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What’s so bad about income inequality?

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Rich vs Poor RS

By Pam Danz-“Income Inequality!” cry the politicians. “Ain’t it awful!” echo the chattering classes.

“What’s so bad about income inequality?” say I.

Well, I’ve heard that the super-rich become isolated by their wealth and use their money to buy government officials who then make laws that are not for the benefit of the average citizen. But then, other depositories of wealth like the unions or big business do the same thing. Perhaps they will balance each other out. If anybody at all cared about maintaining the Constitution and its strong defense of equality of opportunity and equal protection under the law, neither the unions nor the rich could get away with that sort of power-grab. Maybe more of us ought to support The Voter Integrity Project.

It is a moot question anyway, because, every time redistribution has been tried rigorously as in the USSR, North Korea, and Cuba, lots of wealth dissolved into the pit of the disincentivized drunken work force (the poor) and the rest went into the dachas of the ruling class (the rich). Even the soft socialism of the European Union has created many economies on the brink of collapse.

Besides, as the Bible says, “The poor will always be with us.” And so, my friend, will the rich. It’s part of human nature. If you somehow stripped everyone in the nation of their assets and their education and redistributed all the money equally, within 10 years we would again have super-rich and poor folks. We human beings are just made differently. Some people value wealth and will do anything to earn and retain it and most others value other things more than great wealth. For some it’s living in the moment and relationships, for others it’s pursuit of the arts. Still others are infinitely curious and would rather do research than guard their wealth. Still others think the purpose of money is to support a hedonistic lifestyle. Contrarily others want to spend their time preaching the good word and are quite sure they have been blessed with wealth in order to help others. Then there are the explorers and adventurers who want to get out there and DO rather than sit home and count their coupons and balance their budgets.

When in this imaginary case the folks with an entrepreneurial bent received their pile of newly redistributed money they would immediately set about learning all they could about acquiring more wealth and go on to actively do so. They would win some and lose some, and a few of them would end up sitting on an enormous pile of money.

A larger number of people would carefully put their money in a bank or an annuity and let it erode through inflation and the finagling of the first group as they go about their REAL lives.

An even larger number of people would vigorously spend their share in riotous living.

Some people would busily give away their money to buy power or friends. Some would actually do so because of warm-hearted altruism.

If the experiment adhered to our Constitution which protects our right to the pursuit of life, liberty and property the end result would, again, be a population full of rich people and poor people and everything in between. If the experiment was set up under socialism or other forms of tyranny, you would end up with a small wealthy ruling class and a country full of serfs. (How socialism leads to tyranny and serfdom is a topic for another time.)

Suffice to say that during the fall of Rome the taxes on landowners, the rich, became so high, partly because of the government’s removal of the means-testing for the distribution of grain and oil, etc. that the landowners were not making a living. The landowners started walking away from the estates that had been in some their families for generations. They chose not to stay in business and wanted a new start elsewhere. The government made it illegal to leave so they had to continue to produce, losing more each year. Central Planning run amok! Senators bought their “constituencies” with freebies so they needed that tax base to stay in power. Sound familiar?

Here and now, over-taxed businesses still have the option to relocate to areas of the world that are more business-friendly and over-taxed individuals move their capitol offshore. The rich are not crazy enough to invest in an area that does not bring the best return on the dollar invested. Hence, the Laffer Curve. http://www.investopedia.com/terms/l/laffercurve.asp

Our problem is not income inequality; it is politician-taught covetousness and divisiveness. Why should we care if others have fantastically more money than we do as long as we have the freedom to study hard, work hard, take risks, and borrow start-up capital from those aforementioned rich people, to improve our own lots? Any government policy that teaches a dependent entitlement mentality and discourages hard work and risk-taking with punishing taxes is headed rapidly the way of Rome.

It is not the extremely wealthy or the existence of the poor that we really need to worry about so much in the United Sates, it is the lack of mobility and the shrinking middle class. Tangentially, our poor are the best-off poor people in history. (Most of our poor folks have roofs over their heads, stamps to buy enough food, Medicaid, free education, etc. The poor in the earlier quote from the Bible were sheltering in a doorway, eating left-over crumbs, and having their sores licked by dogs as medical care.)

Mobility is a problem because if you let the hope of the poor be taken away, they won’t put out the extra effort needed to rise up out of poverty. The snobby French and Spanish nobility used to scoffingly call the British, “A nation of shop-keepers.” Just anybody in England could put out exceptional effort and break into the nobility within a generation or two. The English free market model was carried over to the New World. It might be worth noting which model, the hierarchical centralized governments of the French and Spanish, or the English free for all, led to the most wealth for the most people in their respective countries and colonies. Our government is becoming more and more hierarchical and centralized and killing middle class jobs, right and left. Our heavy debt and entitlements are creating a country where our children will not have the opportunities to rise up that past generations enjoyed.

Wealth is created by investing yourself and your money in more and better goods and services that the citizens turn out to want, not by slicing up a static pie of existing wealth into unequal slices. The government needs to stop selective taxing and regulating entrepreneurs out of existence and get out of the way so that the free market, with no government or private monopolies, can do its work of improving the financial welfare of all.

As a person who has worked in the arts, I have always actually rejoiced at the growth of the filthy-rich class and that they have more and more discretionary money. It just means they are an expanding market for art work, opera, etc. If I were an entrepreneur, I would also rejoice at the presence of more venture capital. The rich don’t eat their money, they buy goods and services, and they invest it in companies that want to grow and provide good jobs for the rest of us. Let’s stop driving those rich resources offshore with unequal taxation and invective. Let’s stop running our middle class out of the country with utopian attempts at redistribution.

Pam Danz lives in Flat Rock, NC and used to write for the Radford News Journal in Radford VA. Along with several other careers she is a Masters Degreed educator with experience teaching from Middle School through college.

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