Inequality

There is a lot of chatter these days about the injustice of inequality, and demands that we do something about it–mostly take from the 1% and give to the rest. The United Nations, home to ne’r-do-well relatives of the world’s kleptocrats, has even established a standard of virtue for the subject called the gini coefficient.

Let’s start with an examination of the concept. The consumption gap between a Russian prince and a Russian serf does not begin to compare with the gap between an American in the bottom quintile (the usual definition of poverty) and the so-called 1%. People defined as poor in America live, from a material perspective, better than 99% of all human beings who have ever inhabited our planet and better than 75% of people on earth today. The reviled tide of capitalism has lifted all our boats out of the mud of grinding poverty and the daily struggle for physical survival.

In a sense, we have reached the limits of consumption. We are essentially equal. The problem at all economic levels in our country is not malnutrition; it’s obesity. A ten year old Honda and a new Rolls Royce will both go the speed limit and get you from point A to point B. Silk pants and jeans both cover the butt and go on one leg at a time. A double-wide with a wall banger yields the same shelter from the elements as a mansion with a heat pump (except in the event of a tornado). Having more money these days does not get you that much more in terms of the basic necessities.

More importantly, the goal of equality is unattainable. At one level, the idea that all men are created equal is the foundation of our concept of nationhood. Unlike most places on earth, our sense of nation is not ethnic; it is based on the founding ideals expressed in the Declaration of Independence and the Bill of Rights. It took us 250 years to work out the logic of including women and African-Americans in the equality tent, but we are making progress. From the perspective of basic rights (equality before the law and protection from government intrusion), the goal of equal treatment is one on which we should forever focus. At another level, there is no such thing as equality and never will be.

The fact is that some people are born shrewder, more ambitious, more energetic, more focused, more ruthless and more charismatic than others. Every organized society known to us has been dominated by an elite. What about revolutions, when the “people” rise up to destroy the oppressors? No such thing ever happened. Even those movements which began with popular discontent were soon preempted by the charismatic and ruthless. The people are just a club that the new elite uses to beat down the gates of privilege. Revolutions are about an energetic elite replacing a decadent and lazy elite. The new elite soon works full time to entrench itself and lives a privileged existence in its dachas. Unruly peasants are sent to the gulag. The questions to be asked are who are the elite and how do they behave?

I think there are four general classes of elites in the history of our species. Priests, generals, politicians, merchants or some combination thereof have dominated every society whose history I’ve read.

Most of the early rulers were priests and their acolytes. They managed to convince insecure humans that they could mediate with the angry gods. That form of rule has gone out of fashion, except in Iran, where theocrats share power with generals. If you consider (as I do) communism to be a religion, the Kim and Castro families are also theocrats.

Generals dominated most of known history until recently. Roman emperors were generals, elected and supported by the legions. When ancient China was united, the ruler was the general of a hoard from the north and his descendants. Between emperors, the country was ruled by regional warlords. The feudal system in Europe was all about war. A noble was granted land in return for a pledge to produce a set number of trained troops when called upon by the noble above him in the food chain. The king was the lead general. Even a few decades ago, most of South America was ruled by generals.

The modern welfare state is run by politicians. They set multiple rules of behavior, many of which do not apply to the political elite. They extract 30–50% of the wealth of their countries to engage in social engineering. They transfer wealth from one segment of society to another and ask for the votes of the transferees in return.

Rule by merchants is infrequent. Maybe Venice in its hayday, the early years of the industrial revolution in England, and the so-called Gilded Age in America could be characterized as rule by merchants.

I would suggest that rule by politicians may sound like a solution for inequality, but it isn’t. Once the political class entrenches itself, innovation and competition are stifled. Economic growth, that lifting of all boats, is inhibited. The clever and ruthless learn how to exploit the rules, capture the regulators and generate monopoly profits. All socialism eventually becomes cronyism. Most human beings are, to some extent, lazy liars. Transparency and competition get us out of bed and keep us competing and innovating. Inhibiting competition produces stagnation.

I would suggest that the right mix is rule my merchants, constrained by politicians. If merchants are allowed to compete and prosper, and the rules prevent them from committing fraud and creating monopolies; we can generate wealth for the society and inhibit the creation of monopoly wealth. If we work to create equal opportunity, as opposed to equal outcomes, the results will take care of themselves. We will almost certainly not have dynastic or entrenched privilege, because some of the descendants are invariably lazy. The problem isn’t inequality; it is entrenched inequality.

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