"By the logic of inequalityphobes, the world would be a better place if the great business billionaires had never been born."

Financial Post
The equality obsession

Liberals promote primitive, economically challenged assumptions for political ends

‘Why don’t Americans pay more attention to growing income disparity?” asked Timothy Noah in a piece in last Wednesday’s Post. Terence Corcoran established Thursday that Mr. Noah’s claim of “growing disparity” is essentially a crock, but that claim invites more probing questions: Why are modern liberals obsessed with income inequality (to the point of cooking the books), and why do they claim that it is unequivocally “bad” and almost invariably getting “worse?”

Inequality of income and wealth is inevitable under a system of relatively free enterprise because people have different talents, ambitions and drives. Given capital accumulation, mass production and extensive markets, it is possible for individuals to become fabulously wealthy on the basis of ideas alone. Thus it was with Andrew Carnegie, John D. Rockefeller and Henry Ford. Thus it is with Bill Gates, Steve Jobs, and the likes of Canada’s Jim Balsillie and Mike Lazaridis. Such individuals create jobs, wealth and tax revenue. Their wealth is not earned “at the expense” of anybody else, except unsuccessful competitors. And yet the inevitable “inequality” created by these men, and other talented and entrepreneurial individuals, is constantly bemoaned as a moral blight and a potential danger. Inequality is confuted with inequity.

The key to understanding the modern liberal position is that it seeks — consciously or unconsciously — to promote and exploit primitive, moralistic, economically challenged assumptions for political ends (which is pretty much a definition of left-wing politics). The alleged answer to “inequality” is “redistribution,” of which modern liberalism is the champion. The problem is that such redistribution is both morally dubious and economically damaging, not least to “the poor.”

The case for taking from some and giving to others has to be bolstered by a claim that the “haves” are somehow morally tainted by their wealth. That is a hard case to make in modern society, although Wall Street bankers will always be useful poster children for capitalist “greed” because they don’t manufacture anything that most people can understand. They also made a useful scapegoat for the consequences of bad redistributionist policies (which were pursued by both Democrats and Republicans).

At the end of his article Thursday, Mr. Corcoran raised the central question of why inequality would matter in a market economy “where no kings rule by force and no aristocracy plunders the people.” This gets to the heart of the liberal position, which seeks to equate economic power with the oppressive political variety.

Humans for 99% of their existence lived in a zero-sum environment, in which some could only have more if others had less. All relationships outside the family tended to be political, that is, they were based on violence and coercion, or uneasy coalitions of countervailing power. For capitalism to evolve, it was essentially for arbitrary political power to be restrained, and so it was in pre-Industrial Revolution Britain. But expanding commercial relationships — and resulting wealth disparities — were inevitably viewed through ancient moral lenses. Power seekers had no interest in changing the prescription.

The “Invisible Hand” — the metaphor for the cybernetic mechanism that guides commercial society via the price system — turned many intuitive assumptions upside down. For example, Adam Smith noted that “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” Equally important, the open pursuit of such self interest produces a broad, “unintended” social good.

Smith was no fan of “the rich,” but the rich of his day were mostly landowners whose wealth had political rather than economic origins. Although the burgeoning commercial society of Smith’s day was still tainted by slavery and colonialism, stunning technological advances, mass production and greater freedom would bring unimagined wealth to the previously poor. Nevertheless, denigration of capitalism was from the start based on inappropriate moral condemnation of “greed” and “exploitation,” which was the essence of murderous Marxism, and which persists to this day on the liberal/left.

Significantly, Messrs. Carnegie, Rockefeller, Vanderbilt and co. were dubbed “Robber Barons.” But medieval barons’ power had come from the sword, not the mind. Just as with the butcher, brewer and baker, the steel, auto and computer producer, and the billionaires of the communications revolution, could — and can — serve themselves only through serving others. Their wealth was, and is, a measure of that service.

Mr. Noah — whose inspiration is fretful liberal economist Paul Krugman — suggests that the taxing of the Rockefellers and Vanderbilts was based on fears of America turning into a “European-style aristocracy.” But again this tellingly confuses a political aristocracy with a group of people whose wealth was rooted in commercial achievement and who had little or no political power.

The greatest capitalists have always been the greatest philanthropists, and the U.S. tax system is thoroughly “progressive.” In 2001, the top 1% of American earners paid more than a third of federal income taxes. Nevertheless, Mr. Noah — who ignores taxes and government transfers — suggests that U.S. levels of income inequality are similar to the “grotesque maldistribution of wealth” in Latin America. He fails to register that Latin American wealth disparities are still significantly more politically based, an inheritance of the corruption of the Spanish empire. Meanwhile, from Juan Peron through Fidel Castro to Hugo Chavez, nobody has spouted more about equality and egalitarianism than Latin American dictators.

It has been a staple of socialist thought since Marx that the middle class would soon disappear and the world would be left to plutocrats and paupers. Mr. Noah is unembarrassed to disinter this Marxist drivel, and claims to be perplexed at why most Americans don’t share the concerns of “the experts” (apart, that is, from “a few libertarian outliers.”) He thinks it may be due to (misplaced) belief in social mobility, or because the U.S. is “big enough to maintain geographic distance between the villa-dweller and the beggar.”

Where’s Che Guevara when we need him?

Call me a libertarian outlier, but I think that most Americans have caught on to the fact that they are better off in a country where the Carnegies, Fords and Gateses can flourish — and thus potentially “worsen” income distribution figures — than in lands where the productive rich are vilified and taxed out of existence, to the detriment of all.

By the logic of inequalityphobes, the world would be a better place if the great business billionaires had never been born. Ordinary people can grasp how nonsensical that idea is. Sophisticated liberal “experts” apparently can’t. But then to do so would hardly serve their political interests.