Income inequality a blessing?

When I give food to the poor, they call me a saint. When I ask why they are poor, they call me a communist.

—Dom Hélder Pessoa Câmara

The philosopher … rose up and departed with the air of a man that had co-operated with the present system.

—Samuel Johnson, The History of Rasselas, Prince of Abyssinia

According to RealClearMarkets.com’s editor, John Tamny, income inequality is a good thing.

Keep in mind, I get this second-hand from Michelle Smith of MoneyNews.com. You could therefore argue that she quotes Tamny selectively. On the other hand, Smith says nothing to contradict or undercut Tamny, so she’s either in agreement with him (“He who is silent consents”) or letting him hang himself with his own words.

Tamny points to the rising popularity of cell phones, reminding us that back in the 1990s these devices were a source of awe. The wealth of the wealthy has also changed society by improving the masses access to a wide range of items, from music to healthcare. [Please hold the laughter in; the best is yet to come.]

“[T]he simple, life-enhancing truth [is] that when the wealth gap is increasing, that’s a certain signal that the lifestyle gap is shrinking —rapidly,” Tamny writes.

“[T]he sentient among us should cheer every time they read of rising inequality,” he adds. “The sentient should cheer because it signals enterprise being rewarded, freedom to keep the fruits of one’s labor, and then for all of us not rich it signals that our lives are getting better and better; the lifestyle disparity between us and them (the rich) shrinking precisely because economic achievement is taking place.”

This is the kind of obtuse baloney offered by people who either have never known real economic struggle or have conveniently forgotten it. It reminds me very much of the antebellum Southern apologists who wrote pious blather about how happy their slaves were, how much more fortunate they were to serve their benevolent masters in chains than to be free and starve in a hostile world.

Let’s take the points as presented in Smith’s recap:

“[The] rich club is not as static as people are often led to believe.” Yes, it is. By definition, the richest 1% of the population will grow as the population grows, in proportion to population growth, without anyone from the 99% making any more money than they did the year before. The three hundred new names in Forbes’ list that Tamny refers to were most likely not far from it the previous year, and the names they’ve replaced are most likely close to the top now.

A study done in 2006 showed that a person born into poverty had only a 1% chance of reaching the top five percentiles of income; a person born into the middle quintile only slightly better — 1.8%. By contrast, a person born into the top quintile had a 22% chance of making it to the top 5%. The study also found that persons born in the middle quintile had about as much chance of ending up in a lower bracket than their parents’ as they did of ending up in a higher bracket.[1] In America, it’s easier by far to become wealthy if you’re born into the upper classes than it is to work your way up there from the lowest brackets.

“Wealth among the upper class also serves as a driver for creativity in society as it encourages more people to come up with ideas that will allow them to climb the ranks.” This is true so far as it goes. What it doesn’t say is that the present system allows the wealthy to profit from the creativity and labor of those people, often out of proportion to the wealthy’s actual contributions to an enterprise’ success. In fact, the satanic ingenuity of the system has created a host of wage slaves whose jobs are to be creative in their masters’ service, for their masters’ profit, at so much per year.

“Furthermore, while many people tend to focus on the rate at which wealth grows at the top, the reality is that the benefits flow to the rest of society as that happens.” This is where we came in, above, and there’s a whole host of counters to this silly statement.

• To a kid scrabbling for food and shelter in the trash-strewn hellhole of Mumbai, a cell phone, personal computer and car may be signs of unattainable wealth. In nearly every American city, if you don’t own a cell phone, a computer and a car, you’re virtually unemployable and socially crippled.
• Imagine two people driving two different cars — a new Rolls Royce and a 1997 Honda Civic — side by side. To argue that because both drivers have cars they have equal lifestyles is facile in the extreme. If you’re wealthy, you have access to better goods and more services than if you’re poor or middle-class; the lifestyle gap shrinkage is nominal at best.
• What makes the cell phone, computer and car relatively accessible is not income inequality but rather demand and technical innovation, which lowers the cost of production. Neither demand nor innovation require increases in the wealth gap.
• And I can’t believe Tamny had the gall to cite access to healthcare as a benefit, when the cost of healthcare can impoverish just about anyone. This is one area in which naked greed has created a monster. In other nations healthcare access and affordability are much better without our disparity in incomes.

Let me restate something I wrote back in October 2011:

In sum, don’t tell me how good poor people in America have it, as if it justifies CEOs earning over three hundred times the average workers’ salary and the top 10% owning  [95%] of the total American financial assets. Yes, many of the bottom 5% should be grateful they have working toilets and that their children aren’t suffering from beriberi or scurvy.

But they don’t have capitalism to thank for that. For that, they have an inefficient and bloated federal bureaucracy to thank for correcting a little — very little — of capitalism’s inequity.

Income inequality is an ineradicable fact of economics. Some people deserve to earn more because they contribute more effort and ingenuity to an enterprise’s success, or because they have a skill set that requires greater training and incur higher costs in obtaining that skill set. The point of here is not to argue that rich people are evil or that wealth in se is evil.

But the math doesn’t work any other way: Where x is the sum total of a nation’s resources and y is a person’s equal share of those resources, one person getting 300y means that more than 300 people will get less than 1y, and that some of them will get less than z — that portion of y which represents survival minimum. That goes beyond income inequality to reach economic injustice.

You don’t need to be a communist to see that. To blind yourself to injustice, to call injustice good, is to cooperate in evil.

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[1] Hertz, Tom. (2006). Understanding Mobility in America. Center for American Progress; pg. i. Retrieved March 8, 2013 from Center for American Progress: http://www.americanprogress.org/issues/economy/news/2006/04/26/1917/understanding-mobility-in-america/.