In 2017, the top 1% of Americans earned a record amount of money. That year, the average income of someone in the 99th percentile was a whopping $492,311. As a result, income inequality has come into the fray as a major point of discussion in recent years. Specifically, Bernie Sanders has focused on it heavily, arguing that the divide is too great. Many others disagree. One fact, however, complicates the income inequality debate: as the rich are getting richer, so are the poor.
By Manuel Martin | United States
Income inequality is broader today than it has ever been. Moreover, corporate CEO pay exceeds average employee pay by a wider margin than ever before. Owning a home was once the American dream. But, with home prices reaching 2006 record highs, it now appears to be a luxury of the wealthy few.
Income inequality may seem more prevalent than ever, and many believe it needs coercive governmental solving. However, there will always some who make more than most. This is simply because someone is always the best at what they do, which is good for everybody.
Income inequality benefits everyone, especially the poor. Inequality allows those, rich or poor, to work hard, push past the average, and earn huge financial rewards for their risk and hard work.
Advancement and Innovation
People applying their skills and resources to push past the status quo is how society advances. When the public wanted a faster horse, Karl Benz created the first car. When this still was not enough, the path to commercial airplane travel began. In both situations, someone got a lot of money for being the best at something and helping society.
These advances in travel lead to substantial financial rewards for the entrepreneur, and a better quality of life for all. Today, people travel much faster and more comfortably than they did in times of horses. Without the incentive of money, entrepreneurs would not have a reason to invent. The promise of unequal income strives the forward motion of society.
Income Inequality and the Poor
Many may argue that income inequality hurts the poor, but in reality, the opposite is true. In a free market, income inequality greatly benefits the poor.
A place where individuals are free from political rules and regulations, a free market allows low-income workers to find creative forms of earning money. Free markets create opportunities for even the most unskilled to find work and build marketable skills. Sadly, that free market does not exist today. In today’s world of regulation, many of these avenues are illegal, despite being entirely harmless. Trying to prop up society’s lower class by raising the minimum wage makes it harder for low-skilled workers to find employment, build their work history and advance their earnings potential.
Minimum wage laws create artificial barriers for employers who want employees to do simple tasks. These laws make previously cheap labor expensive. Thus, it incentives entrepreneurs to invest in machines to do the work instead. Though automation occurs regardless, minimum wage speeds this process up. As a result, the low-skilled workers have less time to find a new job before a machine takes it.
A Building Block of Society
Income inequality is the foundation of everyone’s career. Almost everyone starts their career by earning much less than when they finish their career. Ultimately, this is a good thing too, as it gives an incentive to continue working and improve work quality.
Should your primary care physician earn as much as a heart surgeon? Should a pre-school janitor earn as much as a civil engineer? I think we can all agree that income inequality, in these situations, is both fair and just.
Humans pick careers for many reasons, one of the most important reasons being monetary compensation. When the state takes from those who earn more, fewer people will choose such careers. Why should they, if their harder work and more expensive schooling doesn’t lead to higher income? These people, such as doctors and professors, provide great services to society and deserve compensation for such. Society doesn’t need more hamburger flippers, and should not encourage this profession with equal pay for it. However, we can always use another doctor; greater monetary reward will send more people down that path.
Heart surgeons earn more than primary care physicians because they provide more value. Removing the financial rewards for them will lead to fewer people becoming heart surgeons. As a result, the overall quality of life will drop. If heart surgeons get no reward for saving lives, who will save lives?
These principles apply to all people and all careers. In general, those who earn more provide more value to others; removing their incentive to earn more removes their incentive to provide more value. Of course, this is not universally true, but more often than not is. In a free market, resources tend to go to those who efficiently provide valuable goods and services that consumers want and need.
Wealth Redistribution Hurts the Economy
If almond farmer Jack can afford to bid $3,000 for a plot of land, and almond farmer Bob can only bid $2,000 for the same plot, Jack will win the property. Jack can afford to outbid Bob: he likely produces more almonds per acre for almond consumers. Therefore we can assume he earns more profit per acre than Bob and can afford to outbid him. As a result, Jack will continue to provide a more efficient product for society’s betterment.
What would happen if the State used the law to redistribute money or land from Jack to Bob? Well, Bob, the less efficient farmer, would produce fewer almonds with the new land. Jack, for his efficiency, receives a punishment of not being allowed to fairly buy land. The consumers? Well, they don’t have as many almonds on the market, because Bob did not produce as many as Jack would have. When quantity decreases, price increases. So, because of this policy, the consumer ends up paying more for almonds. Though Bob gets his land, everyone else, Jack included, suffers for Jack’s success. This wealth redistributionist policy is how you regress society.
Free markets lead to the efficient allocation of resources, which advances society and drives up our standard of living. Wealth redistribution simply cannot vouch for this.
Double Inequality of Value
The above average standard of living that Americans have come to rely on is produced by entrepreneurs creating goods and services that people like you value and are willing to pay for. This exchange of value leads to both parties advancing their wellbeing. The company values the money more than keeping the good or service, so it sells. Likewise, the customer values the good or service more than keeping the money, so he or she buys. This double inequality of value is true for every instance of free trade. For any free trade to occur, both parties must benefit.
To advocate for policies that will punish success is punishing people for improving lives. Few policies can as regressive as taking away the incentive for people to create value for customers. Ironically, many modern-day “progressives” actually support such ideas. In effect, they only regress the quality of life. Clearly, wealth redistribution is really what hurts the hard-working many in support of the few.
Wealth inequality is essential to society. Only it can reward the creator of the next lifesaving drug or 200 MPG car for improving lives.
As Unequal as Possible
Inequality drives innovation. Henry Ford didn’t revolutionize the auto industry to make his company equal to the competition; he wanted to be as unequal as possible. By creating more value for his customers, he earned an unequal amount of profit. Should the government have restrained this inequality to protect the horse and buggy industry? Of course not.
Here is the secret when it comes to inequality: it’s your fault. No, this does not single out anyone in particular. Rather, it merely shows the desires of all consumers.
The fact is, you decide to go to your favorite restaurant because you think it’s the best. The other restaurants simply do not deserve an equal amount of money from you. They may have worked hard, but your favorite gets the reward for best satisfying your desires. You watch a movie because you think it’s the best. By buying one over another, you create income inequality. Do you buy a car at random? No, you buy the best one you can afford, denying other car manufactures of income. Making an informed purchase creates income inequality, but is not bad for anyone. No car dealership is entitled to your money. Individual preferences and income equality cannot exist on the same plane.
Freedom of Interaction
Libertarians are often accused of being naïve and ignorant for believing people should be free to interact without the State. However, advocating for equality policies without fully grasping what drives inequality is the real naïve idea.
You drive inequality by your desire to consume the best music, food, houses, cars, and phones. Every single time you choose one product over another, you reward the company. As a reward for giving you what you see as the best, they receive your money. You cannot get rid of income inequality without also getting rid of the system of financial incentive that drives progress.
On the other hand, using the State’s force will only create a form of inequality that is actually harmful. When the State has a right to take from one to give to another, they have a lot more power than the people. Thus, such a solution only creates new, worse tiers of inequality than what existed before.
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By Ian Brzeski | United States
Around the world, horrendous atrocities keep happening and people keep turning a blind eye. We focus on the little problems rather than the larger grand scheme of things.
Life in the Unites States is not as bad as it could be. Our problems are far less problematic than those throughout the world. The average low-income American is far better off than King Louis XIV and John Rockefeller ever were. Humanity has progressed tremendously in recent times, yet we still have the audacity to complain about every little thing. We complain about problems that don’t even carry weight compared to other problems such as how:
- There is a lack of diversity amongst many “top” companies
- Our president is a “racist, xenophobic, misogynist pig”
- Social media companies should be censoring Alex Jones and other conservatives
- plastic straws should be banned (despite how only 1% of plastic pollution in the world comes from the United States and only a fraction of that comes from straws)
For God’s sake, there are more pressing concerns than the ones I just listed. People around the globe are dying at the hands of the United States government. Just the other day a Saudi led airstrike, backed by the United States, killed dozens of Yemeni children on a school bus. The airstrike killed kids on their way to school without any warning. This is utterly detestable. Where is the outrage?
People are quick to work themselves up if Trump says something controversial. But how come when the United States backed Saudi government bombs innocent civilians and children in Yemen you barely hear about it? Don’t even say that the death of these children is a result of collateral damage. We should never consider human lives as collateral damage. I’m not saying that the concerns I listed aren’t problematic, but when comparing the problem of the murder of innocent children to the to the “problem” of income inequality in the workforce it’s clear which one should take preference over the other.
When I turn on the news all that anybody can talk about is Donald Trump. It’s either how Trump is awful because of racism or the greatest because our economy is booming. Nobody ever talks about how he’s currently the head of a government that is supporting Saudi Arabia who is practically committing a genocide against Yemen. The United States along with the U.K. is in a coalition with Saudi Arabia which provides them with weapons, fuel, and other forms of support so they can continue to terrorize Yemen.
This is sickening and nobody is doing anything about it. People would rather smear Trump for racist or sexist comments. Give me a break. How is getting Trump impeached for being subjectively a bad person and for kissing up to Putin more important than the human rights violations happening in Yemen? How is any of that more important than the thousands upon thousands of bombs we drop in the Middle East per year, killing loads of innocent lives? I’m sick of people disliking Trump for all of the wrong reasons.
The strategy of “bombing the shit” out of countries is not unique to Trump and it dates back to Harry Truman who is mainly remembered for dropping atomic bombs on Japan, injuring and killing hundreds of thousands of people. Republicans and Democrats have consistently been dropping bombs in other countries since World War II and people aren’t realizing that it happens under both parties. Obama dropped 26,171 bombs in 2016 and has bombed the most countries since World War II. Trump has also been dropping bombs at unprecedented levels. Having a booming economy is never an excuse for these mass murders ever taking place. All of this is absolutely monstrous and it doesn’t seem that people care at all. We keep electing these mass murderers.
People need to wake up and realize that the mainstream politicians simply don’t care. All the recent presidents have been puppets to the establishment and the track record shows. If people were half as outraged with the establishment and their wrongdoings as they are with their other minuscule problems, maybe we can stop these massacres from taking place.
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K. Tymon Zhou | United States
How do you justify identity politics? Dr. Michael Eric Dyson, a Georgetown university sociology professor, uses history as a justification. Identity politics, in Dyson’s view, is a defensive response to historical injustices. During a recent interview, he declared that “When I check history, I think white people invented race.” Dyson attacks his critics as historically ignorant, living in the “United States of Amnesia.” Dyson’s claim has a degree of validity. The United States has been historically dominated by whites. However, Dyson’s claim presents a false narrative that white Americans are uniquely guilty.
The idea that any one demographic group “invented” race is patently absurd. Sociologists recognize that humans instinctively gravitate towards group identities. Dyson’s claim that whites invented race as a group identity denies this universal principle. Henry Tajfel, a British social psychologist, demonstrated this in a 1970’s experiment. Tajfel and his team organized a group of teens into completely arbitrary categories. The teens were told they were divided by artistic preference. Despite this arbitrary categorization, the teens persistently choose to give fake money to members of their own group. Group favoritism is a natural product of group identity, forming in-groups and out-groups. Consequently, cultural and philosophical justifications for racism are only mere outgrowths of this primal instinct. This extends beyond racial identity. Non-European cultures created hierarchies of in-groups and out-groups within their own societies. West African slavery was centered on kinship, not racial identity. Mesoamerican civilizations such as the Aztecs and Mayans enslaved prisoners of war. Such examples demonstrate that group identity resulting in oppression is hardly unique to whites.
Even if one accepts Dyson’s premise that whites invented race, there are gaps in his argument. If race is a white invention, then why did American minorities embrace the concept? In the 1830s, Cherokee Native Americans embraced slavery, asserting that they were equal to whites and superior to African-Americans. As Paul Chatt Smith, a museum curator at the National Museum of the American Indian, explains:
The Five Civilized Tribes were deeply committed to slavery, established their own racialized black codes, immediately reestablished slavery when they arrived in Indian territory, rebuilt their nations with slave labor, crushed slave rebellions, and enthusiastically sided with the Confederacy in the Civil War.
If the idea of Native Americans owning slaves is shocking, African-Americans owning slaves is downright horrifying. Although, the number of African-American slave-holders was minuscule, a number became wealthy through slave labor. William Ellison, a black South Carolina planter, died owning 900 acres and 63 slaves in 1860. Ellison’s story is a perverse corruption of the American dream; he was born into slavery, but seems to have fully embraced the racial hierarchy of antebellum America. Moreover, free African-Americans were willing to fight for the Confederacy. The Louisiana Native Guards was formed by free African Americans.They asserted their loyalty to the southern cause:
The free colored population [native] of Louisiana … own slaves, and they are dearly attached to their native land … and they are ready to shed their blood for her defense. They have no sympathy for abolitionism; no love for the North, but they have plenty for Louisiana … They will fight for her in 1861 as they fought [to defend New Orleans from the British] in 1814-1815.”
These examples demonstrate that whites were not alone in their racism. It had enshrouded and penetrated all segments of American society. One can make the argument that only a minority of Native Americans or African-Americans owned slaves. However, the same was true of the American South, with only 25% of Southerners owning slaves. If one forgives the Cherokee and African-American slave-owners, one also must forgive their white peers.
These complex historical circumstances do not diminish the scope of injustice but it demonstrates that history is not a race-centered morality play. In Dyson’s narrative, whites alone are responsible for racial injustice. In reality, whites were acting on a universal group instinct in establishing in-groups and out-groups. They were not alone in accepting racist dogmas and prejudices. Indeed, Dr. Dyson lives in the United States of Amnesia, not his opponents.
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By Sean Calvert | Canada
Late stage capitalism, or late capitalism, is an idea that has re-emerged in recent years to explain the purported failures of contemporary capitalism. According to this notion, absurdities and failures in the economy are symptomatic of capitalism’s death throes. These perceived failures, however, are not inherent to the system, as many Marxist economists believe, but are rather due to intervention by the state. As for the absurdities, none provide evidence that capitalism is failing.
While Marx himself never used the term late stage capitalism, he did describe what the final stages of capitalism would look like. In volume three of Das Kapital, Marx described how in capitalism’s last stage, market competition would decline as capital centralized in fewer hands. Marxist economists, such as Michał Kalecki, believed that capitalism was inherently monopolistic and that its fate was to move towards a system that would eventually devour itself.
The term “Late Capitalism” can be traced back to Marxist economist Werner Sombart’s work Der moderne Kapitalismus, published in the early 1900s. In this work, Sombart explains that Capitalism developed in three stages: early (pre-industrial revolution), high (the industrial revolution), and late stage capitalism (World War I and beyond).
The term was popularized seventy years later by another Marxist economist, Ernest Mandel. For Mandel, Late Capitalism is characterized by the rise of multinational corporations, consumerism, and globalization. He argued that the last expansionary wave began with the birth of fascism in Europe and the advent of the US and UK command economies during the Second World War. This expansion lasted until 1972 when it reached its limit. Economic stagnation and class struggle followed.
When Mandel was writing, he was witnessing the very end of the post-WWII boom. He believed that the working class would soon rise in a mass, revolutionary movement. Obviously, this did not happen. The slump did not create anything resembling the conditions that sparked the revolutions in Tsarist Russia.
Contemporary understandings of Late Capitalism have broadened out from the original definition to include all the deficiencies and absurdities of the current economy. These include the destruction of the middle class, the growing gap between the rich and poor, and popular focus on useless goods, such as wifi-enabled kettles.
The “late” in “late capitalism” implies that capitalism is at the end of its age. Just as Late Antiquity marked the end of the Classical era and the transition to the Middle Ages, so too does late stage capitalism herald both an end and a beginning. Marx believed that the final stages of capitalism would be marked by the rise of the proletariat and the diminishment of the middle class as wealth was concentrated into fewer hands. These three factors, according to Marx, would result in the emergence of a proletarian revolution. Yet history proved otherwise. Crises, such as the Great Depression, came and went, yet there was no revolution.
Marx predicted that the advent of monopolies would signal the collapse of capitalism. While it is true that large corporations came to control the economic landscape, their dominion is not natural. Economist Horace Gray found that aspiring monopolies would petition governments to designate them as public utilities to protect them from competition. AT&T enjoyed monopoly status until its government supplied patents expired in 1893. By 1907, AT&T’s competitors controlled 51% of the market.
Income inequality is touted as one of the elements of late stage capitalism. Inequality is not necessarily a bad thing – it exemplifies the choice of the individual in a capitalist society. One person may choose to be a schoolteacher and another become a doctor. The income gap between the two is no doubt large, but the two individuals made different choices, leading to different outcomes.
On the other hand, the wealth gap between the rich and poor in the U.S. is growing at an alarming rate. A Bloomberg article found that between 2010 and 2015 the average annual income between the top 20% and the bottom 20% increased by more than $29,000 to $189,000. New York Times columnist David Brooks reports that wealth inequality is greater in the United States than it is in Iran or Russia. Surely this must be a sign that capitalism is in its final stages.
While this is true, the major reason for the channeling of wealth to the super rich is due to collusion among the state, large corporations, and special interest groups. It is called cronyism, and it is inherently against the precepts of free-market capitalism. Corporations lobby the government to create policies, which range from subsidies to protective regulations, which in turn create barriers for new competitors, effectively killing most competition and funneling wealth up the rungs of the socioeconomic ladder. It is not capitalism per se that has funneled the wealth to the top, but the state and its regressive regulations.
It must not be forgotten that capitalism allows more upward social mobility than alternative economic systems. “Oh, but the middle class is shrinking! Marx predicted this!” No doubt this is true in the United States. A Pew Research study showed that between 1991 and 2010 middle-income households fell to 59% from 62%.
Yet acording to the U.S. Census Bureau, since 1967, the number of households which have an income of more than $100,000 has increased from 8.1% to 27.7%. In addition, the number of low-income households, defined as those that make less than $35,000, has decreased from 38.7% to 30.2% since 1967. From these statistics, we can conclude that most households are moving up rather than down the income ladder, contrary to what Marx predicted.
Some who believe that we are in late stage capitalism point towards absurdities and irregularities within our socio-economic system. A $1200 margarita is touted as evidence of decadence. Yet a $1200 margarita undeniably targets the exceedingly rich, and should be regarded as a non-issue because consumers have the choice to pursue lower priced margaritas.
Critics of capitalism fail to recognize is that most of capitalism’s perceived shortcomings are, in fact, not intrinsic the economic system. Rather, they are consequences of the anti-capitalist policies of the state that constrict the free market, and in doing so, give rise to the perception that capitalism is on its deathbed.
Mandel waited from 1973 until his death in 1995 for the proletariat to revolt. Yet his wait was in vain. If capitalism is as unsustainable and as exploitative as many Marxists make it out to be, we would have already seen a revolution akin to the overthrow of Tsarist Russia. For now, and the foreseeable future, free-market capitalism remains the best economic system we have.
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