Wealth Is Not the Culprit

There was a viral video called “Wealth Inequality in America” making the rounds this week and a post by Derek Thompson at The Atlantic that cited it with the headline “Wealth Inequality Is a Problem, but How Do You Even Begin to Solve It?

It was enough for me to write a response at Forbes:

There are at least two problems with Thompson’s article.  First, the very term “wealth inequality” and second, his less than enthusiastic reference to the “returns of globalized capitalism,” a sentiment more obnoxiously expressed in the way the video he embedded put facetious quotation marks around “’dreaded’ socialism” to hint that such a system has actual merit as an alternative to capitalism.

To address the first issue, we need to agree right now to do ourselves a favor and stop calling it “wealth inequality.”  Wealth is not the culprit.  There should be no negative associations with the word wealth in the context of people having it.  Poverty and social dysfunction are what plague us; they cannot be fixed by taking from the haves to give to the have-nots.  To improve the situation, the have-nots must become the do-somethings.

While the solution may be complex in its execution, it can be simply stated: Establish stable institutions to empower people to be free and productive and they will prosper. Redistribution of a static supply of resources accomplishes nothing and makes no one richer.  Wealth creation is the answer.

I go on to explain what I mean by wealth:

Though the video uses little animated dollar bills, money is only the measurement of wealth, it is not the substance.  Wealth is instead a richness of life.  As John Stuart Mill put it, wealth may be defined as “all useful or agreeable things, which possess exchangeable value.”  It is potentially anything our boundless minds can produce from the materials at hand.

And then I go into the persistent, oblivious fascination with socialism, though it pains me that such things even still need to be said: 

Let’s get something straight once and for all.  Socialism is not to be satirically “dreaded,” it is to be summarily avoided at all opportunities.  Socialism is economic insanity.  There is no more adequate way to describe it.  Even if we were to tolerate the folly of redistribution, for instance through taxation and welfare transfer payments, this is merely the least offensive socialist idea.

Socialism entails nationalization, the state management of the means of production and resources.  The state is the main employer and therefore the main benefactor.  People are reliant on the whims of leaders and technocrats to determine a fair compensation for their labor.  Because the state sets prices arbitrarily, rationing inevitably follows.  Black markets become a necessity.  Socialism is an economic system that requires a shadow economy to operate.  It is at every level inefficient and global history more than proves this by now.

I close with an argument that many have been trying to make lately, a case for capitalism and its moral and material superiority:

Capitalism is not the enemy.  Not for a free people who have prospered because of it, at least. Capitalism has done more to save and enrich lives in Western civilization than we can possibly enumerate.  Perhaps that’s the problem.  Most Americans don’t know any other way of life.  They don’t understand how miserable, sick, and poor we’d be without the creative power of a free market.

They don’t grasp how disturbing socialism has been in practice.  In the 1930s, in the larger cities of the Soviet Union, abortions outnumbered births.  People had no incentive even to carry life on into the next generation.  People need incentives.  They need to believe that their children will thrive and prosper.  The only system to successfully and consistently instill that kind of confidence is capitalism.  So, yes, socialism is rightly to be dreaded and no, the returns of capitalism are not to be viewed with scorn.

The full post can be found here.  What do you make of the “wealth inequality” meme? Why does it seem to capture people’s attention?

  1. Geometricus

    “Maybe I should have made mine a cartoon.”I would love to see a response to this with equally arresting graphics which unmasks the folly of the old, tired income redistribution schemes this video seems to call for. A hot link which becomes equally viral as an instant reponse. Anyone aware of a candidate that already exists?

  2. Jimmy Carter

    To think that “wealth inequality in America” is “a problem,” one must see the economy as a fixed pie with either a) the wealthier taking from others or b) those in charge of distribution giving more to some than others.

    My response is,” Yeah? So? It’s none of Yer damn business what others have or don’t have. If You have more than You care to have, then give away as much as You want. If You want more than You have, then get Yer ass going and earn it. Simple.”

  3. HVTs

    Maura –

    – Your expository clarity is a delight; I don’t read it, I imbibe it.

    – You should write a book on this topic.  Consider enlisting david foster as co-author.

    – Are you as bemused as I by the Left fetishizing evolutionary theory while simultaneously decrying inequality? Does the leopard worry about equality of outcome when feasting upon the slowest zebra in the herd?

    – That incomes should be equal is the great unexamined assumption. It is impervious, as Larry3435 points out, to evidence-based analysis. The scale of human suffering caused by government-imposed income equality compared to that caused by market-based inequality? It’s like complaining about a hangnail to a quadriplegic.

    – Why does the inequality meme so capture people’s attention? In two words: the evil twins envy & jealousy. It’s Cain killing Abel—it’s that old, that ingrained, that intractable. As God taught Cain, the only antidote is Biblically-defined wisdom, which begins with fear of the Lord. Perhaps a Buddhist would say denial of self also overcomes envy. . . my only rejoinder: how many self-deniers do you know? Fear is a more consistent human motivator than self-denial—I think God understood this.

  4. EThompson

    Let’s get something straight once and for all.  Socialism is not to be satirically “dreaded,” it is to be summarily avoided at all opportunities.  Socialism is economic insanity.  

    Yikes… Blue Yeti’s post (my favoritii) on the Fab Four may have to take a back seat to this one!

    Exquisitely stated.

  5. Rachel Lu

    If you asked me the question, “is wealth the culprit?” my immediate response would be, “I don’t know. What’s the problem?”

    When people worry about wealth inequality, they are thinking about the way that (they suppose) society is becoming more materially stratified, such that the wealthiest five or ten percent have substantially more than the middle class, while the poorest Americans have substantially less. Let’s assume for a moment that the popular narrative is true, and the rich have gotten a whole lot richer over the last decade or two. Meanwhile the middle class has seen at best a very modest rise in its standard of living, while the bottom seems to be falling out under the poorest Americans.

    If this is the phenomenon people are referencing when they talk about wealth inequality (and if the narrative is, broadly speaking, true), is it “a problem”?  Well, that’s a very complicated question. It may well be that a (significantly) materially stratified society is, all things considered, the best one we can have, given all our current economic and political constraints.

  6. Rachel Lu

    But that kind of stratification certainly isn’t inconsequential, either socially or politically. And it’s not the kind of society Americans are used to thinking of themselves as having. We shouldn’t think of wealth inequality as something to avoid at all costs, certainly. But I also don’t think it’s wrong for people to be troubled by the prospect of a heavily stratified society. It raises some new moral concerns for us, and also hurts our pride as Americans, because we’re used to thinking of ourselves as a society in which the common man is king and the middle class lifestyle is basically normative.

  7. david foster

    Note that there is not much concern about power inequality. Barack Obama says there comes a point where you’ve made enough money, he never said there comes a point where you have enough power.

    Yet power is always convertible into wealth. Sometimes this is an in-kind conversion, as with the dachas, cars, and special stores available to Soviet officials. Sometimes the conversion is in the form of money, as in the $200,000 per-event speaking fee that Hillary Clinton will reportedly be getting.

    To a large extent, the issues being raised about economic inequality are a smokescreen for the attempts of certain elites to centralize and dominate political power and to enjoy the personal rewards thereof.

  8. david foster

    Also see my post Jousting with a Phantom. Excerpt:

    Those people who call themselves “progressives” are talking a lot about equality and inequality these days. And conservatives/libertarians, in response, attempt to explain why “equality of outcomes” is infeasible and unwise.

    To a substantial degree, though, they/we are jousting with a phantom. Because leading “progressives” don’treally believe in anything resembling equality—indeed, quite the contrary.

    Consider, for example: Many people in “progressive” leadership positions are graduates of the Harvard Law School. Do you think these people want to see a society in which the career, status, and income prospects for an HLS grad are no better than those for a graduate of a lesser-known, lower-status (but still very good) law school? C’mon.


    Quite a few “progressive” leaders are members of prominent families. Do you think Teddy Kennedy would have liked to see an environment in which he and certain other members of his family would have had to answer for their actions in the criminal courts in the same way that ordinary individuals would, without benefit from connections, media influence, and expensive lawyers?

    (linking not working, will try to add later)

  9. Maura Pennington
    david foster: Note that there is not much concern aboutpower inequality. 

    You raise a good point.  And I like the way you refer to it as a “smokescreen.”  The way wealth and power are being knotted together is problematic.

  10. Larry3435

    Back in the days when I used to try to convince Lefties, I would tell them this:  

    As an empirical matter, the standard of living for the middle class and the poor always rises proportionately to the degree of wealth inequality. This is not surprising, since “wealth inequality” simply means the accumulation of capital by the investor class. Look at any society where there is little or no wealth inequality (the nearest one is about 90 miles off the coast of Florida) and you will see misery and squalor. Go anyplace where  people are struggling and ask them what they want most, and they will tell you they want some big, rich corporation to come there and set up shop. They know that is what will create jobs and invigorate the economy. Hooray for wealth inequality!

    But that was then.  This is now, and I have simply given up.  Nothing will ever convince them.  Not Cuba.  Not the USSR.  Not China.  Nothing.  It is endless, and hopeless.

    If I may quote (from memory) my favorite author Robert Heinlein, “The only capital crime is stupidity.  The penalty is death, and it is carried out without trial and without mercy.”

  11. tigerlily

    I think “income inequality” is just another tool used by progressives to justify statist policies – higher taxes on the wealthy, more social spending & programs and the like.

    Regarding income or wealth inequality, I believe it’s a good thing as long as it occurs in a society that is not static.  Income inequality is a large driver in luxury goods eventually becoming mass consumption items.  The automobile, the radio, microwave ovens, cell phones are just a few of many other  now almost universal goods that got their start as luxury items. Capitalists looking for higher profits found ways to lower costs and increase the market for their products, but this would not have been possible if there were no rich to be the original consumers for such products.

    Also, I doubt that income inequality  has been or is increasing in the USA. How many ordinary office or factory workers were able to take ocean cruises in the 1970′s – something that is rather mundane nowadays?

  12. david foster

    Link to my previously-mentioned post Jousting with a Phantom:


    Also want to make the point that much of what is bothering people now is not inequality per se but rather the reduction in class mobility. Being relatively poor *now* is much less painful if there’s a realistic chance that you (or your kids) will in the future be much richer.

    And one of the absolute main causes of the reduction in class mobility is the insane overemphasis on educational credential…an overemphasis that  has been very largely promoted by exactly the same people who are talking most loudly about the evils of inequality…

  13. Mark

    Some random thoughts.

    1.  Income inequality is part of the liberals “bright shiny objects” campaign (see, free contraceptives for another example) to distract from the lack of progress on the economy and jobs.  Even if you are concerned about it, it is irrelevant to our current economic woes.  That’s precisely why it is being focused on so much by the Administration and the media.

    2.  Measures of inequality are notoriously hard to do accurately.  For instance, liberal assessments often leave out transfer and inkind payments which can be very significant..

    3.  Regardless of inequality living standards are much higher in general than they were 40-50 years ago (I’m 62 and have some perspective on this).   There is plenty of data around about what stuff (as George Carlin would say) the average homeowner or apartment dweller had in 1970 v today.

    4.  The states with the highest income inequality tend to be blue states like NY and CT.  In fact, the location with by far the highest income inequality is the District of Columbia.

    5.  The work areas where income inequality are the highest also tend to be Democratic; media, entertainment, sports, financial services.

    More to come

  14. Maura Pennington
    Larry3435: This is not surprising, since “wealth inequality” simply means the accumulation of capital by the investor class. 

    Exactly!  I’m not sure people get that.  When it comes to investing, why should we expect a large part of the population to be involved in that in the first place?

  15. WI Con


    7.  I worked in the corporate world for many years and enjoyed it and am opposed to government intervention but it would be good to see a little more modesty and willingness to take less at the top.

    People “at the top” are paid according to what the market will bear. Modesty has nothing to do with a free market. · 11 hours ago

    I used to believe that “People at the top are paid according to what the market will bear” – while it’s true in the sense of what the market will bear – does the compensation truly reflect the value added by these individuals? Look at some of the Golden Parachutes & Separation Agreements of failed CEO’s and Corporate Officers and it raises legitimate questions.

  16. Neolibertarian

    Maura Pennington:

    What do you make of the “wealth inequality” meme?  Why does it seem to capture people’s attention?

    Probably because Mommy and Daddy teach their children how important wealth equality is every Christmas.

    I grew up with two older brothers during the 1960s, and I can’t recall a time we all got an equal amount of presents; the oldest got the most expensive presents, the middle one got the next most expensive, and then there was me. If I ever complained, which if you knew my Dad you’d understand why I’d never THINK of complaining, I’d be told that’s the way it is.

    Once I reached their age, then I could complain.

    Today, parents are absolutely obsessed with spending the same on all the kids, even to the penny.

    Why wouldn’t kids grow up “wealth equality” obsessive?

    Besides, what the demagogues are usually referring to is wealth, not income.

    There are three great destroyers of wealth:

    1) Divorce

    2) Low interest rates

    3) Easy credit

    We have 54% divorce rates. 0% interest rates. And credit coming out of our ears.

    Better to invent a bad guy than look in the mirror.

  17. Mark

    5.  The measures I have seen show that there has been some decrease in inequality since the 2008 financial crisis.

    6. There is a global trend towards inequality noted by many economists due to super-specialization and the elimination of many mid-level and administrative jobs.  This is independent of political philosophy and who is in power and it is a trend that is troublesome. 

    7.  One thing that does grate at people is the accumulation of wealth at the top end of businesses while at the same time benefits etc for those not at the top are cut.  I worked in the corporate world for many years and enjoyed it and am opposed to government intervention but it would be good to see a little more modesty and willingness to take less at the top.

  18. RushBabe49

    Maybe things would be clearer if we used different nomenclature.   Instead of “income inequality”, how about “EARNINGS inequality”.  Instead of “welfare”, how about “money taken from your neighbors”.  I have always wondered why the “low-income” people were more deserving of society’s resources than anyone else.  What makes them any better than others, just because they are low-income?  And because of their low-income status, they don’t have to work for what they get-they have it handed to them by US.

    Another subject which I believe to be true, and liberals definitely do not, is that human beings, by their very nature, are Capitalist (liberals don’t believe in such a thing as human nature).  If left entirely alone, they will set up trade networks, and exchange goods and services.  The perfect illustration: Black Markets.  Whenever the State attempts to fool with the normal flow of markets, black markets ALWAYS appear.

  19. Margaret Sarah

    Two confusions I see in the way this discussion is commonly carried on. First, there is a confusion between inequality at a given point in time and stratification, or lasting inequality. We must definitely guard against the latter. Regulations, licensing, demands for certification, and minimum wage laws and union shops make the lower rungs of the economic ladder less accessible to the poorest. Some are necessary, but they should be viewed with great suspicion by any conservative.  Our system of public education in cities has become a force for stratification rather than for liberation for the poor; it should be thoroughly reformed or dismantled. Conservatives should not leave education to the progressives who have destroyed it.

    Second, observing the chaotic lives of the poor we tend to confuse despair and demoralization with poverty. Actually, we have an underclass that has been created by generous welfare benefits–benefits too generous to forego, but offering no self-satisfaction and opportunities for accomplishment. When conservatives talk about welfare, we should avoid complaints about paying taxes to give to the poor, and instead emphasize the sad condition of people who are wards of the state, never allowed to achieve and progress in their lives.  

  20. EThompson

    7.  I worked in the corporate world for many years and enjoyed it and am opposed to government intervention but it would be good to see a little more modesty and willingness to take less at the top.

    People “at the top” are paid according to what the market will bear. Modesty has nothing to do with a free market.