly abuse... And so on. Until they both sink in intellectual quicksand. When they finally stop,  instead of answering the real question we started with, lefty goes back to his original assumption that inequality is the root of all problems and right goes on thinking all rich people deserve it.

Here's a simple test to make this more productive.  Always ask first: When you are talking about inequality are you really talking about injustice? Almost every case where someone speaks of a concrete example of inequality, when you peal through layers, they really mean material injustice. They are against the *way* wealth is obtained.  Whether it is Wall Street or kleptocrats in poor countries, the real root of the accusations is theft, abuse of power, denial of opportunity, corruption, and especially  regulatory capture. And those are usually clearer issues with clearer solutions.

Of course clearer doesn't mean easier. Justice is hard by itself.  But if you seek real understanding, in each instance, first look at injustice. When you have fully considered that, often you will find the issue is fundamentally injustice. The rest, as they say in research, is implementation details.

Now in the rare cases where there really is no injustice, there is something to say about inequality.  When you rigourously examine what people can actually defend,  it is not the overall inequality.  Say one independent worker is at the 40th percentile because they want time for their hobbies; and another person  works twice as  much and ends up at the 80th percentile. Few people would argue that the second person should subsidize the first.  When you get down to it, morally the case is: help those at the bottom. Yet, when politicians talk about inequality (in the US especially), it's always about the middle. Middle class this, middle class that. How come?

Because the real issues they are talking about are actually issues of injustice.   And if you are part of the machinery of said injustices, then the best way to avoid dealing with questions of injustice is to roll  them into with the incoherent debate about "inequality".   That will make sure everyone is so confused they will think you are the good guy. That is also partly why both the Tea Party and Occupy Wall Street movements became what they are. They both started out as rebellions against bail-outs. Now they are mainly fighting against each other while being directed by their former targets. Political jujitsu.

So if you, dear reader, are a kleptocrat, congrats! It's working. If you are not, then please don't get confused. Focus on injustice.

P.S.  The jujitsu works because of fundamental human traits: desire and scapegoating. I recently came across the thoughts  Rene Girard. That deserves its own post.

Comments

Bill Kamps Added Sep 12, 2017 - 5:25pm
Nemo, good article. 
 
Yes a lot depends on how the wealth was acquired.  Look at Equatorial Guinea.  It has the highest per capita income in Africa, which on the surface sounds like a good thing.   However, it also has a very large percentage of its population with no access to clean drinking water, and most of the population lives in the poorest of conditions.  So why is this happening?  Well the country gets most of its revenue from oil royalties and the ruler of the country, instead of sharing this bounty with the citizens, keeps it all for himself and the family.  Not millions, but billions.  Yes, he keeps it all.
 
However, people are also saying it is immoral? ( at least wrong ) for a CEO to make 1,000x what a secretary makes.   Which would be interesting to hear your take on that.  The  right will say, well the CEO is increasing the value of the company by so much, that person is worth what they are getting?   But then we have the Marissa Meyers of the world who lost value in the stock, had to sell the company at a bargain, and her going away present is $120M.  Or the exec at Wells Fargo who was caught violating company policy and fired, and given $100M in severance.
 
Sometimes the CEO is paid appropriately for the value they bring to the company, and sometimes they are just paid a lot to go away.
 
Yes it matters, how was the wealth acquired.  I dont think anyone is begrudging Warren Buffett the money he has made.  But too many are making too much, for not doing very much, or doing things are close to being illegal, and the corporations would rather pay them off, than go through a court fight.
 
The bad players have put a pox on all their houses.  The responsible CEOs are being  tarred with the same brush as the nefarious ones.
John G Added Sep 12, 2017 - 5:35pm
Unequal societies have poorly performing economies and more social problems.
The neoliberal era has seen increasingly poor indicators, bigger and deeper recessions and weaker recoveries. Growth has declined steadily since the mid 70s when the Monetarists gained ascendancy and the neoliberal fixation on "inflation fighting" replaced full employment policy.
The poor subsidise the rich.
The rich do not create financial wealth, they accumulate it from others.
The right wing 'fiscal responsibility' types would crash the economy in 5 minutes. Governments are not like households and macro isn't the sum of all the micro.
Saint George Added Sep 12, 2017 - 11:49pm
Unequal societies have poorly performing economies and more social problems.
 
North Korea has one of the worst performing economies in the world yet everyone is perfectly equal to everyone else. Do explain, skiddy.
 
Curious minds want to know.
Bill Kamps Added Sep 13, 2017 - 7:53am
John G, I dont know that recessions are now worse than before.  The panic of 1895 was worse than 2008, the depression of the 1930s had unemployment well into the 30% range.  Even the recession in the mid 1970s was arguably worse than 2008.
 
It is true that as the economy has become more hamstrung, recoveries and growth has been slower.  Also I agree that austerity would be far more problematic than debt and inflation.
 
The poor have always subsidized the rich, going back to the king/serf model.
 
SG, if a society is unequal in the extreme, ie no middle class, then growth is much  more difficult.  That does not mean equality at the extreme level of NK is preferable.  "Equality" is not all that is going on in NK.
 
Economies are complex things and it is difficult to make generalizations, because often times it is a matter of "to what degree".  A little inflation is a good thing, huge amounts not good, for example.
George N Romey Added Sep 13, 2017 - 4:00pm
Other than a few party bosses everyone in NK is dirt poor, equal just extremely poor. The tendency in Capitalism is ever concentration of wealth. The post WW2 US economy was an anomaly. How to get that kind of an economy back and maintain is the big question. My own belief is that we need a policy of full employment not the phantom inflation fighters.
Mike Haluska Added Sep 13, 2017 - 4:00pm
Nemo - nice article.  The best we can do as human beings is strive for EQUAL OPPORTUNITY - NOT EQUAL RESULTS.
Mike Haluska Added Sep 13, 2017 - 4:08pm
John G - your assertion:
 
"The poor subsidise the rich.
The rich do not create financial wealth, they accumulate it from others."
 
Raises some questions:
 
First if the "poor" are really "poor", how the hell do they "subsidize the rich"?  I don't recall seeing many financial planners offices in poor neighborhoods.
 
Second, if wealth is not created then how do you account for goods that are manufactured from natural resources?  A Bentley is certainly a lot more valuable than the minerals in the ground it was made from!  A potato in Idaho is certainly a lot less valuable to me in Indiana than the potato that was transported to Indiana from Iowa.
 
John G Added Sep 13, 2017 - 7:45pm
Not worth bothering with Haluska.
Saint George Added Sep 13, 2017 - 8:37pm
Many thanks for your contributions to this Web site, skiddy-g. They go a long way toward filling a much-needed gap.
Mike Haluska Added Sep 14, 2017 - 11:23am
John G - great response!  What is "not worth bothering with" are people who can't muster a rational defense of their ideas and views and simply sling insults and diversions.
John G Added Sep 18, 2017 - 10:03pm
Kamps. John G, I dont know that recessions are now worse than before.  The panic of 1895 was worse than 2008,
The neoliberal era began in the mid 1970s.