Thursday, 27 June 2013

Is ALL inequality a Bad Thing?

A mate sent me the above. And it certainly make the case against unequal distribution of income and wealth very powerfully.  In response, I sent this....

Good vid.  Makes the case rather better than the OWS mob at Zuccotti park. (and all their silly "mic checks" and "twinkles"...)

There's no doubt that income (and wealth) inequality in the US has widened in recent decades.. 

But is all inequality Not a Good Thing?  When I first arrived in China in the mid-70s, top incomes were about 300 yuan/month, and averages maybe 100/month. Very equal.  China's GINI index then would have been very low (ie "good"). Since then, incomes and income disparity have both risen markedly.  But you'd not get too many Chinese wanting to go back to those "more equal" days.  China's GINI index has gone up, but so has the happiness of Chinese people (generally speaking, of course... there are still many totally screwed by the system).

So, the question is not really that inequality is a Bad Thing: rather  how much inequality is reasonable and healthy?

I'm not sure we have an answer to that.  And even if we think that the current US income/wealth inequality is unhealthy, the question then is, what to do about it?  Given that Obama has not been able to get even rises in taxes on the rich. What then?  Confiscation?

In any case -- and this is going to sound like a Republican talking point -- the rich are not merely sitting on their piles of cash.  Once they have their mansions and super-yachts, what do they do with the rest of their cash pile? Answer: put it to work -- creating industries, employing people. [Witness the world's richest cool guy]. Would we rather have business people doing that, or the government?

Finally, there's the question of what has caused that rise in inequality.  Most on the Left say it's the reduction in taxes, especially on the rich, in recent decades. No doubt that's a part of it.  But only a part.  There's also the change in the structure of the economy.  In the US, there used to be great jobs in manufacturing and retail, that used to give folks a route to the middle class.  Now, both of those have been decimated (most recently retail).  That's structural.  And no increase in taxes will fix that.  

It's possible that some of these jobs will come back, at least in manufacturing, as the in-sourcing trend takes hold. (technology and rises in Asian wage rates).

Perhaps all this is sounding a bit like a counsel of despair..  But I have great faith in the flexibility of the US system and its people....  and not too much in the capacity of its government to do much more than set the rules then stand out of the way..