Slouching Towards Gomorrah (12 page)

The general subject of equality may be approached through
the topic of economic inequality. It is an almost universal assumption among cultural elites, particularly intellectuals, that inequalities of wealth or income pose a serious problem that the political nation should address. Christopher Lasch, to take but one of many examples, asserted that “economic inequality is intrinsically undesirable…. Luxury is morally repugnant, and its incompatibility with democratic ideals, moreover, has been consistently recognized in the traditions that shape our political culture…. [A] moral condemnation of great wealth must inform any defense of the free market, and that moral condemnation must be backed up with effective political action.”
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As an empirical matter, Lasch is no doubt correct in saying that many of our political traditions find economic inequality incompatible with democratic ideals. That is merely a way of saying that if you extend the idea of democracy far enough, you arrive at socialism: “one person, one vote” extended to the economic realm. But why anybody should agree with Lasch that such a situation would be desirable is not readily apparent; the basis for his proposition seems no more than a reflexive egalitarianism. If economic inequality is “intrinsically” bad, then it is bad regardless of any consequences, good or bad, such as increases in freedom and productivity or, on the other hand, the social unrest it may be thought to produce.

What then can be the moral basis for objecting to economic inequality and asserting that condemnation of great wealth, backed up with political action, is essential to any defense of the free market? The obvious candidate is envy. It is impossible to see any objective harm done to the less wealthy by another’s greater wealth. It is not, after all, the case that the richer man’s income is extracted from the poorer man. Vacationing at the shore, I see a large yacht at anchor in the harbor. Though I may wish I had one, it is quite clear that I do not lack a yacht because another man has one. The economy is not a zero/sum game. A Rockefeller’s or a Bill Gates’s or a Michael Jackson’s wealth does not diminish my wealth or anybody else’s. (It is irrelevant to the present point to note that political action to deprive such folks of their luxuries would, because of its adverse effects on incentives, make the rest of us poorer.)

Nor is it at all clear why luxury should be morally repugnant.
If luxury is inconsistent with the democratic ideals that have shaped our political culture, that means only that some of our democratic “ideals” are the product of envy. Envy has been said to be pure evil because it wishes to deprive others even though we gain nothing for ourselves. That is not quite the case. The political action Lasch called for results in redistribution. It may be that academic intellectuals would gain only the satisfaction of seeing the better off lessened, but there are many classes of people who will receive income that is transferred to them from the wealthy through government. For such folks, the emotion of envy is reinforced by cupidity. Much of the wealth will accrue to the bureaucrats who accomplish the redistribution but who would otherwise be employed in the private sector. (We are not discussing here the case of redistributions to persons who would otherwise fall below a subsistence level. Such redistributions result from compassion rather than envy.)

Envy certainly has shaped and continues to shape our political culture. That is probably why it is front-page news in the
New York Times
that the United States displays greater inequality in wealth than other industrialized nations.
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The unstated assumption that makes this worthy of the front page is that there is something morally wrong, even shameful, in having greater wealth inequalities than other societies. The problem allegedly posed is not about an inequality between those who do and do not have enough money to subsist or to lead a life free of want. The problem raised is the inequality between persons or families that are above that line.

It would be possible to argue that the measurement of inequalities used is dubious as a factual matter,
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but it is more to the present point to accept the story’s assertion as true and ask why it is even worth mentioning. The answer is not obvious. We have seen that nobody has less wealth
because
others have more. What, then, is the problem? Sometimes the egalitarian appeals to an undefined, and undefinable, notion of “social justice.” Thus, our current president justifies higher tax rates on those with higher incomes because they are “not paying their fair share.” He does not, of course, specify how one knows what a fair share would be. Egalitarians never tell you that; they never specify how much reduction of inequality would be enough. They cannot do that since there is no objective criterion to specify the stopping place
between the present situation and complete equality. They content themselves with saying that present inequalities are too great, and they will go on saying that so long as any inequality remains. Irving Kristol, as editor of the
Public Interest
, wrote to professors who had expressed great discontent with inequalities in the distribution of income in the United States, asking them to write articles about what a “fair” distribution would be. He was never able to get that article and has concluded, no doubt correctly, that he will never get it.
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It has often been observed that the more inequalities are reduced, the greater is the resentment of any remaining inequalities.

The primary tool for reducing inequalities of income is redistribution through the progressive income tax. The intellectual case for the fairness of any progressive income tax was fatally undermined years ago by Walter J. Blum and Harry Kalven, Jr., professors at the University of Chicago school of law.
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They examined and found seriously wanting the various theoretical supports for progression. Their discussion of theoretical economic rationales is beside the point here, but they also examine “the possible rationale for desiring to lessen economic inequalities within the confines of a private enterprise and market system.” They begin by asking whether, if the wealth of the society tripled overnight without any changes in the relative distribution among individuals, the issue of inequality would be any less urgent. Since there have been enormous increases in wealth, even among the poorest, and the issue of equality has grown more disturbing, the answer cannot be in the affirmative. Thus: “It initially appears that what is involved is envy, the dissatisfaction produced in men not by what they lack but by what others have.” I think that is what finally appears as well, though it would be impolitic for a supporter of progression to say so. “No proponent of progression has rested his case for doing something about economic inequality on the grounds of mitigating greed and envy”

Two other lines of argument are advanced instead. The first contends that improvements in the general welfare will result from greater economic equality. The second contends that permitting the existing degree of inequality works injustices between individuals. Blum and Kalven found these contentions weak. I find them weaker still.

To the first, the authors advance a technical objection, which is nonetheless important, but then object: “The general welfare is stated in deceptively simple terms.” One may grant the assumption that lessening inequality would produce a net increase in the aggregate happiness of the community. “No matter how the case is put, it is still true that all that has happened is that the welfare of one group in the society has been increased at the expense of the welfare of a different group. Stated this way there is no ‘general’ welfare; there is only the welfare of the two groups and the wealthy receive no counterbalancing benefits for their surrender of income or wealth…. If the wealthy have otherwise valid claims to their income, there is little reason for subordinating those claims to this narrow version of general welfare.”

As for the argument that the government or the less wealthy would spend the money in more desirable ways than the rich, the authors attribute its appeal not to the way the less wealthy are spending the money but to the fact that they, rather than the wealthier, are spending it. Nor does the contention stand up that the workings of democracy are impeded if there is too great a disparity in the wealth of the citizens. There are many avenues to political power and wealth is not the most significant.

In order to address the argument about justice as between individuals, Blum and Kalven examined the claims of the more wealthy to the income that is to be taken from them by progressive taxation. There is, they concede, a large amount of “undeserved” income…due to factors like monopoly, fraud, duress, and chance…but this does not establish a case for redistribution. That would require a correlation between such income and the rates of progression, which would further require that there be some general relationship between total income and undeserved income and that the undeserved component increase more rapidly than total income. They point out that almost nothing is known about the distribution of undeserved income, and guesses about it “seem to be a most precarious base on which to rest the tax structure.” They might have added that, to make progression just, we would have to assume not only these things but that all persons with large incomes had the same proportion of undeserved income. That is extremely improbable.

It would unduly lengthen this discussion to take up all of the
arguments for greater economic equality. The authors noted, however, that “it is quite difficult to sponsor progression on the basis of economic equality without calling into question either the meaningfulness of personal responsibility [in achieving success] or the fairness with which the market distributes rewards. Progression, when offered on these grounds, is an unsettling idea.” It will be seen, I believe, that most demands for equality, even those outside the subject of income equality, also involve questioning the meaningfulness of personal responsibility and the fairness with which (non-economic) rewards are distributed.

But if the intellectual case for lessening income inequalities fails, the political appeal of the idea remains. James Q. Wilson has analyzed the concept of fairness, which children understand at a very early age.
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He attributes that to the sociability of children, who want to win approval, initiate play, or maintain contact. The idea of fairness is, then, built into humans as social animals. Wilson says the concept has one or more of three meanings, the relevant one for our present purpose being equity. “In modern equity theory, a division of something between two people is fair if the ratio between the first persons worth (his effort, skill, or deeds) and that person’s gains (his earnings, benefits, or rewards) is the same as the ratio between the second person’s worth and gains.”
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But “severe inequalities [of wealth] distort the evaluation of contributions by both the advantaged and the disadvantaged, leading to outcomes that are unfair as judged by the natural standards of equity that develop in the household.”
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The problem, therefore, is not the inequality itself, but that the severity of the difference makes it difficult to know whether the same ratio of inputs to outputs exists between the advantaged and the disadvantaged. This uncertainty leads, in turn, to a suspicion that the ratio is skewed and hence unfair.

While that is no doubt true, it is inadequate to explain current levels of taxation. (Wilson was not attempting such an explanation.) Progression today sets in for a married couple at an income of $38,000, and the next higher bracket begins at $91,850. Those incomes are certainly not large enough to distort the evaluation of inputs between such couples and couples making $25,000. The difficulty of assessing the ratio between inputs and outputs does not exist. The ratio assessment problem cannot account for even more dramatic examples of progression. A family with a $500,000 income
pays $154,000 in taxes while a family with an income of $45,000 pays $3,800. “With eleven times the income, the rich[er] family pays 40 times the taxes.”
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Something besides a suspicion of skewed ratios is obviously in play. Even if a discrepancy in wealth or income were great enough to make ratio assessment difficult, the presumption Wilson describes favors denying that the inputs of the richer person can really be great enough to justify his rewards. Why that presumption? Why not a presumption that the richer person has in fact merited his wealth? The presumption Wilson describes is not explained by the difficulty of comparing inputs and outputs. If difficulty of assessment does not explain current rates of progression in the tax code, the only remaining explanation seems to be envy. The United States tolerates much greater income disparities than other industrialized democracies. Sweden is the extreme example of taxation for egalitarian purposes. Given the non-existent case for income equalization, it is not that America is odd compared to Sweden, but that Sweden is odd compared to us, and that we are odd compared to a rational, nonenvious view of income distribution.

President Clinton at one point proposed raising taxes on the rich although it did not appear that it would increase the tax revenues received from them. A substantial proportion of the public said they favored higher taxes on high-income earners even if that did not increase the total taxes such people paid. The effect would not be to help anyone else but merely to pull down the better off. The motivation can only be envy, and it is surprising that so many people would admit harboring that emotion. Helmut Schoeck states: