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November 15, 2011

The trouble with inequality

The real problem of economic disparity is the ungrateful, narrow-minded attitude of the wealthy.

Over the past several months, economic inequality has become a major topic of public discussion, as the Occupy Wall Street demonstrators rally on behalf of the “99%” and President Obama prepares to campaign on a debt-reduction plan that emphasizes higher taxes on the wealthy. In a society where more than 80 percent of income gains over the past three decades have gone to the richest one percent of earners, inequality is clearly something worth worrying about. However, those who have been most active in calling attention to the problem have not thought clearly enough about just what is wrong with gross disparities of income and wealth, and this failure has prevented them from appreciating just how hard these problems are to solve.

Intuitively, it seems clear to us that extreme inequality is bad in some way, but those who try to discover the basis of this intuition will encounter serious difficulties. The most obvious one is the reasonable thought that the only basis for finding any phenomenon morally problematic is the fact that someone is harmed by it; this cannot be a reason for objecting to a large income gap, since one person can be much wealthier than another even if the second person is in no way badly off. We might try to work around this problem by positing that the government needs revenue that can only come from the wealthy, or that inequality concentrates purchasing power in a small segment of society and thereby destabilizes the economy. Both of these claims might be true, but if we rely on either as our sole reason for objecting to inequality, we are committing ourselves to the intuitively implausible view that if economists somehow found a way to solve either problem that did not require reducing income disparities, inequality would cease to be a problem.

However, we can deal with these flaws by adopting a different view which identifies at least one real problem with inequality: the way in which wealthy members of a highly unequal society fail to respect their fellow citizens. To see why, note first that in a market economy, large income disparities usually emerge when people with productive talents use their bargaining power to demand very high salaries. If asked what justifies this use of their skills, the only reply they can give is that those skills were acquired through voluntary hard work and can therefore be exercised in whatever way they choose. However, this claim is clearly false. While the process of developing a talent involves some voluntary effort, that effort will only be effective in the presence of certain social institutions, including the families and schools that provide necessary instruction and encouragement and the societal store of accumulated expertise that anyone trying to cultivate a talent must rely on.

Therefore, when the talented make the benefits that society derives from their productive activity conditional on their receipt of extremely high incomes, they are showing profound disrespect for other citizens. They are responding with indifference to the benefits that important social institutions have obtained for them and are using resources to which society as a whole has some legitimate claim as if those resources belonged to them alone. Furthermore, if highly productive people come to fully internalize this view of their abilities, many of them will likely come to see ordinary people who lack their skills as failures who could have become wealthy but chose not to. Widespread adoption of this attitude will likely undermine the equality of social status and mutual respect among economic classes, which foreign observers since Tocqueville have seen as uniquely valuable features of American life.

Having developed at least a partial account of what makes extreme inequality worth opposing, we can also see why the protesters and politicians now agitating against it have failed to grasp the difficulties of resolving the problem. If large income disparities are objectionable in large part because they damage the relationship between the wealthy and their fellow citizens, then they cannot be addressed by increasing the amount that rich Americans pay in taxes and expanding social programs (the main approaches favored by the Occupy movement and the Democratic Party) alone. Indeed, if the attitude that gives rise to the inequality is not dealt with, higher tax rates would likely be met with tax evasion and reduced economic growth. Instead, what is needed is a concerted societal effort that goes beyond public policy, in which we as citizens work together to change the social ethos which leads the wealthy (and all those who aspire to be wealthy) to assume that their use of their talents need not be constrained by obligations to society. People who favor the use of state power to redistribute income are often criticized for their radicalism, but the truth is that they may not be radical enough.

Ajay Ravichandran is a fourth-year in the College majoring in philosophy.

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