All Commentary
Sunday, September 1, 2002

Equality and Capitalism

Capitalism Continually Makes People Better Off

Probably the most common charge against capitalism is that it creates wealth and income inequality. The frequency of this allegation testifies to the fact that it strikes a chord with large numbers of people. It’s so believable. After all, who can deny that Bill Gates, Warren Buffett, and bond traders each have vastly more money than ordinary folks do?

Friends of capitalism typically concede that it promotes greater wealth inequality. Even Ludwig von Mises wrote that “inequality of wealth and income is an essential feature of the market economy.” But, like Mises, pro-market scholars go on to point out that inequality is the price paid for the immense and widespread prosperity unquestionably made possible only by the free market. “Sure, there’s more wealth inequality,” the concession goes, “but even the poorest people are much better off with capitalism than without it.”

Let’s not be so quick to grant that capitalism creates greater wealth inequality.

Do a mental experiment. Imagine resurrecting an ancestor from the year 1700 and showing him a typical day in the life of Bill Gates. The opulence would obviously astonish your ancestor, but a good guess is that the features of Gates’s life that would make the deepest impression are that he and his family never worry about starving to death; that they bathe daily; that they have several changes of clean clothes; that they have clean and healthy teeth; that diseases such as smallpox, polio, diphtheria, tuberculosis, tetanus, and pertussis present no substantial risks; that Melinda Gates’s chances of dying during childbirth are about one-sixtieth what they would have been in 1700; that each child born to the Gateses is about 40 times more likely than a pre-industrial child to survive infancy; that the Gateses have a household refrigerator and freezer (not to mention microwave oven, dishwasher, and radios and televisions); that the Gateses’s work week is only five days and that the family takes several weeks of vacation each year; that each of the Gates children will receive more than a decade of formal schooling; that the Gateses routinely travel through the air to distant lands in a matter of hours; that they effortlessly converse with people miles or oceans away; that they frequently enjoy the world’s greatest actors’ and actresses’ stunning performances; that the Gateses can, whenever and wherever they please, listen to a Beethoven piano sonata, a Puccini opera, or a Frank Sinatra ballad.

In short, what would likely most impress a visitor from the past about Bill Gates’s life are precisely those modern advantages that are not unique to Bill Gates–advantages now enjoyed by nearly all Americans.

And while we modern Americans focus on how much more money Bill Gates has than the rest of us, our time-traveler would likely find the differences separating Gates from average Americans to be much smaller than the gargantuan differences between his own pre-industrial life and that of today’s ordinary Americans.

He would also likely find the wealth differences between ordinary Americans and the richest Americans trivial compared to the differences between most pre-industrial folk and the royalty who ruled them.

Before capitalism, royalty and the nobility had exclusive access to a deep pool of servants and amenities that made their lives vastly more agreeable than those of ordinary people. For example, monarchs spent no time washing clothing; their servants washed it for them. When dusk came and indoor lighting was needed, the rich just snapped their fingers and servants lit the chandeliers and candles of the great houses–and these or another set of servants emptied their masters’ chamber pots when necessary. Whenever the king fancied listening to a string quartet or watching a play, his court musicians and actors performed for him. If he or a powerful noble wanted to send a message to someone miles away, a messenger galloped off to deliver it. Needing to bathe, members of the royal household counted on servants to draw and heat the water for their baths. And only the rich could afford books.

A Flick of the Wrist

In modern America, no such differences separate the rich from the rest of us. We have automatic washing machines and clothes dryers (and inexpensive neighborhood laundries) that rescue us from the time-consuming, backbreaking, and dangerous labor of washing our clothes the pre-industrial way. When we need light, or want to listen to music or watch a movie, a flick of the wrist brings light instantaneously and a touch of a button brings expert performances to us in the privacy of our homes. When we wish to gossip with a friend 3,000 miles away, we do so effortlessly. Each of us bathes or showers whenever we want simply by turning on hot and cold running water from our taps, and our modern version of the chamber pot is emptied whenever we wish by indoor plumbing. Our homes are full of books.

The fact is, material benefits enjoyed in the past only by the superrich are, in today’s capitalist societies, enjoyed by nearly everyone. This undeniable fact demolishes accusations that capitalism creates inequality.

I made this point recently to an e-mail acquaintance. She accused me of belittling the plight of poor and middle-income Americans. Her argument boiled down to the claim that material things such as home appliances, indoor plumbing, and telephone service are irrelevant. “Life is more than materialism!” she insisted, complete with exclamation mark.

I responded in this way: “I don’t understand. You say that the market’s great failing is that it distributes wealth too unequally. I say that it distributes wealth–actual material amenities–far more evenly than people realize when they look only at money. You’re correct that life is more, much more, than materialism. But if you grasp this point, why do you worry about the amount of money people have? Surely money is even less significant than what it can buy. But if you insist on believing that the distribution of monetary assets is the proper focus, I will proudly consent to being called a materialist–for I will then call you a ‘moneyist.’ Better to be a materialist than a moneyist.”

The next time you hear someone lament the unequal distribution of money in a market economy, challenge him or her to show the relevance of that fact in light of the larger fact that capitalism continually makes increasing numbers and varieties of goods and services accessible to ever larger numbers of people.

  • Donald J. Boudreaux is a senior fellow with the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University, a Mercatus Center Board Member, and a professor of economics and former economics-department chair at George Mason University.