Another good article from a friend, Eric. Reposting this.
February 01, 2018 at 12:01 am
By Eric Jurado
Aren’t we all supposed to be equal? And yet the gap
between rich and poor just keeps growing. We need to maintain equality among
people. Isn’t vigorous government action necessary to keep the playing field
level—to keep the wealthy and powerful from taking more than their fair share
and oppressing everyone else?
There has been a lot said and a lot written about income
inequality—about how unfair it is that a few people are very rich and the rest
of us aren’t; that the income gap between the wealthy and even the
middle-class, let alone the poor, is so large.
There’s only one problem with this complaint.
It’s wrong.
Income inequality is actually a good thing—when it is the
product of a free market economy.
And your own life proves it!
An economy is made up of millions of individuals making
decisions about their own lives—where and how much they want to work, what they
want to buy, and so on.
You are one of those individuals.
In a free society, you are free to pursue a path in life
that you believe best suits your talents. That talent might be teaching, or
making music, or banking, or starting a small business, or raising a family.
Whatever it is, this freedom helps to make life enjoyable, exciting, and
meaningful.
But it’s also an expression of inequality. This is simply
because we’re all different. We have different talents, different temperaments,
and different ambitions.
That’s okay because—again in a free society—we can seek
out opportunities that play to our personal strengths; that distinguish us from
others.
If you find what you’re really good at and work hard, you
might have great success and make a lot of money. If you’re an outstanding
athlete, I’ll buy a ticket to see you play. If you’re a savvy investor, I’ll
give you some of my money to invest.
As long as you have the freedom to guide your own
destiny, you have a chance to reach your full potential—achieving success,
however you define it. But if someone, say, a government bureaucrat, told you
that your ambition had limits, that there was a ceiling above which you could
not rise, I doubt you’d be happy about it. You’d feel like you were in a
straightjacket.
Forced equality means less opportunity to pursue what
makes you individually great.
But what about the growing gap between the rich, the 1
percent, and the rest of us, the 99 percent, that one hears so much about?
Isn’t that a bad thing?
Again, the answer is no.
Here’s why:
In a free-market economy, people become wealthy making
what the rich enjoy today into something almost everybody can enjoy tomorrow.
The rich are the test buyers.
Consider the cellphone. Now we all have them, but when
Motorola manufactured the first one in 1983, it was the size of a brick, had a
half-hour of battery life, reception was terrible, and calls were very
expensive. It cost $4000. But if no one had bought that $4000 brick, there
wouldn’t be a $40 cellphone today.
In the 1960s, a computer cost over a million dollars.
Nowadays, thanks to billionaires like Michael Dell, we have incredibly advanced
computers that cost us a few hundred dollars.
Remember what out-of-reach luxury flat screen TVs once
cost? Only the rich could afford them. Today, your living room is essentially
your own private cinema.
The free market is about turning scarcity into abundance.
What was once available to the few is now available to the many. Wealth
inequality is an important corollary to that truth.
So, should I resent the people who became wealthy because
they have more money than I do, or should I be grateful for the economic system
that allows them to enrich my life and the lives of millions of other people?
This feature of the free market—income inequality—can
appear terribly unfair. But with a little further investigation, the real
picture becomes clear. Income inequality makes what once seemed like impossible
luxuries available to almost everyone; it provides the incentive for creative
people to gamble on new ideas; it promotes personal freedom, and rewards hard
work, talent, and achievement.
In sum, income inequality signals that individual
liberty, opportunity, and innovation are all present in a free economy. Pretty
good for something that’s supposed to be so bad.
Two final points:
The 1% Club is always open to new members. And you don’t
have to be in the top one percent to have a very good life. And that, not the
existence of the very wealthy, is what matters most.
Eric Jurado is a hedge fund manager. He covers economic
and political issues with liberty as his guiding star.
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See also:
Inequality 31, Economics, politics and forcing equality, January 16, 2017
Inequality 32, Free land distribution, free housing Kadamay, April 13, 2017
Inequality 33, Decline in global poverty, October 16, 2017
Pol Ideology 72, You love capitalism,. January 14, 2018
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