PrintJanuary 5, 2011
The Attack of the Radical Egalitarians
Radical egalitarians are an energetic bunch, and while it may be tempting to dismiss their pleadings as hopelessly Utopian, history cautions otherwise. A century ago, who would have believed that America would struggle to abolish differences between men and women while trying to ensure that blacks and whites achieve identical academic successes? Today, their troublesome fantasies have turned to income gaps, particularly the gulf between the super-rich and the rest of us.
The lengths to which these egalitarians will go to realize their dream (and our nightmare) is illustrated in Nicholas D. Kristof's recent New York Times op-ed entitled "Equality, a True Soul Food." This is impassioned "sky-is-falling" stuff. It strongly suggests that these social engineers are on the warpath and will not relent until billionaires are forcibly reduced to mere centi-millionaires while their lowly doormen earn six-figure incomes. Don't laugh -- even more preposterous leveling schemes have come to pass.
For Kristoff, income inequality is not about starving masses while the rich mimic Roman emperors. It is all about how today's ordinary folk, even if well-fed, well-housed, well-attired, and living decently, all with the latest technological gadgets, cars, and air-conditioned houses, react when knowing that the rich are "obscenely" rich. Today's less-than-super-rich, according to Kristof, suffer "melancholy of the soul."
And what might this melancholy bring? Plagues of biblical proportions. And Kristof is explicit: high crime, narcotics addiction, teenage pregnancy, burgeoning heart disease, anxiety, distrust, mental anguish, certain cancers, suicide, beer bellies, obesity, growing infant mortality, soaring school dropout rates, persistent poverty, and proliferating gangs. So, want to reduce cancer and mental illness and cut the prison population? According to Kristof, just soak the rich (especially upping the estate tax), pour yet more money into early childhood education, and stand back.
Needless to say, this analysis cannot withstand even cursory scrutiny, regardless of Kristof's "scholarly" citations. Does anybody believe that the super-rich will passively accept confiscatory taxes? Has Kristof ever heard of flight capital or offshore banking? Hard to imagine menial workers following the gini coefficient (a statistical measure of inequality) and then growing suicidal as it creeps from, say, 0.6 to 0.7 (1.0 is perfect inequality). Where I live, the recent tribulations of the football Giants, not the gini, brought melancholy. In New York City, the Mecca and Medina for unbridled capitalism, crime has dropped sharply as Wall Street bonuses soared into the stratosphere. Indeed, when many of these "obscene" bonuses temporarily vanished, unemployment increased among the have-nots. It takes a whole village of upscale restaurant employees to feed a Goldman Sachs partner flush with bonus money.
More generally, to suggest that ordinary citizens actually track relevant economic statistics is bizarre. If there is any public sense of have vs. have-not gaps, it probably reflects occasional mass media accounts of a few over-the-top social extravagances, and even then, it cannot be assumed that these excesses bring resentment. Do Yankee fans become mentally ill or join gangs when hearing about multimillion-dollar salaries for mediocre players? Unlikely, if the team wins.
But what is important here is not yet one more example of how the New York Times, by hook or crook, promotes radical egalitarianism. Far more serious in the long run is how Kristof and his co-believers push their message into public debate to transform economic inequality from a natural condition to a compelling problem needing drastic government remediation. Worse, bemoaning burgeoning inequality all too easily obscures how this inequality increases society's total wealth. Yes, the super-rich now have mega-yachts, but lowly doormen (such as one in my apartment building) can now afford spiffy SUVs and vacations at five-star resorts in the Dominican Republic. Greed may or may not be good, but rising inequality is even better for the "have-nots."
Let's begin with the New Testament, and specifically the gospel of St. Matthew, which says, "For to everyone who has, more shall be given, and he will have an abundance; but from the one who does not have, even what he does have shall be taken away "(Matthew 13:12). This is called the Matthew Effect, and it means that those of greater ability can over time leverage small differences in ability into larger differences in outcome. The phrase "the rich get richer" is the economic version, but it has been well-documented across multiple areas.
Consider, for example, a typical village market in a poor country, where vendors sell identical merchandise and everybody haggles over prices. Suppose one entrepreneur is a bit smarter, saves his money, and is able to cut costs or better advertise his yams. He drives the competitors out of business and becomes richer, though customers now receive the benefits of his talent (he also wisely keeps prices low to discourage potential rivals). He soon expands and hires others, and with economy of scale and enhanced cash flow, his business becomes more lucrative. Selection is widened, he develops brand loyalty to his products, distribution networks and inventory controls are improved, and in a few years, a modest difference in business acumen generates a major difference in wealth. And rest assured that this new plutocrat has no interest in impoverishing his customers (next year, he hopes to sell them cars). It is a familiar pattern; Sam Walton, who founded Walmart, was not exactly Isaac Newton, but he was a bit smarter than K-Mart executives, and this extra ability was systematically applied in hundreds of seemingly small ways.
In the final analysis, to level the playing field so that nobody receives these "obscene" salaries and all that goes with it -- private jets, $50-million mansions -- resembles thoroughbred racing: fast horses must carry extra weight to give the slower horses a "sporting chance." Win too many races, and the handicap increases.
Now let's imagine that Mr. Kristof has a time machine, and, enraged over the damage done to America's "poor" by plutocrats like Bill Gates, Steve Jobs, Andy Gove, Larry Ellison, and Michael Dell, he travels back to the beginning of the computer revolution. Outside IBM, most early firms or divisions of corporations -- Packard Bell, AT&T, Xerox, Tandem, Control Data, NCR, Honeywell, RCA, Tandy, General Electric, and countless home-basement ventures (see here) are struggling, so their CEOs are hardly causing any mental illness, let alone cancer. Kristof now convinces Washington to pass regulations keeping them all alive, an economic version of saving endangered species unable to survive in the wild. Patents must be shared with minimal fees, "unfair competition" is generously defined, and cutthroat pricing is outlawed while those tottering on bankruptcy are bailed out so that no single firm can dominate the market and make "obscene" profits. Computing naturally becomes a backwater field akin to a public utility, unattractive to risk-taking entrepreneurs, let alone garage-based geeks. Why seed high-risk Silicon Valley startups if there can be no gigantic profits? Michael Dell stays at the University of Texas, sticks with pre-med, and becomes an affluent suburban plastic surgeon; a newly arrived immigrant Andy Gove (born Gróf András István) starts a Hungarian restaurant, eventually goes bankrupt, and returns to Hungary. Intel and Dell never happen.
Kristof's aim is not to reduce mental illness or cure a high dropout rate; he is trying to asphyxiate the goose that lays the golden eggs. He is an economic illiterate with a Stalinist agenda. Business is not a zero-sum game where the rich get richer and the poor grow poorer. The billions of dollars generated by these plutocrats are not converted into gold bars and secretly buried, nor is the money consumed by bacchanalian excess. This income is spent, the economy expands, and others get paydays. When all is said and done, as the debate over the "Bush tax cuts" showed, these egalitarians hate the wealthy more than they love the people they are, ostensibly, trying to help. This is the sort of thinking that inspired revolutions in Cuba and Zimbabwe. Perhaps Kristof should add one more item to his catalog of ills instigated by the super-rich: envy.
Robert Weissberg is professor of political science-emeritus, University of Illinois-Urbana. His latest book is Bad Students Not Bad Schools.
Robert Weissberg is professor of political science-emeritus, University of Illinois-Urbana. His latest book is Bad Students Not Bad Schools.
