Let me enumerate again my arguments “Why inequality is good”.
1. Because it respects and rewards hard work, efficiency and ambition.
2. There are people who have little or zero ambition in life. To drink and party everyday, to rely on some outside support for their continued existence are their joys and complacency.
3. Between the two, inequality is sure to happen in the short term, and such inequality will widen over the long term.
4. “The rapid economic advance that we have come to expect seems in a large measure to be the result of this inequality and to be impossible without it.”
5. Government welfare and entitlement programs that are meant to reduce inequality and improve equality among the people are mostly unproductive.
6. “All obstacles to the rise of some are, in the long run, obstacles to the rise of all… To prevent progress at the top would soon prevent it all the way down.”
7. Government policies of institutionalizing forced equality penalizes hard work, performance and being ambitious.
8. When the poor and initially less ambitious see that there are less entitlements coming, they will become more self-driven and independent, and society can progress faster.
(Note: #s 4 and 6 above are quotes from Friedrich Hayek)
Here are two long comments:
(1) from Excuse me?? -- If the author’s polemic holds true, then the elites of society should let their children fend for themselves in the third world, is this not the best way to learn??
Showing Compassion to our fellow men “are incentives to remain poor” really?
Please read, Milton Friedman and the Social Responsibility of Businesss.
Look what pure capitalism and minimal Gov did to Chile and Argentina in the 70/80s?
This is Darwinian economics nightmare come to life
And the naughty title “Why inequality is good”. Try telling it to the 3 billion human beings without clean water!
I replied to him/her that the elites of society, the middle class of society, work hard to give their kids a good future. They don’t over-drink, over-smoke, over-fight, have horrible life and leave their kids to fend for themselves. The desire to give their kids a good future is an incentive for them to excel, to work long hours, to be efficient.
Look at N. Korea, Myanmar, Zimbabwe, Congo, etc. They want to have an equal society, they got it. People are equal, equally poor, except the top officials of the Communist Party and the dictatorial governments. The pursuit of forced equality created unintended, totally opposite results.
Here is a much longer comment.
(2) from Alex Ang -- The common citizens in Communist and dictatorial governments are probably as you claim, “equally poor”. However they are certainly not politically equal to their “masters”. The inequality is thus a result of political structure coupled with entrenched corruption within the economy.
Furthermore, your analogy of a Communist country as an equal but failed society falls far from the argument for inequality. Infact Ludwig Von Mises term the issue as a “calculation problem”. The problem with Communism’s planned economy does not lie in the advocation of equality, but the ineptness of central planners to rationally allocate resources when compared to the price mechanism.
In your essay, you claim that a welfare state promotes a more equal society but leads to sloth among its dependents. However you use a dictatorial government as an example in your comment. It is a general fact that dictatorial countries does not have a coherent welfare system- it is a cause of the poverty you mentioned earlier among citizens. Here is the point where logic contradicts: if dictatorial governments does not advocate welfare for its citizens, wouldn’t the society be better off as your essay argues? Why are many there so many poor counries with dictatotrial rule then? In a word of fairness, it could be because they implemented a central planning system along side a lack of welfare. But suely the lack of welfare will have spurred its citizens to work and produce more illustriously- as your logic claims – leading to a much higher overall level of GDP?
Although Austrian and Chicago schools tirelessly advocate the free market, they forget one simple fact: free markets never exist in reality. That is why externalities and free rider problems are taught in basic economics. They act as warnings and safeguards against the seduction and captivity to beautiful and attractive theories. I am not against the free market. In fact the Austrian and Chicago ideas are good models to start with in building our understanding of how real life economics works. However when economists stop refining the models to match reality, it becomes as dangerous as it is intellectually dishonest...
We need to rethink what encompasses a “market” and model it after reality rather than to defend and propogate models as the defining solution to our economic conundrums. We need to an economics grounded in reality.
Before lambasting welfare using abstract theorem, we need to sort out a fundamental question: Are the poor really as slothful as alleged? More enquiry needs to be taken on this matter.
In order to reply to Mr. Ang's comments point-by-point, I selected five important quotes from him:
1. “The problem with Communism’s planned economy does not lie in the advocation of equality, but the ineptness of central planners to rationally allocate resources.”
2. "if dictatorial governments does not advocate welfare for its citizens, wouldn’t the society be better off as your essay argues?"
3. “so many poor countries with dictatorial rule … because they implemented a central planning system along side a lack of welfare. But surely the lack of welfare will have spurred its citizens to work and produce more…”
4. “free markets never exist in reality. That is why externalities and free rider problems are taught in basic economics.”
5. “Are the poor really as slothful as alleged? More enquiry needs to be taken on this matter.”
Here now are my counter-comments to him:
On #1. Check again ALL communist revolutions, both successful, failed and on-going. They are ALL advocating social equality , (1) like land redistribution -- confiscate the land of the rich landlords, give to the poor landless farmers. Like social or collective or communal ownership of the means of production – expropriate ownership of the rich of manufacturing plants, power plants, banks, etc., and give ownership to the workers, the farmers, the urban poor, the upland dwellers, etc.
On #2, ALL dictatorial governments advocate welfare for its citizens, at least in words and promises. The Philippines for instance, has its experience of dictatorship under the Marcos government (1965 to 1985). Within those 20 years in power, Marcos programs include (a) land reform or forced land redistribution, (b) monopolization of sugar trading, coconut trading, etc. to protect workers in the sugar and coconut industries, (c) created many new bureaucracies to provide more market regulations, more welfare to the poor, and (d) declared Martial Law, imprisoning and killing many political dissenters who criticize his programs.
On #3, The purpose of having central planning is to have central ownership by the state, central taxation by the state, central welfare and subsidy programs by the state. So ALL dictatorial and central planning governments have welfare for the poor as their main reason or alibi. The poor who usually improve their lives are those who did not depend on state welfare, but those who become micro-entrepreneurs and capitalists. Those who work in the “informal or underground” economy.
On #4, Free markets exist. ALL markets are composed of individuals – buyers and sellers, producers and consumers, rich and poor, young and old, male and female. Someone looking for a haircut for only US$1, a barber shop provides the service at such price, a market equilibrium is created where demand meets supply. Facebook, google, youtube, yahoo, etc., they all exist and thrive because people demand social networking sites, search engines, for free. They provide the services at a price demanded by the people – zero cost – and the market for social networking and search engines is created.
On #5, I did NOT say, explicitly or implicitly, in my article above that the poor are slothful. On the contrary, I did say that the lazy, the complacent and irresponsible become poor. But the poor who “become hard-working and entrepreneurial, they will become more self-driven and independent, less dependent on politicians and the state. And society can progress even faster.”
Inequality 1: Rich Getting Richer is Good, August 29, 2009
Inequality 2: To Each According to his Needs... September 01, 2010
Inequality 3: Freedom, Free Market and Inequality, February 14, 2011
Inequality 4: Why Inequality is Good, May 10, 2011