Doug Masson can always be counted upon for thoughtful observations about policy proposals, whether those are at the state or federal level. In a recent post, he took a look at the GOP’s tax bill, and made a point that is often missed–or misunderstood.
After criticizing Orrin Hatch’s nonsensical justification for a provision that would widen the gap between the rich and poor, Masson writes
I always get grief from my conservative friends when I say stuff like this, but reducing wealth disparities in the country isn’t just a matter of bleeding-heart, feel-good liberal mumbo jumbo like fairness and equality. Concentration of large amounts of wealth in a few hands distorts markets and democratic processes. The system can tolerate — even thrives under — certain amounts of inequality. It creates incentives that fuel the economy. But, beyond a certain point, things start to break down.
The most common defense of Masson’s position–a defense that is entirely accurate, albeit incomplete–is historical. Most countries that have experienced persistent large-scale inequalities have eventually been destabilized by revolt or revolution. This country is already seeing signs of citizen unrest; continued Congressional theft from the poor in order to bestow even more goodies on the rich will be met with anger and resistance, and it won’t be pretty.
Economists also support Masson’s thesis. They point out (as I’ve done several times on this site) that 70% of American economic activity is dependent upon consumption, and when large numbers of Americans have little or no disposable income with which to consume–when they are barely able to afford necessities–the economy can’t grow. When demand is weak, employers don’t increase production–which means they don’t create new jobs.
Those practical arguments are persuasive, but we shouldn’t ignore the fairness argument, because it goes to the heart of what makes a just society.
John Rawls was the pre-eminent political philosopher of the 20th Century, and his book Justice as Fairness established a framework within which political philosophers still argue. Rawls believed that all social primary goods–by which he meant liberty and opportunity, income and wealth, and what he termed “the bases of self-respect”–should be distributed equally, unless an unequal distribution of any or all of these is to the advantage of the least favored.
Inequality, in other words, can be justified, but only if that inequality is necessary to the improvement of the lives of the least fortunate.
When Masson writes “The system can tolerate — even thrives under — certain amounts of inequality. It creates incentives that fuel the economy. But, beyond a certain point, things start to break down,” I read that as another way of making Rawls’ point.
When markets work–when we have genuine capitalism, not the corporatism that characterizes the United States today–they usually meet Rawls’ criteria. Invent that better mousetrap, and everyone’s mouse-catching is improved. The money earned by the inventor provides an incentive to other ambitious folks, prompting them to invent something else that will improve life for many people, including poor people. A rising tide really does lift all the boats–we just have to be careful to define what constitutes a “rising tide.”
The fact that our mousetrap inventor has more money than someone else is thus a permissible inequality, because he has earned it in a way that improves–in some way, to some extent– the lives of the less fortunate.
This definition of justifiable inequality doesn’t reflect the inequities in today’s America. As Masson points out, money acquired isn’t necessarily the same thing as money earned; there’s a difference between that inventor/entrepreneur and those whose wealth was inherited or acquired as a reward for “gaming the system” or helping others to do so. Bigly.
Our gilded age inequality fails all three tests: history, economics and fairness.
We need to fix it.