Why inequality matters
One of the central myths of our economy is that inequality isn't a moral problem. That view is wrong.
One of the major confusions of mainstream liberal thinking is the notion that poverty is a moral problem that we ought to address, but equality itself is not.
Stephen Pinker, a leading thinker identified with liberalism and the author of Enlightenment Now, holds this view. “Economic inequality,” he says, “is not itself a dimension of human well-being” and “not itself morally objectionable.”
There is an unspoken idea behind Pinker’s claim, which is that there is an important distinction between absolute wealth and relative wealth.
These are two concepts worth clarifying.
If you wanted to measure changes in your absolute wealth over the past 12 months, you’d look at how much wealth you had 12 months ago and how much you had now, and calculate the change. The result would represent your change in absolute wealth.
But if you wanted to measure change in your relative wealth, you’d have to look at how much your absolute wealth changed in comparison to that of everyone else with whom you wanted to compare yourself.
So you might notice that your wealth increased by 5% over the past 12 months, but that on average people in your country experienced a wealth increase of 10%.
From this perspective, you might think your bump in absolute wealth is a bit disappointing.
Pinker would argue that you shouldn’t look at relative wealth at all. As long as your absolute wealth is increasing over time, it doesn’t matter if your neighbour’s is increasing at a faster pace.
But this view is seriously flawed — flawed enough, in fact, that you can use it to justify all sorts of horrific economic structures.
Imagine a scenario in which a serf is working long, difficult days in the fields for his feudal Lord.
It might be the case that the serf’s economic conditions are improving each year. His potato rations might be going up, he might get a new winter coat. In other words, his absolute wealth is increasing.
Meanwhile, over the same period of time, the serf’s Lord has acquired new tracts of land on which he has constructed opulent estates.
Under Pinker’s criteria, there’s nothing wrong with this scenario. Both the serf and his Lord are better off in absolute terms, which is the only thing that counts.
But there is obviously much to object to here from the perspective of the serf. There’s no good reason why he should get only a few extra potatoes while his lord gets a new estate.
If instead a portion the wealth that bought his Lord a new estate were directed to the serfs, his quality of life would improve immensely while the Lord’s quality of life would not diminish. This would be a preferable state of affairs for the serf.
Here we can see the problem with focusing exclusively on absolute wealth: our concern is not whether things are slightly better than they were in the past, but whether they are as good as they could be.
Image the serf were to demand a moral justification for the economic structure in which he lives. The Lord’s only reply could be to adopt Pinker’s framework and argue that the serf’s conditions were improving over time. But this is a morally hollow reply given that the serf’s condition is obviously much worse than it could be under a system in which, for example, half of what the Lord spent on a new estate instead went to the serf.
The point of all this is just that economic arrangements have to be justified in comparison with other possibilities, not just some other worse state of affairs in the past. This is why we rightly condemn serfdom and find any justification for it ridiculous, even though it could be justified by Pinker’s framework.
But this is not controversial – contemporary defenders of serfdom are few and far between. Let’s instead turn to our economic system of capitalism, which of course remains well defended. Can it be justified on the grounds that it’s the best possible arrangement?
Capitalists will typically argue that it because it grows “the economic pie” — overall wealth — which benefits everyone, even if those at the top benefit the most.
This claim has its share of issues given some of capitalism’s other tendencies, but let’s accept their premise for the sake of argument.
Now let’s acknowledge another fact about capitalism, which is that capitalist economies always generate large amounts of inequality. This is in fact considered a feature of the system rather than a bug, it’s apparently how you motivate people to produce the most “valuable” things (why then financial speculators are so well-rewarded is less clear).
At this point we must ask: does this distribution of wealth matter?
In some cases it probably does not. If two people inherit money, and one gets $10,000 while the other gets $50,000, that’s not a big deal. Maybe one can buy an extra television or a nicer car, but who cares?
Sometimes, however, the distribution of wealth matters quite a bit.
If a fraction of Jeff Bezos’ wealth, now around $132 billion, were distributed differently — say, to build homes for the homeless — the lives of the poor would improve a great deal, while Bezos would hardly notice.
It’s almost so obvious that it’s not worth saying, but let’s make the point clear: a distribution of wealth different than the status quo — one in which some of Bezos’ billions were spent on housing — would better maximize human happiness and potential.
If we look at political equality — the idea that each person should have roughly equal influence in the political system — we find another area in which wealth inequality has harmful consequences.
While most people’s political influence is limited to voting and maybe volunteering on a political campaign, the rich are a great deal more influential. They can, for example, buy a media empire to promote their views, or make huge campaign contributions, or run TV ads on issues they care about.
This is not limited to conservatives — the rich across the political spectrum have more influence than everyone else, and the very rich have significantly more power. Of course, those with a lot of money tend to favour policies that preserve the status quo, but that’s another matter.
Since political power is zero sum — if I have more, you have less — this is an obvious care where unequal wealth distribution conflicts with a value most of us believe in, that of political equality. Here, then, is another matter on which we’d be better off were wealth more equally distributed.
We now have looked at two cases in which we’d be better off with greater equality, and certainly we could think of many more. Because we have to justify our economic structure in comparison to other reasonable alternatives, we must conclude that a system with greater equality would be more moral than our own.
Recall where we began, which was with Pinker’s claim that inequality was not morally important. But we have seen now at least two ways in which a society with greater levels of equality would be preferable to the status quo in morally important ways. How can it then be the case that equality is not morally relevant?
The truth of the matter is that the whole notion that equality is irrelevant provides ideological cover for policies that enrich the wealthy and degrade the poor, and until we dispense with the whole lousy myth we’ll never fix those problems.