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Equality Serves the
Common Good
 

by Lawrence Reed

 

“Free people are not equal, and equal people are not free.”

I wish I could remember who first said that. It ought to rank as
one of the great truths of all time, and one that is fraught with
profound meaning.

Equality before the law-for instance, being judged innocent or
guilty based on whether or not you committed the crime, not on what
color, sex, or creed you represent-is a noble ideal and not at
issue here. The “equalness” to which the statement above refers
pertains to economic income or material wealth.

Put another way, then, the statement might read, “Free people
will earn different incomes. Where people have the same income,
they cannot be free.”

Economic equality in a free society is a mirage that
redistributionists envision-and too often are willing to shed both
blood and treasure to accomplish. But free people are different
people, so it should not come as a surprise that they earn
different incomes. Our talents and abilities are not identical. We
don’t all work as hard. And even if we all were magically made
equal in wealth tonight, we’d be unequal in the morning because
some of us would spend it and some of us would save it.

stevejobsobama

To produce even a rough measure of economic equality,
governments must issue the following orders and back them up with
firing squads and prisons: “Don’t excel or work harder than the
next guy, don’t come up with any new ideas, don’t take any risks,
and don’t do anything differently from what you did yesterday.” In
other words, don’t be human.

The fact that free people are not equal in economic terms is not
to be lamented. It is, rather, a cause for rejoicing. Economic
inequality, when it derives from the voluntary interaction of
creative individuals and not from political power, testifies to the
fact that people are being themselves, each putting his uniqueness
to work in ways that are fulfilling to himself and of value to
others. As the French would say in a different
context, Vive la difference!

People obsessed with economic equality-egalitarianism, to employ
the more clinical term-do strange things. They become envious of
others. They covet. They divide society into two piles: villains
and victims. They spend far more time dragging someone else down
than they do pulling themselves up. They’re not fun to be around.
And if they make it to a legislature, they can do real harm. Then
they not only call the cops, they are the cops.

Examples of injurious laws motivated by egalitarian sentiments
are, of course, legion.

They form the blueprint of the modern welfare state’s
redistributive apparatus. A particularly classic case was the 1990
hike in excise taxes on boats, aircraft, and jewelry. The sponsors
of the bill in Congress presumed that only rich people buy boats,
aircraft, and jewelry. Taxing those objects would teach the rich a
lesson, help narrow the gap between the proverbial “haves” and
“have-nots,” and raise a projected $31 million in new revenues for
the federal Treasury in 1991.

What really occurred was much different. A subsequent study by
economists for the Joint Economic Committee of Congress showed that
the rich did not line up by the flock to be sheared: Total revenue
from the new taxes in 1991 was only $16.6 million. Especially
hard-hit was the boating industry, where a total of 7,600 jobs were
wiped out. In the aircraft industry, 1,470 people were
pink-slipped. And in jewelry manufacturing, 330 joined the jobless
ranks just so congressmen could salve their egalitarian
consciences.

Those lost jobs, the study revealed, prompted a $24.2 million
outlay for unemployment benefits. That’s right-$16.6 million came
in, $24.2 million went out, for a net loss to the deficit-ridden
Treasury of $7.6 million. To advance the cause of economic equality
by a punitive measure, Congress succeeded in nothing more than
making almost all of us a little bit poorer.

To the rabid egalitarian, however, intentions count for
everything and consequences mean little. It’s more important to
pontificate and assail than it is to produce results that are
constructive or that even live up to the stated objective. Getting
Congress to undo the damage it does with bad ideas like this is
always a daunting challenge.

In July 1995 economic inequality made the headlines with the
publication of a study by New York University economist Edward
Wolff. The latest in a long line of screeds that purport to show
that free markets are making the rich richer and the poor poorer,
Wolff’s work was celebrated in the mainstream media. “The most
telling finding,” the author wrote, “is that the share of
marketable net worth held by the top 1 percent, which had fallen by
10 percentage points between 1945 and 1976, rose to 39 percent in
1989, compared with 34 percent in 1983.” Those at the bottom end of
the income scale, meanwhile, saw their wealth erode over the
period-if the Wolff study is to be believed.

On close and dispassionate inspection, however, it turns out
that the study didn’t tell the whole story, if indeed it told any
of it. Not only did Wolff employ a very narrow measure that
inherently exaggerates wealth disparity, he also ignored the
mobility of individuals up and down the income scale. An editorial
in the August 28, 1995, Investor’s Business
Daily
 laid it out straight: “Different people make up
‘the wealthy’ from year to year. The latest data from income-tax
returns . . . show that most of 1979’s top-earning 20 percent had
fallen to a lower income bracket by 1988.”

Of those who made up the bottom 20 percent in 1979, just 14.2
percent were still there in 1988. Some 20.7 percent had moved up
one bracket, while 35 percent had moved up two, 25.3 percent had
moved up three, and 14.7 percent had joined the top-earning 20
percent.

If economic inequality is an ailment, punishing effort and
success is no cure in any event. Coercive measures that aim to
redistribute wealth prompt the smart or politically well-connected
“haves” to seek refuge in havens here or abroad, while the hapless
“have-nots” bear the full brunt of economic decline. A more
productive expenditure of time would be to work to erase the mass
of intrusive government that assures that the “have-nots” are also
the “can-nots.”

This economic equality thing is not compassion. When it’s just
an idea, it’s bunk. When it’s public policy, it’s illogic writ
large.

Lawrence W. Reed

President

Foundation for Economic Education

 

Summary

 

  • If people are free, they will be different. That reflects their
    individuality and their contributions to others the marketplace. It
    requires force to make them the same
  • Talents, industriousness and savings are three of many reasons
    why we earn different incomes in a free society
  • Forcing people to be equal economically may make misguided
    egalitarians feel better but it does real harm to real people

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