So, Really, Why Does Inequality Exist?

In the age of information, industrialization, and automation, how does inequality still exist when so many goods and services can be provided at practically no cost, in terms of human capital? The answer to this question is answered in vastly different ways depending on who you ask and depending all too often on their political beliefs. Further, no explanation can honestly be exhaustive, because the specific causes of inequality vary country to country, region to region, and even ethnic group to ethnic group. This is simply a fact, but it doesn’t mean that there isn’t a good answer. It simply means that there are no short answers.

If you ask a socialist why there is inequality, he’ll respond with a rote answer of “unfair distributions of capital resources” usually involving greedy capitalists. The socialist is not necessarily wrong, he’s simply omitting 95% of cases contradicting his theories. Sure, however, he’s absolutely correct 5% of the time in economic cases involving capitalist economies. Unfortunately for the socialist, things get worse for his position when we get to inequality outside of capitalist economies, such as countries like China, Venezuela, or Cuba, where capitalism can’t easily be trotted out to scapegoat. We find the worst examples of inequality are perpetrated by the very same bureaucracies the socialist claims we need to police inequality.

In socialist countries, there are huge, desperately poor “peasant” classes, often denied even basic ownership rights, with limited access to clean water or even enough food to eat. Despite decades of socialist policies, their GINI ratings are barely different than the United States. China, for example, has a GINI rating of 42.16 (2012), compared to the 41.06 in the United States. Based strictly on the GINI information, Marxist socialist China has created a worse inequality problem than the largely capitalist United States. Why? Isn’t it obvious?

An American traveler asks his socialist guide, “I still see a lot of limousines. I thought everyone here was supposed to be equal?” The guide replies, “This is true, but in America, do you not have limousines?” The American said, “Sure, anyone that can afford to can if they want.” The guide said, “By ‘anyone’, you mean greedy capitalist class like your movie stars and businessmen who exploit the poor?” The American said, “Sure, something like that.” The guide responds, “Ah, we have no greedy capitalists here, so only government officials can afford limousines. Therefor, we have half as much inequality, you see?”

Sadly, for the devout socialists, for whom the Venezuelan people being forced to comb through garbage for scraps of edible food isn’t a problem caused by socialism but somehow remains the fault of the rest of the world, no amount of evidence to the contrary will change their minds, and they will continue to miss the point. They will never understand that commodity prices are not fixed, or, worse, will believe that price volatility is solved by price fixing. Fundamentally rejecting market theory, they are perpetually surprised by recessions and shortages exactly like Venezuela. No, there’s no cure for this kind of willful ignorance.

On a different end of the political spectrum(s) are the nationalists, who are absolutely convinced that the United States is losing, but not because our eroded capitalist market system, our largely exhausted post World War II manufacturing advantage, or the ever increasing number of global competitors. For these myopic peasant minded partisans, American inequality is simply a result of other nations “cheating” America. In their tainted worldview, the white worker is out of work because the Mexican immigrant stole his job, and the black worker is out of work, because he’s lazy or criminal.

As more foreign competitors continue to enter the global market, the nationalist demands more government protection of inflated wages and more subsidization, both direct and indirect, of industries, and tariffs and trade restrictions that will only cause American products to be even less competitive abroad, deny cost savings to American buyers domestically, and provoke protectionism from foreign trade partners. They call themselves “capitalists” while advocating exactly the same trade policies as avowed socialists, which only further reveals their fundamental misunderstanding of not only the philosophies that they think they espouse, but often reality itself.

A conservative asks a nationalist, “Don’t you realize American companies are expatriating jobs because of cheaper foreign labor?” The nationalist responds, “Of course, that’s why we need tariffs, lower corporate taxes, and to punish companies that expatriate American jobs!” The conservative retorts, “Don’t you see that you’re protecting decades of progressive and labor union wage inflation and advocating for carrot or stick government interventionist policy in the market? Isn’t that de facto socialism?” The nationalist shouts, “Why do you hate America so much, you globalist cuck!?”

The nationalist is even more delusional than the collectivist socialist, because at least the socialist is right 5% of the time, whereas the nationalist’s understanding of inequality couldn’t be more disconnected from objective reality if they tried. So, is that it? Is the socialist’s answer, accurate 5% of the time, right enough to answer the inequality question? Don’t worry, even while I concede that the socialist’s heart is in the right place, I recognize that their brains aren’t. They’re not even in the ballpark.

To start, inequality is a loaded term. From a purely capitalist perspective, put any two people in a room together, and there will be inequality. They’ll have different skills, different values, and different perspectives on the world. Even if they could agree on the problems facing society, they’d likely completely disagree on the solutions to those problems, even if only insomuch as the degrees. This will come as a surprise to socialists around the world, but inequality is actually the norm in human experience, not the exception.

When any two people go out into a market, where other individuals are free to trade based on their needs and the applicant’s skills, is really where the “inequality” comes into play, but the leftist takes an extreme view of equality. The radical left holds that, because all individuals are morally equal (held to the same standards of justice and moral duty), all individuals should be economically equal. In this rather naive worldview, they believe a surgeon is the equal of a baker, even though the surgeon likely couldn’t bake a cake that anyone would want to eat, and the baker couldn’t accurately identify a healthy spleen, let alone a diseased one.

“Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.”
-Groucho Marx

For the vast majority of cases, inequality exists because people are inherently unequal, while some people are better at leveraging their inherent inequality than others. Whether that be a migrant worker who leverages his tolerance of a lower standard of living and works hard at a lower wage to support himself and his family, or when a young black woman leverages her hard work in school, despite all social and cultural obstacles in her path, and lands a high profile job with a prestigious company, or when a young white man, whose family is too poor to put him through college, leverages his skill in a trade and, through hard work and discipline, grows a business of his own.

This, absent artificial barriers, such as government interference, entrenched racism, or unnecessary labor barriers, is the norm for most economic situations, but not all economic situations. As stated earlier, there are exceptions where inequality simply persists. The most troubling truth that should (but rarely does) give the devoted socialist pause is that the worst cases of inequality exist in precisely the places leftists have had the most influence, often for generations, over the economic lives of those suffering from inequality, but then “it’s always someone else’s fault“.

Similarly, the nationalist, rather than address the government policies that perpetuate the economic problems they claim they want to fix, blames instead the foreigner boogeyman. Where the socialist believes American workers should earn higher wages, because all workers should earn higher wages, the nationalist believes American workers should earn a higher wage, because “‘Murica!“. In the end, both the socialist and the nationalist seek to protect an uncompetitive wage in an increasingly competitive global economy. (And, no, acknowledging that an increasingly competitive global economy exists isn’t the same thing as being a “globalist“.)

Here’s the short of it. Inequality exists because it’s natural. There is simply no solution to basic inequality, but that’s not to say that society shouldn’t care about inequality. We most certainly should. Society has a moral duty to minimize inequality that occurs for arbitrary reasons (usually bad government policy, wage restrictions, or plain old small minded racism). The only question left to ask is what are we going to do about it? The same things we’ve always tried to do (which haven’t worked)? Or is it about time to try the liberty solutions?

I think the answer is obvious. Don’t you?


Liberty is For The Win!

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