Sunday, September 14, 2008

Income Inequality: What's the Problem?

I certainly invite answers to this question in the "comments" section:

What's wrong with the rich getting richer?

Imagine that you and a few hundred others have fallen through a tear in the space-time continuum into the future: the 23rd century. You now work in a museum, doing what only you can do: keeping records and recreating the work you did when you lived in the 21st century, for the benefit and delight of historians and anthropologists who really appreciate the insights you bring from the past. (This scenario assumes that you loved the work you are doing now, and you're perfectly content doing that same work in the future.)

In fact, you're getting paid twice as much as you earned in 2008. And you're able to use the extra income to buy an extraordinary range of goods and services that were completely unavailable to you in the 21st century.
• You travel from place to place in a transporter beam like on Star Trek.
• The labor-saving devices in your kitchen boggle your imagination.
• 23rd century health-care will keep you alive an estimated 112 more years, in youthful vigor.

Here's the catch:

You and the others from the 21st century who slipped through the wrinkle in time are in something of a separate caste. Because human beings in the 23rd century are so much more highly educated, morally developed, and psychologically balanced than people of the 21st century, you are not allowed to vote.

Further, everyone else earns at least 100 times as much as you and others from the 21st century do. It's like earning $100,000 per year in a world where everyone else earns $10,000,000 per year.

Because everyone in the 23rd century has their act together, you are treated with respect, kindness, and genuine affection by everyone else. Every conversation you have with 23rd century human beings is rewarding and edifying. You are becoming wiser with each conversation, and you're building many good habits and admirable character traits the more you interact with people of the future. As a result, your very generous employers give you almost weekly raises. You still haven't figured out what 23rd-century inventions you want to buy with all the extra income you already receive.

But the "income gap" between the 21st century people like you and the 23rd century people is huge, and growing every day.

"The rich get richer, and the poor get relatively poorer."

Is this really a problem?

Is thus "fundamentally unfair?"

Many left-leaning economists say it is.

This blogger quotes the Center on Budget and Policy Priorities and the Economic Policy Institute, who say:

During the two decades before the early 2000's, the average income of this country's poorest families rose by 18.9%. During that same time the average income of our richest families rose . . . nay, exploded by 58.5%.

"Paul Krugman is very upset," writes George Reisman.

In his Monday New York Times Op-Ed column this week, he complains that while the real incomes of the great majority of Americans have essentially stagnated or declined over the last thirty-five years, "income at the 99th percentile rose 87 percent; income at the 99.9th percentile rose 181 percent; and income at the 99.99th percentile rose 497 percent."

Krugman calls it "a rising oligarchy." He also speaks of "a new Gilded Age," and says, "if the rich get more, that leaves less for everyone else."

But that just isn't true. Krugman admits that the rich of today are richer than the rich of the Gilded Age:

We are now living in a new Gilded Age, as extravagant as the original. Mansions have made a comeback. Back in 1999 this magazine profiled Thierry Despont, the ''eminence of excess,'' an architect who specializes in designing houses for the superrich. His creations typically range from 20,000 to 60,000 square feet; houses at the upper end of his range are not much smaller than the White House. Needless to say, the armies of servants are back, too. So are the yachts. Still, even J.P. Morgan didn't have a Gulfstream.

Yes, the rich are richer, but so are the middle class. And most dramatically, so are the poor. Only an intensely envious person would contend that the poor of 200 years ago were better off than the poor of today.

What is Wealth Inequality? - Art Carden - Mises Institute

The poor are not getting poorer, they are only getting relatively poorer.

And the reason why the poor are living better lives today than 200 years ago is precisely because the rich are getting richer.

For Society To Thrive, The Rich Must Be Left Alone - George Reisman - Mises Institute

There are several reasons why the "income gap" is such a boogeyman among socialists:



Krugman claims that when the heads of corporations (that are creating all the wealth that is being enjoyed by the poor and middle classes) become richer, the political landscape becomes more conservative; there is "a general shift to the right" he says.

This may explain why the socialist revolution always kills off the rich, leaving only democrats to be herded by The Party. (I assume that Krugman assumes that he'll still be around after the revolution as a "Party advisor.")

Liberalism is Aristocracy

The remedy is:

Libertarian Democracy

Laissez-faire capitalism is true democracy. Not the majority voting for the rulers who will initiate force against the minority, but the masses of consumers making their own voluntary choices in every area of life.

A truly laissez-faire capitalist society is one devoid of the initiation of force.

Under true laissez-faire capitalism, corporate CEO's do not use the government to extort multi-million dollar severence pay packages from taxpayers by force when their corporations go belly-up.

People are free to begin a business, hire the employees they want at the wages they want, sell the products they want at the prices they want, and consumers are free to reject the price or benefit from the product. If consumers choose to buy the product, it will be voluntarily, and it will signify an increase in their standard of living. The poor will get richer, and those who serve the poor by creating jobs for them and selling the goods and services that enrich their lives, will get even richer. _

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