Inequality Is a Side Effect of Progress

And that's okay.

"Imports are Christmas morning; exports are January's MasterCard bill." - P.J. O'Rourke

Completed in 1883, the Brooklyn Bridge took fourteen years to build. This engineering marvel brought a still distant world even closer together.

What’s important about the Brooklyn Bridge in a bigger, historical sense is what it signals about mankind: as humans we’re in relentless pursuit of closeness with our fellow man around the world, with trade top of mind. Seemingly every technological advance of major consequence (the telephone, the car, the airplane, the computer, etc.) has been about shrinking the world in a figurative sense, and reaching more people with goods and services in a literal sense.

It’s a Small World After All

Progress has been defined by a shrinking of the world through technology.

In modern times, and thanks to the internet and Wi-Fi, we individuals can communicate with and transact with the world instantaneously. Thinking about the latter in terms of one of the world’s most valuable companies, Amazon’s worth is a function of Jeff Bezos being able to serve the world’s needs from Seattle despite Amazon not having a physical presence in much of the world. The importance of Amazon’s story cannot be minimized.

Progress has once again been historically defined by a shrinking of the world through technology. As it shrinks we have more and more people capable of serving our myriad needs. It’s exciting to remember that humankind’s best and brightest have worked feverishly for centuries to enable more and more trade among individuals who don’t share the same town, or for that matter, country. Here lies the source of our immense wealth.

The more that we can get from others in return for our toil, the greater the odds that we can do the work most commensurate with our skills. In that case, the internet has enabled free trade on a scale previously unseen, thus enabling our own productivity-enhancing specialization in concert with the increasingly specialized being served by the world’s greatest entrepreneurs no matter their location.

Anyone doubting the scenario described in the above paragraph need only look at the share prices of US-based Amazon, and China-based Alibaba. The stocks of both are a reminder that open trade is a prosperity machine simply because a growing ability to get in return for our toil enhances the odds of us doing the work that most amplifies our skills.

If the previous assertion weren’t true, neither Amazon nor Alibaba would be worth much. They thrive given the basic truth that we work so that we can import. Our importing could be from across the street, or from the other side of the world, but that’s really of no consequence. The making is all about the getting.

The Globalization of Exchange

All of this looms large in consideration of the policy yearnings that define the modern left in the US, along with the Donald Trump right. Lefty New York Times columnist David Leonhdardt views rising inequality as evidence of a “broken” US economy, while President Trump similarly views rising imports as evidence of a US economy rushing toward “carnage.” Leonhardt despises Trump, Trump likely despises Leonhardt assuming he contemplates him, but what both miss is that their policy yearnings are intensely similar.

Thanks to the globalization of exchange, we increasingly don’t have to worry about what we can’t do.

Indeed, is it any surprise that inequality has soared in modern times? It shouldn’t be. What’s important is that the rising inequality has logically and happily been an effect of a surge in global trade. Thanks to transportation and communication advances, the entrepreneur of today can serve much of the world. While Bezos’s genius would have been limited to the Pacific Northwest 100 years ago, nowadays much of the world can be touched by his greatness.

Leonhardt moans that “inequality has soared only in recent decades,” and the proper answer is that of course it has. With the proliferation of technology that has figuratively shrunk the world, the odds of genius business minds getting to serve the needs of the world have grown.

What’s important is that this increase in trade is the source of individual wealth. As individuals i, would take a lifetime to ineffectively manufacture just the plastic case that holds the supercomputers we call smartphones, but thanks to the globalization of exchange wonderfully enhanced by the internet, we increasingly don’t have to worry about what we can’t do.

The more that we’re importing, the more that we’re specializing. And the more that individuals grow prosperous through specialization, the more that the best of the best will grow staggeringly rich meeting the needs of an increasingly well-to-do global population. Yet Trump wants to cruelly delink an increasingly interconnected world through tariffs meant to make wealth-enhancing trade more difficult. The man who promises to improve trade-enabling infrastructure oddly wants to put boulders in front of the cars and planes that will populate what's improved.

Barriers to Boosting Wealth

Even the poorest Americans have access to comforts today that would have staggered the super rich of not too long ago.

Interesting here is that Leonhardt bemoans “living standards for most Americans” that “are stagnating,” while Trump promises to impose tariffs to arrest the alleged decline of US living standards, but the reality is that even the poorest Americans have access to comforts today (computers in their pockets, inexpensive rides at our door with the tap of a button, movies and television on their phones – to name but three) that would have staggered the super rich of not too long ago.

Wealth, per Matt Ridley, is a function of “living made easy by markets and machines and other people.” That’s what’s happening today. While there will always be poor and rich, the definition of modern poor would in certain ways have registered as rich in 2005, and unquestionably rich in 1905.

As inequality rises, the lifestyle gap between the rich and poor shrinks. Of course it does. Innovators get rich by virtue of commoditizing yesterday’s luxuries, and the innovators of today once again get to serve the needs of a much greater number of people.

Yet the overly emotional Leonhardt ironically clamors for policies that would “produce a different outcome" than immense wealth, while at the same time bashing President Trump. What the hysterical Leonhardt plainly misses is that Trump’s desire to put up barriers to the wealth-boosting act that is trade is the quickest path to shrinking inequality.

In decrying inequality, an overwrought Leonhardt seeks policies to reverse progress achieved through the freedom to serve in order to be served. More to the point, in decrying inequality Leonhardt is revealing a Trumpian authoritarian streak that he would presumably prefer hidden, but that Trump proudly wears on his sleeve. Leonhardt has unwittingly found the source of his policy nirvana, but his teary temperament has seemingly blinded him to this truth.

Reprinted from Real Clear Markets.

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