All Commentary
Monday, August 21, 2017

Wealth Redistribution is Not Economic Justice

If we truly wish to establish equality we must allow the market to distribute wealth as it will.

The famed observer of democracy, Alexis de Tocqueville, writes that, though democratic nations love freedom, “for equality they have an ardent, insatiable, eternal, invincible passion; they want equality in freedom, and, if they cannot get it, they still want it in slavery. They will tolerate poverty, enslavement, barbarism, but they will not tolerate aristocracy.”

The objection to wealth disparity is understandable.

It is this hatred of aristocracy – this predilection against the wealthy – that threatens the American democratic experiment today.

On the one hand, the objection to wealth disparity is understandable. When some people in the world are starving, when there is homelessness, when there is poverty, how can it be just that some people have so much? Is it illegitimate to reject the “aristocracy” of wealth? Is it not right – or morally imperative, even – to distribute economic gains to those who are left behind?

You Can’t Distribute What You Don’t Have

Despite the visceral reaction we have to poverty, if we truly wish to establish equality, and keep aristocracy minimized, we must allow the market to distribute wealth as it will.

An economic system of free exchange is largely meritocratic. By this, I mean that generally, those who offer the products that are most desired by others are the most rewarded by the market. Likewise, those who fail to understand what their world needs, or fail to effectively meet that need, typically end up with comparatively fewer rewards.

Those who have higher proportions of society’s wealth have often provided higher proportions of society’s amenities.

This is how the business structure operates. One enterprising man or woman, with a vision for how to supply his or her society with something it lacks, develops a means of producing what the community needs. Others, who prefer to forgo the insecurities of entrepreneurship, content themselves with employment for the businessperson. They are compensated with pay and all of society benefits from access to the new commodity supplied by the business.

It, therefore, makes sense that income distributions would be somewhat disparate. Some people contribute more to society than others. Capitalism incentivizes the risk-taking visionary by promising greater compensation that he or she might otherwise receive.

In fact, economist Thomas Sowell notes, “The very phrase ‘income distribution’ is tendentious. It starts the economic story in the middle, with a body of income or wealth existing somehow, leaving only the question as to how that income or wealth is to be distributed or ‘apportioned.’” Wealth, he notes, is produced. It is not manna from heaven.

Those who have higher proportions of society’s wealth have often provided higher proportions of society’s amenities. However, there are certainly those who acquired their wealth undeservedly and those who are destitute and yet whose characters might be most meritorious. Should the collective public intervene?

Shifting Today’s Burden to Tomorrow

Perhaps social safety nets on local levels can work. Church organizations, charities, even local governments concerned with people living in the immediate area, whose objectives are much more homogenous than those of people scattered across a nation, can have a massive impact on the alleviation of poverty – and provide economic justice.

But the structure of the economic justice system in modern America is antithetical to the natural institutions that were designed to help the poor. Our welfare system ultimately spoils the values which it seeks to uphold.

When we consider persons, we must not only consider those living here and now, but also those yet to come. It is as unjust to allow some to prosper at the expense of today’s poor as it is to supplement our quality of life at the cost of our children’s. And yet, it is exactly this latter sin that our welfare system commits.

Professor Laurence Kotlikoff delivered the following testimony to the Senate Budget Committee: “Our country is broke. It’s not broke in 75 years or 50 years or 25 years or 10 years. It’s broke today.”

The millennial generation finds itself heaped with financial burdens as a result of a bargain made not by them.

It is only a matter of time before the hour of reckoning arrives. Until then, America sustains its fiscal insolvency by passing off its burdens to the next generation of Americans.

What has caused this tremendous spending beyond our means? Largely, the institutions of social welfare programs.

Kotlikoff continues: “Indeed, were we to go back in time and re-label all past Social Security taxes as borrowing, official federal debt held by the public would not be $13 trillion, but $38 trillion, which is 211 percent of U.S. GDP.”

The return on investment that millennials will receive when it comes to Social Security is dismal by any standards, and grossly unfair compared to the benefits received by prior generations. Indeed, the millennial generation finds itself heaped with financial burdens as a result of a bargain made not by them, but by their parents and grandparents – who the bargain disproportionately benefits.

And it is not just the Social Security program. Pension law, labor market regulations, etc. all end up fleecing the young. Lauren Lomasky writes, “From the Social Security Act of 1935 to the Patient Protection and Affordable Care Act of 2010, better known as “Obamacare,” a stream of legislation differentially benefits the old at the expense of the young.”

America’s social welfare program is designed to redress the problem of aristocracy. It is designed to curb the prosperity of the rich at the expense of the poor. In function, it deprives society’s greatest contributors of their rights to their justly earned compensation, and creates a greater economic disparity in the end. Our government largely gets away with it – no one will witness the disparity until it’s too late, until my generation is forced to suffer the consequences of the fiscal incompetency of welfare advocates nearly a hundred years ago.

The problem with America’s democracy is that we’ve realized we can vote ourselves free stuff. But that has crippled our entrepreneurs today, and will cripple our children tomorrow. We cannot fault our electorate’s intentions, but we must recognize where we have erred. The dream of equality can exist to its fullest only when we leave ourselves free.

  • Tegan Truitt is the author of the small blog, A Shortage of Sand, which deals with economic philosophy, and a sometime speaker for the homeschooling company Classical Conversations.