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The Dangers of America’s Obsession with Inequality

February 14, 2018 in Economics

By Michael D. Tanner

Michael D. Tanner

Yippee! Last week’s sell off on Wall Street wiped out more than
$3 trillion in wealth. Overnight, economic equality increased.
True, you and I aren’t any better off – in fact, some of those
losses came out of our 401(k)s and pension plans – but the
important thing is that the biggest losers were evil rich people.
Warren Buffet lost more than $5 billion, Jeff Bezos more than $3
billion. All together, the world’s 500 wealthiest people lost more
than $180 billion. Aren’t you happy?

Of course not. But doesn’t the mindset increasingly heard on the
progressive left and the populist right dictate that you should be?
We have become obsessed with economic equality at the expense of
economic growth. Inequality is said to be the transcendent issue of
our time. Yet a society that is rich and unequal still beats one
that is poor and equal any day of the week.

It is inarguably true that modern free-market capitalism leads
to inequality. It is equally true that it makes all of us richer.
By most measures, most Americans were poor at the start of the last
century. Indeed, if we use a definition corresponding to today’s
poverty measures, 60-80 percent of the U.S. population was poor in
1900. Today just 23 percent of Americans are poor, and even they
enjoy a standard of living that would be envied by the rich of a
century ago.

If in our rush to level
the playing field we limit economic freedom, we could end up with a
society that is more equal but less prosperous.

Crucially, much of the economic progress responsible for that
happy state of affairs came long before the Great Society and the
advent of the mammoth welfare state we have today. “As a matter of
empirical fact,” George Mason economist Tyler Cowen notes, “it is
economic growth that lifts most people out of poverty, not transfer
payments.” Above and beyond its ability to alleviate poverty,
economic growth also brings with it all sorts of side benefits,
including longer life expectancies, a better-educated citizenry,
and expanded civil and political rights.

Someone else’s success does me no harm. Nor am I worse off
because someone else receives a bigger tax cut than I do. Such a
viewpoint stems from the misguided notion that the economy is a pie
of fixed size. In reality, the size of the pie is infinite, and
when it grows we are all better off, even if some people get bigger
slices than others.

To make it grow, we need ambitious, skilled risk-takers. We need
people to be always striving for …read more

Source: OP-EDS

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