Wealth and Income Inequality

In ongoing discussions with anarcho-communists (and their brethren, supporters of “The Venus Project”) and others that would be considered “liberals” or “progressives” the common issue of inequality of income or wealth is often brought up. They will trot out their dog and pony show of showing how bad such is and what problems arise from that. In the end it is impossible to refute their assertions. Economic inequality almost certainly brings about bad outcomes.

The question, however, is what is the best way to combat such inequality? What is the best system to minimize the disparities that lead to such problems?

When examining serious situations of inequality of outcome it appears that most such derives not from any form of free system but from political power. Historically the most equally prosperous societies are those that have held to the basic principles of equality under the law and equal access to the mechanisms of wealth. When such equality of opportunity disappears so does equality of outcome.

In “democratic” societies such as the modern corporatist system, or its predecessor the mercantile system, enormous inequalities appear. Those that have access to political power through the media, lobbyists and other mechanisms inherent in the system use such a system to enhance their advantage. Using tools such as regulatory capture they leverage an initial and slight advantage to an overwhelming juggernaut that cannot be opposed. The statistics shown of how modern Western countries such as the United States and many European countries have huge inequalities derives from such. There is a fairly large class of privileged wealthy but a much larger class of unprivileged poor.

This problem doesn’t disappear, other than statistically, in dictatorships as exemplified in many Third World countries. Those at the very top in such a system are, relative to the masses, extremely wealthy. But, as they are such a small group, the statistics looking at, for instance, the top 20% don’t even notice them. When the wealthy are only a fraction of a percent of the population such numbers barely even take notice of those who’s wealth is many hundreds of times the average. Also, in a monarchy or dictatorship, those at the top often hide their wealth as the wealth of “the state” rather than showing it as personal assets.

All of these inequalities derive from access to political power. Those that have a relatively higher proportion of wealth than the average can use some of that wealth to influence the political systems to increase the proportion they hold. In a never ending feedback cycle, political power leads to ever increasing concentration of wealth in the hands of a minority and ever greater disparities.

Wherever it is allowed to exist political power leads to inequality of outcome. In an feedback cycle of amplification and distortion those with greater access to the systems of political power become ever wealthier while those without such access become relatively poorer and poorer.

Only through market mechanisms of competition and trade under a system of personal property rights does true equality of opportunity exist which is a necessary predecessor to equality of outcome. Only when wealth is derived from serving one another and not through the protection and power of the state can we begin to address the issues of inequality.

Such systems of equality of opportunity cannot exist if there is any political power to be leveraged through the state.

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One Response to Wealth and Income Inequality

  1. Steve Dick June 17, 2011 at 2:38 am #

    Good solid material, Keith. The sadness here of course is that both ends of the current political dynamic don’t want this to change. It’s understandable, if despicable, that the power-mongers don’t want to share. It’s truly sad that the “poor” would rather subsist on government takings than have equality of opportunity. After all it’s so much easier to vote than work…

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