Inequality Under Capitalism: What Are Our Duties to Eliminate Inequality?
Considering the difference between equal treatment and treatment as an equal, is all inequality morally problematic? In other words, do we have an obligation to try to eliminate inequality? Why or why not? Moreover, can we achieve greater equity under capitalism?
In answering this question, you must (a) incorporate the writings of Nozick and Friedman (in addition to your external sources), (b) explain at least one possible justification for preserving economic inequalities (beyond the belief that people deserve the benefits of their talents/natural capabilities), (c) discuss how these socioeconomic disparities can lead to other problematic forms of inequality, and (d) explain what obligations we do have in a capitalist system to respond to inequality.
PLEASE NOTE: with this sort of normative question, where there is no clear right or wrong answer, you must do more than merely state your opinion. This would fundamentally fail to satisfy the expectations of this assignment. Your task is to take a stand on the issue and to defend this position by writing an educated and informed response, incorporating specific ideas from the readings that support your thesis.
Critical Deliberation 
Why Natural Inequalities Progress Society, and Income Distribution Regresses Society
If we take the view that because people are born into circumstance and that everyone does in fact not have equal opportunity to succeed, I being from a white family have better chance than my black peer who was raised in Compton, than we should view our individual wealth accumulation as a lottery of chance. The lottery being based on chance in an income-redistribution society means that the winners must be coerced into redistributing their winnings. Friedman points out that this is in fact very problematic because it stipulates the lottery as useless, there is no incentive to partake in the lottery of chance if the winnings are distributed (Friedman 1962). This is why natural wealth inequalities are ok, the girl willing to risk becoming an actress, should she succeed, clearly deserves more than the girl who chose to work at the local DMV (Friedman 1962). One job carries much more risk and difficulty than the other; this willingness to risk is often why we see natural inequalities and is different than just one deserving their natural capabilities. We should not punish people for successfully taking risks because their peers didn’t under a pre-tense of un-equal opportunity. Nozick illustrates how the state could be better off with compulsory welfare payments because the lower class could be supported by the upper class (Nozick 1976). However, the fact that this behavior would not continue if the rich did not have to pay the poor means that the government is effectively controlling the behavior of one segment of the population (Nozick 1976), while offering more freedom to the poor via welfare payments. This favoring by the state is by definition un-equal and hence by trying to solve the perceived problem of inequality, they have just chosen a different class of people to treat unequally.
A common counter argument in favor of some sort of redistributing of wealth is that because these people at the elite/rich extreme are so much better off due to circumstances outside of their control. The people below them get discouraged and de-incentivized to strive for success if it’s reserved for a lucky few (NYtimes 2010). These socioeconomic inequalities can lead to other in-equalities in political influence because the wealthy can allocate more resources to their name in order to fight for their interests among other affluent government members.
The obligations we do have in capitalist society are to further economic growth in sectors society deems worthy to exploit. Economic growth has become associated with growing inequality, which as Tyler Owen points out is not necessarily the case, “inequality of personal well being is sharply down over the past 100 years” (Owen 2011). Bill Gates may make more than I do but there is no evidence he is happier. Furthermore, economic advancement has given million more access to modern medicine (Owen 2011). Bill Gates has given millions the empowerment of the Internet that in my understanding has made my college degree possible (Owen 2011). In essence these natural inequalities should be preserved because they involve the super rich getting richer and the poor staying around their current level, however what is lost in this argument is that the super rich usually control the mechanisms in order to attain higher living standards for society, which is what has continued to happen for the last 100 years (Owen 2011).
Cowen, Tyler. “The Inequality That Matters.” The American Interest The Inequality That Matters Comments. The American Interest, 31 Dec. 2010. Web. 14 Apr. 2015.
Friedman, Milton. Capitalism and Freedom. Chicago: U of Chicago, 1962. Print.
“How Superstars’ Pay Stifles Everyone Else.” New York Times, 25 Dec. 2010. Web. 14 Apr. 2015.
Nozick, Robert. Anarchy, State, and Utopia. New York: Basic, 1974. Print.
Inequality Does Not Lower Standards of Living
Response to Patrick
I feel that a key focus in weighing the pros/cons of income redistribution is how much of an impact this wealth really has on a recipient’s life.
Proponents will point out that economic inequality tends to give rise to political inequality (Acemoglu). One may also argue that those on the lower end of the spectrum have fewer opportunities than those with more wealth, and opportunity should be equal for all. Finally, one can make the claim that the poor gain more benefit than the rich lose by distribution; that is: the same amount of money makes a bigger difference to the poor and is a net “public good” (Miron).
Critics (like Friedman) will say that money isn’t the only way to have political influence, that opportunity is out there for anyone who wants to put in the effort, and that the rich are entitled to their wealth and any giving should be voluntary.
Patrick discusses these major arguments against redistribution, and he also raises an interesting point in discussing economic inequality versus inequality of personal well being. His example with Bill Gates mirrors the common adage “money doesn’t buy happiness”. According to research, however, money does increase happiness up to a point: $75k/year (Luscombe).
Redistributing wealth such that everyone makes $75/year might be the best we can do economically to maximize our national happiness, but that doesn’t make it a sound financial goal. What Patrick goes on to say I think embodies the strongest argument against needing economic redistribution: the wealthy contribute their wealth toward the betterment of society as a whole, including the poor.
Just as our poor today have a much higher standard of living than the poor in some other countries, the poor in many of those countries still lead much better lives than the poor, or even middle classes of the past. The average American’s annual income has increased twelvefold since the 1800’s, and along with that wealth has come huge improvements in healthcare, education, and availability of goods (Nye).
Our economy may be increasing in inequality, but not at the expense of the poor. This increase is throughout the spectrum, and as a result of the progress made (primarily) by the accumulation of capital in the upper classes, and the economic freedom to improve society that it leads to (Nye).
Acemoglu, Daron. “Economic power begets political power.” Economist. 23 Jan 2011. Web. 15 Apr 2015.
Luscombe, Belinda. “Do We Need $75,000 a Year to Be Happy?” Time. 06 Sep 2010. Web. 15 Apr 2015.
Miron, Jeffrey A. “Rethinking Redistribution.” National Affairs. Winter 2011. Web. 15 Apr 2015.
Nye, John V. C. “Standards of Living and Modern Economic Growth.” EconLib. 2008. Web. 15 Apr 2015.
Lottery of Life: Redistribution to correct for inequalities you are born into
Response to Patrick
While I agree with Patrick on his view that people are born into circumstances that have the tendency to limit some opportunity to succeed and conversely seemingly guaranteeing others success, I disagree with his point that natural wealth inequalities are okay. The circumstances that we are lucky enough to be born into do not justify the massive disparities in wealth, education and well being that exist. He states that this is not intrinsically wrong but I disagree and argue that again this related back to the circumstances one is being born into giving unfair advantage. All of this seems irrelevant to ones willingness to risk and being successful because not everyone is capable of taking such risks. Many times there are other factors that will hold back an individual from moving socioeconomically. While one may choose to risk a lot when it is only there own welfare a risk, the decisions becomes increasingly more convoluted when the welfare of ones family is at risk. This is why government policy and redistribution needs help those in the middle- class. President Obama stated recently “We would give working parents a chance to get ahead with guaranteed paid sick leave, and we’d give Americans of all ages a chance to earn new skills by making community college free for responsible students.” (Obama, 2015: 1). These changes help those who weren’t born with the same natural endowments and acquired wealth. Despite the positive efforts from the Obama administration to tax the wealthy to benefit the middle-class has been rather unsuccessful despite the federal tax rate paid by the 1% of households going up 6 percent since Obama took office (Sahadi, 2013: 1).
The mere fact that life is rigged against some from the very beginning seems reason enough to reallocate some resource to equalize the playing field. The very idea that some are born with natural endowments or acquired wealth is a form of personal lottery in itself and cannot be ignored. Patrick’s argument that the government is essentially coercing one segment into supporting another seems on its face bad but this statement is false. Many would argue that forced redistribution in any form goes against democratic ideals and undermines the role of government but governments are coercive by nature. This argument is made wrong when it is realized that United States government has the political authority to rule its citizens and in turn there is the obligation, on the part of the citizen to obey their government. This is the contract that all citizen essential sign by being in the United States and if they choose to see this as wrong, they can conceivably leave. Ultimately income Redistribution is a necessary part of progress and entirely justified. Natural inequalities do not function to progress society in the way that Patrick is adamant about. The best way to help society progress would be redistribute some resources so that more people are capable of reaching the potential that they are currently being deprived.
Obama, Barack. “A Blueprint for Middle-Class Economics.” Huffington Post. 29 Jan. 2015. Web. 16 Apr. 2015.
Sahadi, Jeanne. “Taxing the Rich: The Record under Obama.” CNNMoney. Cable News Network, 30 Jan. 2013. Web. 16 Apr. 2015.
Income Redistribution Is Not As Easy As It Seems
Response to Patrick
When Friedman uses the lottery analogy to show how people can be born into rich or poor societies, giving them varying levels of opportunity before they even have a chance to fend for themselves. However, one point that this analogy misses is that those families who are wealthy were not always wealthy. Whether it be one generation ago or 20 generations ago, somebody in the family made a decision that increased that families wealth enough for those later generations to benefit from it. According to the analysis of a competitive market, a poor family who may have “lost the lottery” could make that decision. In this way, I believe that almost all inequalities are natural wealth inequalities. If someone took the risk and ends up very wealthy, they have a right to give that success to their children and anyone who they please.
I do agree that some people have more barriers to success, such as being born in Compton where the world may seem like a very harsh place. However, there is no such thing as an unbreakable barrier, and this idea is what drives progress and innovation. Nozick says that people who are not coerced into giving would voluntarily give more than those who are forced to give. I agree with your reasoning in that if the government forces the rich to give to the poor, than this creates another inequality of treatment. The rich are being treated unfairly, and are not allowed to benefit from the success or luck that they have had.
A large counter-argument to limiting government interference is that economic freedom and political freedom should be separated, but it seems that those with greater economic power gain political power. In a study released by the IMF, although some inequality is needed to provide incentive for economic growth, it can also lead to destructive growth. Those who are poor may not be able to afford a higher education, making them politically weaker. If this trend continues, the wealthy will keep political power out of the hands of the poor and make decisions that are widely beneficial to themselves.
I believe that in order to benefit the society, there must be a competitive market in which inequality must exist. Inequality has been strongly correlated to economic growth, and according to Friedman, the market will change itself if it needs to change. Government interference would cause more of what we are trying to get rid of. Those who have economic power seem to be the ones who improve society as a whole, just as Patrick said with his Bill Gates internet reference. Eliminating inequality is an unrealistic problem to tackle. However, improving all standards in our society is not, and that is what a competitive market is meant to do.
Friedman, Milton. Capitalism and Freedom. Chicago: U of Chicago, 1962. Print.
Nozick, Robert. Anarchy, State, and Utopia. New York: Basic, 1974. Print.
Winship, Scott. “E21 Report 1 | Inequality Does Not Reduce Prosperity: A Compilation of the Evidence Across Countries.” Inequality Does Not Reduce Prosperity: A Compilation of the Evidence Across Countries. Manhattan Institute for Policy Research, 1 Nov. 2014. Web.
Berg, Andrew. “Inequality and Unsustainable Growth: Two Sides of the Same Coin?” IMF, 2011. Web
Capitalism Breeds Inequality
Through out the school year we have learned that capitalism needs competition. Competition over time will create efficiency. Efficiency over time creates specialization, and specialization over time tends to create inequality. So in the end I believe capitalism breed’s inequality. And a finding from the Paris School of Economics feels the same way. Thomas Piketty from “PSoE” found that we are living in an era of widening inequality so much so that the share of post-tax-and-transfer income going to the top 1 percent of earners increased from nearly 8 percent in 1979 to about 17 percent in 2007 (Hether Boushey). Also over the course of the current economic recovery, the top 1 percent has received 95 percent of all pre-tax income gains— seeing a 31 percent increase in their incomes— while the bottom 99 percent saw a meager .4 percent increase (Hether Boushey).
With those staggering numbers a question is raised, is it our responsibility to solve inequality? Well, I do not agree that it is our responsibility to try and eliminate inequality because by trying to eliminate equality we would need an intervention from the government and as Friedman stated the only reason a government should intervene in the market is to solve incomplete contracts. If they intervene for any other reason Friedman and I both agree that would be a step towards a command government. A real world example is Thomas Piketty’s Capital in the 21st Century, where Piketty hypothesis that wealth will cause a global war, and his way of solving this is a global tax on capital that could help governments better understand how wealth is distributed (Chris Mathews). This tax implementation is a non-democratic and non-capitalistic theory. It is implementing a tax on some and not on others. So by trying to eliminate inequality you are intruding personal liberty.
One justification for preserving economic inequalities is Nozick’s Wilt Chamberlin example. Where people voluntarily give up there equally distributed wealth to see an individual that specializes in a sport. In summary Chamberlin becomes wealthier then others because of his unique skill. This specialization is integral to capitalism, it justifies innovation.
So the real question is can we achieve greater equity under capitalism? In my personal opinion I do not believe capitalism can promote equity because it is a liberal grounded theory that promotes personal economic growth. While a socialist program promotes equity like Karl Marx.
Boushey, Heather, Understanding economic inequality and growth at the top of the income ladder, Washington Center for Equitable Growth, Oct 15, 2014, http://equitablegrowth.org/research/economic-inequality-growth-top-income-ladder/
Matthews, Chris, Bill Gates’ solution to income inequality, Fortune Magazine, Oct. 15, 2014, http://fortune.com/2014/10/15/bill-gates-income-inequality/
Capitalism and the Peoples Obligation to Inequality Problems
Response to Kellan
One of the consequences that stems from capitalism is inequality, and has Kellan stated, the need for competition in capitalism has lead to the inequalities that are present today.
The debate on whether it is our obligation to eliminate these inequalities comes into question. The issues of inequality does not fall on the people, mainly because the way the economy is set up it allows for people to have social mobility. This means that people have the tools and the ability to move from one socio economic class to another. The burden now falls on the free market and individual instead of policy making to change the way the economic inequality works (Muller, 2013). Government interference in this case would be unjust because it would move the economy from a capitalist system to more of a command economy. As shown the only way to reach a system that does not have major inequality is government intervention. Government intervention though will take away from the free market principles and in agreement with this blog post; inequality is not a reason for intervention.
Many people feel more obligated to help out with the inequality of the United Sates, and in some of these cases can be shown by their charitable donations and gifts. There was nearly $335 billion given to charities in the year 2013 (Comer, 2013). People in the United States have shown that it is their obligation to make sure that people that suffer from the inequality get the same amount of education and have a higher standard of living. Even though people still pay taxes, which fund governmental programs to help the less fortunate, people still donate tons of money on top of that.
There are large amounts of people that feel it is important to make sure the inequality is fixed, but then there is also an equal amount of people that believe it should be up to the free market to regulate.
Muller, Jerry Z. “Capitalism and Inequality.” Global. Foreign Affairs, 02 Mar. 2013. Web. 15 Apr. 2015.
Comer, Amy. “Giving Statistics : Charity Navigator.” Charity Navigator. Indiana University, 23 Dec. 2013. Web. 15 Apr. 2015.
Taxation on Over-Consumption Can Help Promote Value-Creating Equality
Response to Kellan
While I agree with Kellan’s notion that capitalism tends to create inequality and promotes personal economic growth, I do not believe that capitalism itself is what breeds this inequality. It is the policies that are implemented within the society that produces such inequity. The problem here is that while citizens in a capitalistic society have the opportunity to improve their well being, be it through more money, a better job, or a larger home, not everyone has an equal opportunity to gain these things.
Kellan mentions that the top 1% has received over 95% of all pre-tax income gains in recent years. While the capitalistic structure certainly allows for this type of problem to occur, the real issue lies with the policies implemented within the companies that the ultra-elite are working with. For example, after the Recession of 2007-2009, “by 2012 the top 1 percent of income earners had regained almost all ground lost… In contrast, the remaining 99 percent experienced stagnated real income growth.” (Saez 2014) The policies the 1% implement in their companies and lifestyle choices are to protect themselves during times of economic downturn, instead of their employees or other people in need. This type of policy can hinder production and motivation within employees. Now, a counterargument some may bring up at this point is, “well if I am a corporate CEO, then I am entitled to reallocating the money within the company, regardless of the country’s economic state.” I am not arguing that a corporate CEO has the right to reallocate funds within the company under a capitalist system. I am arguing that the inequality this right brings is not a reason to insult capitalism, rather, it is a reason to insult the policies enacted by greedy corporate heads in times of societal economic struggle.
In order to improve equality, Kellan goes on to discuss a global tax on capital, suggested by Thomas Piketty. This tax would target the ultra-wealthy people in the world by confiscating a percentage of their wealth. In my mind, this global tax sounds incredibly invasive and in fact, even more unequal than a progressive tax. The article this suggestion was taken from continues by discussing a quote from Bill Gates on philanthropy and how he wishes there were a clear distinction between different types of wealth. Gates proposes that there should be a “shift [in] the American tax code from one that taxes labor to one that taxes consumption.” (Matthews 2014) Under this type of system, not only would there be a balancing out of equality for those ultra-wealthy people who are over-consuming, but also it would promote the allocation of funds to more value-creating locations, and also promote more saving versus more consumption.
If a policy shift can be made towards the promotion of value-creating expenditures from the ultra-wealthy versus allowing over-consumption habits to unchecked, I believe the capitalistic system can be made even more successful.
Inequality, a Necessary Byproduct of Capitalism
Response to Kellan
Although it might seem unfair that such a small percent of the population has so much of the wealth, it is a necessary aspect of capitalism that helps to develop productivity and is going to be inevitable if competition is expected to persist as Kellan suggests. Heavily taxing the rich and wealthy has proved difficult as those in the higher tax bracket have ways of evading taxes as Friedman so clearly points out. For this reason Friedman suggests a flat tax rate
In a CNBC article titled,” Income Inequality: Is It Good for Everyone?” (Ellyatt, 2013) many different viewpoints of how inequality helps the U.S. economy are posed. For example Rick Santorum stated what he believes to be why we see such a great disparity in wealth among Americans,” Because people rise to different levels of success based on what they contribute to society and to the marketplace, and that’s as it should be.” (Ellyatt , 2013) This no doubt can be compared to Nozick’s Wilt Chamberlain example that Kellan points to. Those that generate greater demand and greater economic activity in a society should be valued more and therefore should have more wealth.
We must treat this unequal distribution of wealth in America the same way we are treating it on a global scale, with the goal of achieve self-sufficiency. A flat tax rate would have to be coupled with the reduction to the eradication of welfare programs, which Friedman also declares as unnecessary for various reasons. If we want to achieve self-sufficiency among the lower class we must treat poverty like we would treat a medical alignment. “This disease is poverty. And the cure for poverty is the Free Market.” (Meyer, 2010)To cure the dieses of poverty we must address the problem directly and not only the symptoms of the problem. Poverty produces bad housing, hunger, and vast other negative situations, but welfare is not the answer. In order to take advantage of the American free market where enterprises can flourish and education is greatly valued, the government must spend its tax dollars on public use to both create jobs and improve schools, parks, and infrastructure. By using tax dollars to improve primary/secondary school and lowering college tuition we can address the problems of poverty while still improving America.
One possible counter argument to flat tax rates and reduction of welfare programs is the idea that rich also get government services that the poor do not and thusly should be paying a larger portion of their income as taxes. For example, government bailouts and eminent domain have save many companies from bankruptcy, saving the CEO’s and large investors from loosing millions. This is a service that the government provides that although benefits the economy as a whole, benefits the rich and wealthy the most. In response, I would say that trickle down economics provides benefits for all and that supply and demand creates the wages of the super rich and therefore are justified.
Ellyatt, Holly. “Is Income Inequality as American as Apple Pie?” CNBC. N.p., 08 Jan. 2013. Web. 16 Apr. 2015.
Meyer, Herbert. N.p., 2010. Web. 16 Apr. 2015. .
Possible Compromise Between Equality and Financial Freedom
Response to Kellan
Kellan, I agree with you on the points you make about economic freedom (or wealth inequality, if you prefer) being critical to personal liberty. Nozick pointed out in his section entitled Philanthropy that forced charity is not charity at all, but a tax. My understanding of Nozick’s Wilt Chamberlain story is slightly different than yours. I feel that the point Nozick is trying to make is about the inequality between the salary Mr. Chamberlain received and the one the other 4 people on the court with him received. Nozick seems to express that the other players have no legitimate claim to the secondary collection D₂ made for Mr. Chamberlain. They all voluntarily accepted their contracts (D₁) under no coercion with full disclosure, and the fact that management’s deal with Mr. Chamberlain was different makes it no less just. Friedman explains the ethics of this process in Chapter 10 of Capitalism and Freedom. “To each according to what he and the instruments he owns produces.”
Some resistance to Nozick in favor of wealth redistribution can be found in the argument that unequal distribution of wealth leads to unequal distribution of power. One could easily attribute this accumulation of wealth and power to the growing economic divide in America and other industrial nations. Publications like The Economist highlight this trend in nearly every issue. In the March 21st issue, The Economist shows data correlating the amount of time parents spend reading to young children, and the child’s propensity to graduate college. The author further correlates the time spent with children to the parents’ financial status. The amount of time the college graduates can spend with their kids seems to correlate with those kids’ college graduation levels. One may then draw the conclusion that we’ve created a cycle in which those with college educations are more likely to push their children to go to and succeed in college, and have the financial means to do so.
To combat this inequality, some have proposed a free or nearly free higher education system similar to Germany’s. Germany’s higher education system is free thanks to a tax rate of 42-45 percent for individuals with incomes over 52000 euros per year. While it sounds nice, this system does not work in the free market system in the US. This is a form of wealth redistribution in which the public taxpayer pays a tax to support a system in which a young adult may enter, but has no obligation to complete. So, on top of the unfair burden this places on the more fortunate, this also is inherently wasteful in withdrawals and failures. As a compromise, I would suggest a voucher system not unlike Friedman’s which would subsidize some of the costs of education for the student, and reduce waste for the taxpayer.
Nozick, Robert. Anarchy, State, and Utopia. New York: Basic, 1974. Print.
Friedman, Milton. Capitalism and Freedom. Chicago: U of Chicago, 1962. Print.
“Minding the Nurture Gap.” Economist 21 Mar. 2015: 73-74. Print.
http://www.worldwide-tax.com/germany/germany_tax.asp Web. 16 April 2015.
When the Game is Played, Some Win and Some Lose
Response to Kellan
I agree with Kellan in his highlighting of competition as a main component of capitalism. Throughout the semester we have explored a wide-range of material that provides a broad collage of capitalistic principles and outcomes. There have been arguments raised for and against capitalism that intuitively make sense but when taken to the extreme do not necessarily seem justified or fair. Thus in thinking about the problem of inequality and how to fix it, I think Kellan does a good job in considering both sides of the fence and facing the harsh reality that capitalism does promote inequality, and as many would agree this is somewhat unfortunate. However as we begin to explore ways of ‘fixing’ this problem of inequality it is difficult not to engage in a slippery slope that ultimately raises very fundamental questions about the nature and responsibility of mankind. As Karl Marx says, “every form of society has been based, as we have already seen, on the antagonism of oppressing and oppressed classes. But in order to oppress a class, certain conditions must be assured to it under which it can, at least, continue its slavish existence” (p. 20), and it is fair to say that capitalism does provide the conditions to keep a class oppressed.
Yet is capitalism evil because it provides these conditions? Or is capitalism a good system because it provides conditions for opportunities at all? All people prefer to be the controllers of their own destinies, and in a capitalist system the argument is that the victims of inequality, the poor, have no control over their own destinies. But in fact they do, even if it is arguably limited. The opposite notion would be that we should eliminate everyone’s opportunity at controlling their own destiny and completely even the playing field. This serves as a counterargument to Kellan and myself, and this counterargument quickly begins to dwell in the realm of socialism or communism. What is the ultimate goal of a government and economic system? This counterargument seems to suggest the ultimate goal is equality. Equality is a worthy enough goal that everyone in society should submit to it, at the expense of their own personal liberty. This is an utterly undemocratic principle that I reject very strongly. It seems reasonable to believe that it is more fundamentally acceptable and preferable to be able to play the game or enter the lottery, then for the game to never be played or the lottery to never occur on the grounds that some will win and some will lose. In capitalism there lies the opportunity at least for a person to increase their economic status as opposed to a socialist system in which all is equal because all is controlled and predetermined. Taken to its extreme, as Nozick puts it, “the socialist society would have to forbid capitalist acts between consenting adults” (p. 163), and this of course is a complete infringement on liberty and property.
Marx, Karl, and Frederick Engels. “Manifesto of the Communist Party.” Trans. Samuel Moore. Marx/Engels Selected Works, Vol. One, Progress Publishers, Moscow, 1969, pp. 98-137.
Nozick, Robert. Anarchy, State, and Utopia. New York: Basic, 1974. Print.
Response to Kellan
I disagree with the conclusion that capitalism promotes inequality. While it is true that many capitalist countries have high levels of inequality (the United States being a prime example) these inequalities are a factor of poor governing and implementation rather than a byproduct of capitalism itself. In an article by the New York Times Joseph E. Stiglitz argues that capitalism is not to blame for the inequality in The United States as some of world’s most equitable countries (such as the Nordic countries) are capitalist. Stiglitz instead argues that the inequalities are caused by the amount of influence money holds in politics and that in order to start restoring equality we need to end the tax breaks and special privileges for the wealthy and corporations so that political equality is greater. Communism may seem like a great alternative to capitalism in theory but in practice communism has failed to provide the equitable outcomes promised by Marx. Even though Capitalism may not lead to perfectly equitable distribution of resources does not mean that necessarily it promotes inequality.
Capitalism failing to provide equitable distribution of resources then begs the question of whether or not we are morally obligated to eliminate inequality. I agree with Kellan that it is not our responsibility to eliminate income inequality, but I disagree that government intervention in the market should be limited to incomplete contracts as Friedman states. Government intervention should not be as limited in scope as Friedman describes and shouldn’t try to promote equality but rather ensure that all people have an equal opportunity to succeed and that no one is hindered by the conditions they were born into. In terms of taxes for redistribution of wealth I agree with Nozick that it is better to allow people to choose how to donate their money rather than force them to pay taxes to redistribute wealth (although there still should be taxes for social programs such as unemployment, social security etc…).
As stated before I disagree with Kellan’s conclusion that we cannot achieve greater equity under capitalism. When answering this question it is important to think about whether or not it is realistic to eliminate inequality and also how effective other forms of government have been at reducing inequality compared to capitalism. While some argue that communism promotes equality historical examples have rarely shown this to be true (given few countries follow the Marxist definition of communism exactly) while many capitalist countries have thrived and some capitalist countries like Norway and Sweden have some of the lowest rates of inequality in the world (Barford).
Barford, Anna. “The Rise of Income Inequality Amongst Rich Countries.” Inequality Watch. December 13, 2011. Accessed April 17, 2015. http://inequalitywatch.eu/spip.php?article58.
Stiglitz, Joseph. “Inequality Is Not Inevitable.” The New York TImes. June 27, 2014. Accessed April 17, 2015. http://opinionator.blogs.nytimes.com/2014/06/27/inequality-is-not-inevitable/?_php=true&_type=blogs&_r=1.
Capitalism: The Breeding Ground of Inequalities. Systematically limited.
In chapter ten of Friedman’s Capitalism and Freedom, Friedman states that there are three types of inequalities. These include: natural capacities, inequality from inherited wealth, and inequality from acquired wealth. Among these three, an argument can be made that not all inequality is morally problematic. Since this is the case, an obligation to eliminate inequality would not be appropriate in a market society. Furthermore an attempt for seek equity under capitalism would ill mannered.
Primarily, the driving force behind preserving economic inequality would be that of the free rider problem. To explain, if economic inequality was removed, equal distribution would lack the incentive for an individual to allocate product for him or herself. In other words, forcing reallocation of product equally, will provide no incentive to further oneself by working hard. This notion is echoed with Nozick’s excerpt regarding philanthropy. Remember when individuals are forced to contribute, they actually contribute less, rather than contributing more when not required. Therefore, preserving economic freedom can in fact yield more contributions, as the free rider magnitude is decreased.
Socioeconomic disparities can lead to other problematic forms of inequality as individuals often see money as a form of opportunity. Let us look at the Declaration of Independence to assist in unpacking this statement. It states: “…unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness” (“DoI: A Transcription). From this, the connection between economic opportunity and pursuit of happiness can be clearly made. Because of this, hindering one’s economic opportunity soon becomes a form of Constitutional inequality, rather than simply economic. A common case of this is seen with the Supreme Court’s ruling of Citizens United v. FEC. Essentially what was decided was that under the first amendment, money given to campaigns was seen as a form of speech and was protected (Stevens). Therefore, these socioeconomic disparities can lead to forms of political inequality, rather than just socioeconomic.
Up until this point, we have discussed how economic inequalities can lead to worsened political inequalities, and that preserving economic equality can lead to greater monetary contributions. However, does one have an obligation to respond to inequalities in a capitalist system? The argument can be made that no obligation is to be had. In other words, the inequality is the stage, which the system is on. It is an inherent byproduct of the way this market system behaves. Now the counter argument to this is that economic freedom needs to be upheld with political freedom and because of this, the obligation to remove the inequality is present. Unfortunately, I would be hard-pressed to discover greater equity under capitalism. As discussed, capitalism breeds some forms of inequality. The most trivial form of inequality is that of natural capability. In the market system, there is a niche for each individual. It would behoove the individual to optimize their natural capability for that niche, as states do with competitive advantage. Capitalism breeds inequality. A cynic’s view is that a differentiation between morals and capitalism needs to be made.
“The Declaration of Independence: A Transcription.” National Archives and Records
Administration. National Archives and Records Administration, n.d. Web. 14 Apr. 2015. .
Friedman, Milton. Capitalism and Freedom. Chicago: U of Chicago, 1962. Print.
Robert Nozick – “Philanthropy,” in Anarchy, State, and Utopia (1976).
Stevens, J. CITIZENS UNITED v. FEDERAL ELECTION COMM’N. N.p., 24 Mar. 2009. Web. 14 Apr. 2015. .
Capitalism and Inequality Blog Response
Response to Josh
I feel that too much talk of morality has crept into the discussion about income and wealth inequality. I think most can agree that some economic inequality is necessary to incentivize people (and corporations) to be efficient and innovative. That is to say that the principal of competition as a good thing is sound, but competition necessitates winners and losers, and in economic terms that means inequality is bred from competition. I also think that most can agree that wealth inequality domestically and internationally are unacceptably and even dangerously high and always (or almost always) have been. I would say this is not a moral line of thinking, but a logical one grounded in real world facts. There is a baseline minimum of wealth that an individual needs access to in order to have the opportunity to find a meaningful place in life for themselves. The fact of the matter however is that billions of people around the world do not have access to this minimum and hence do not really have equal opportunity, while the top 1% amass wealth and property far beyond what they could ever use or spend in their lifetimes. There is little blame to point out, both rich and poor are being rewarded and punished by a self-perpetuating system that needs a little adjustment.
So I would say that reducing inequality is not a moral obligation but one of necessity for everyone to have a fair chance in life. Furthermore, persistent and significant inequality tends to lead to rebellions and revolutionary change as the poor lose faith that the economic and or political system is fair or beneficial to them. I am speaking specifically of the loss of social mobility in American in the last 30 years. It’s not so much the inequality that will lead to violence, as the inability of the poor to improve their station. If someone was raised poor, and their parents and grandparents before them were raised poor, and they are underpaid and overworked their whole life and looking at their children growing up poor too, well, the system might start to seem broken and the American dream dead. If too many people find themselves in this sort of situation, a socialist style revolution might become possible. Many articles blame the lack of social mobility on failing and underfunded public schools (1, 2). I agree that this is a big part of the problem, but I feel that there are other significant factors as well. The two I would point to most are wages that have been stagnant for decades (caused by the general labor surplus) and the ludicrous earnings the wealthy constantly bring in from investments. Even though that isn’t income earned from working, it has to come from somewhere right?
I would have said that equality is the stage that capitalism is set on, and that loss of equality is like tearing a bunch of holes in the stage. If more people had surplus income then more people would be able to invest and to put their own ideas into practice. This must be better (more efficient) than a stratified system where only a few are directing the labor of the entire country. But unfortunate capitalism seems to create that same stratified inequality, so I would say that at this point it becomes the responsibility of the state to intervene and correct this trend at least somewhat. I directly disagree with Freedman and Nozicks general claim that state intervention is unjustified. Sometimes it is, but often things do not change for the better and when that happens an outside force is needed to correct it. As cumbersome as state intervention often is the state is the only entity that potentially could do something about growing inequality and loss of social mobility; so it must fall to the state by default.
Reeves, Richard V. The Economic Case for Social Mobility. Brookings Institution research page, Aug, 2013. http://www.brookings.edu/research/opinions/2013/08/16-economic-case-social-mobility-reeves
Zakaria, Fareed. Social Immobility Erodes the American Dream. Washington Post opinions page, Aug, 2013. http://www.washingtonpost.com/opinions/fareed-zakaria-social-immobility-erodes-american-dream/2013/08/14/c2fc6092-04fa-11e3-88d6-d5795fab4637_story.html
Inequality Fosters Prosperity
The continuous debate that persists surrounding the large gap in income and wealth leading to massive inequalities between the rich and poor might not be as detrimental as politicians have made it seem. In fact, through analyzing the works of Milton Friedman, Robert Nozick, and other economic thinkers, we can see that economic growth and the stable nature of mobility in the market endure, and by preserving economic inequalities we can be better off in the long-run and create incentives for individual growth.
Looking at Friedman and Nozick, the strong sense of personal betterment and the notion that you ‘reap what you sew’ is very important. The existence of inequality is not inherently bad. Friedman makes the analogy of a lottery; a group of individuals that have equal initial endowments who agree upon entering knowing there are very unequal prizes showing that the resultant inequality of income is required to allow individuals to make the most of their initial equality. The important takeaway from this analogy is that by redistributing income after the lottery, it is the same as denying them the chance of entering the lottery at all (Friedman 1962, 162-3). Because individuals have freedom of occupation and market mobility, inequality will surely be present, and not as an ailment, but as a way to make the most of ones natural capacities and condition (Friedman 1962, 162-3). Nozick’s ideals surrounding philanthropy directly play in to this notion of income redistribution. When individuals are forced to pay or contribute, they in turn give less than what they would give if it were a voluntary transaction (Nozick, 1974).
Another compelling argument in favor of income inequality and the acquittal of redistribution is the notion that with large income gaps comes stronger economic growth. In developed nations, greater inequality tends to directly correlate with increased economic growth (Winship, 2014). Using the analogy that stronger growth may explain how, “when the top gets a bigger share of the economic pie, the amount of pie received by the middle class and poor is nevertheless greater than it otherwise would have been” (Winship, 2014). The idea is that by increasing the “economic pie” through allowing for free market principle and inequality, people are better off as a whole due to the unrestraint of the economic elite. A similar notion that needs to be addressed is the fact that the unconstrained opportunity for individuals to create value in a society as well as the fact that their income reflects what they create encourages innovation and entrepreneurship (Garrett, 2010).
Although economic inequalities can lead to the overall benefit of the greater good, these socioeconomic disparities can lead to other forms of inequality. For one, there is the notion that the economic elite has an unfair advantage or disproportional leverage on political influence due to their vast resources and wealth. Living in a capitalist society, I don’t believe we are obligated to eliminate inequality, but rather to embrace it and realize its economic potential. Controversial, yet by allowing for free enterprise and creating incentives towards self betterment, the economy can run at full efficiency and allow for the greatest economic growth.
Friedman, Milton. Capitalism and Freedom. Chicago: U of Chicago, 1962. Print.
Garrett, Thomas A. “U.S. Income Inequality: It’s Not So Bad.” Federal Reserve Bank of St. Louis, 10 May 2010. Web.
Nozick, Robert. Anarchy, State, and Utopia. New York: Basic, 1974. Print.
Winship, Scott. “E21 Report 1 | Inequality Does Not Reduce Prosperity: A Compilation of the Evidence Across Countries.” Inequality Does Not Reduce Prosperity: A Compilation of the Evidence Across Countries. Manhattan Institute for Policy Research, 1 Nov. 2014. Web.
Inequality is a Problem for Everyone
Response to Harrison
Harrison claims that inequality is not inherently bad. He talks about the analogy of a lottery. The problem with this analogy is that not all people start at an equal place like the analogy would say. They start unequal and also receive “unequal prizes”. Because people don’t start equal, income redistribution is needed so that people have a equal chance of succeeding. For example, those who can’t pay for college need help from the better off so they have the same chance of getting a degree as those who can already pay for it on their own.
Inequality should try to be eliminated because it helps everyone if it is. According to Eric Schurner, of US News, “countries with lower levels of economic inequality showed higher levels of long-term economic growth” (Schurner, 2014). This is the case because “giving more people a shot at economic success produces greater gains for society because more people are contributing” (Schurner, 2014 ). Income redistribution ultimately will help everyone because it can help turn everyone in society into a productive member of society instead of having a large gap between the successful and unsuccessful.
In regards to Nozick’s views of philanthropy, people may not give at all if they are not forced, which would create a huge problem. The charity also may not be distributed equally. Some of the people who need money may not be willing to publically ask because of their own pride but that doesn’t mean they don’t need the money. Having a system in place to equally distribute the money is fairer and helps get the money to those who really need it.
Harrison brings up the point that if the elite has more money the middle class and the poor will also get more money and growth. As we saw in Wednesday class however, the elite 1% have the majority of the wealth and the middle class and poor have almost nothing. An increase in the elite does not mean that it will trickle down. Likely, the wealthy will just gain more of the wealth. As far as income being a form of encouragement, I think this could be true but people need help to gain a higher income. If someone is stuck in a minimum wage job because they can’t get other work then they won’t have time to increase their skills and education because they’re working. Thus, they need the help to get a better income. Brad Plumer says that high inequality can lead to underinvestment in education, which would mean that people are less educated and can’t get jobs that would provide them a better income (Plumer, 2013) Therefore, income redistribution is needed so that people have a better chance of being successful and increasing their own place. (Extra Credit 2)
Friedman, Milton. Capitalism and Freedom. Chicago: U of Chicago, 1962. Print.
Nozick, Robert. Anarchy, State, and Utopia. New York: Basic, 1974. Print.
Plumer, Brad. “Is Inequality Bad for Economic Growth?” Washington Post. The Washington Post, 2013. Web. 17 Apr. 2015.
Schurner, Eric. “Why Inequality Is Bad for Economic Growth.” US News. U.S.News & World Report, 2014. Web. 17 Apr. 2015.
Bad for Our Economy, Bad for Our Morality
Response to Harrison
I agree with Harrison’s original premise that inequality is not inherently bad, and Harrison’s point that inequalities can make the most of our natural capacities is one well-supported by Friedman. Those who have the equal opportunity to pursue the type of life which they would like to live should of course be allowed to do so, and this will lead to some people making more money than others (Friedman 1962: 162). Furthermore, as Nozick explains, to achieve economic equality would take constant government intervention (Nozick 1976: 163), and this is would be a violation of individual rights.
But, inequalities in our system don’t always stem from different talents or different amounts of work. They often stem from systematic oppression of certain groups. People who are born into low socioeconomic classes in the United States almost always stay there, and this is tied very explicitly to race, as well (Desilver 2014: 1).
According to John Rawls’ idea of the “veil of ignorance,” this is fundamentally unjust. Rawls first suggests that we imagine that we do not know what station of life we had been born into. He then argues that in order for a decision to be moral, it should still be the decision we would make regardless of who we had been born as (Rawls 1971: 128). According to this view of morality, the decisions we would need to make in order to have a moral economic system would have to be the same whether we had been born a man in a family of white CEOs or a woman in a family of black housekeepers. By this view, reforms to ensure equal opportunity would be absolutely necessary. Our system is fundamentally unjust. It benefits some unduly and oppresses others.
Not only is this bad for those who are born into less fortunate circumstances, it is also bad for the economy as a whole when the purchasing power of entire classes is drastically reduced. Studies show that as the income gap widens, the economy as a whole actually slows (Stone et al 2015: 1). Some inequality spurs the economy on, but at the levels we have, it is actually reducing our overall productivity.
A system where inequality is determined by not only by one’s abilities and one’s willingness to work but also by other less relevant factors is fundamentally wrong. Some inequality is justified, and as Harrison very compellingly explains, some inequality is good for the economy, as it can grow the amount of income which every sector has. It would make very little sense to argue that everyone should have relatively equal wealth. But what can’t be good for the economy is when entire groups of people are unable to fulfill their full potential, and all the while wealth accumulates in places where it does very little good for the majority of people.
Friedman, Milton. Capitalism and Freedom. Chicago: University of Chicago Press, 1962.
Nozick, Robert. Anarchy, State, and Utopia. New York: Basic, 1974.
Desilver, Drew. “5 facts about income inequality.” Pew Research Center. January 7, 2014. http://www.pewresearch.org/fact-tank/2014/01/07/5-facts-about-economic-inequality
Rawls, John. A Theory of Justice. Cambridge: University of Harvard Press. 1971.
Stone,Chad; Trisi,Danilo, Sherman,Arloc, and DeBot, Brandon. “A Guide to Statistics on Historical Trends in Income Inequality.” Center on Budget and Policy Priorities. February 20, 2015. http://www.cbpp.org/files/11-28-11pov.pdf
Envy or Impartiality? The Real Motive Behind America’s Economics
Coping with economic inequalities is so highly controversial because of the questionable underlying intention. Is the government’s involvement due to an absence of fairness or the presence of resentment? Officials and constituents often are on one side of the fence. The fairness side believes that there is a lack of opportunity for people to gain economic status. Barriers preventing opportunity could be anything from a lower class upbringing, racial stereotyping, gender disadvantage, or an insufficient education level. The resentment side believes that jealousy and envy drive the lower class to demand regulation on the upper class, in order to subside the economic gap. Either way, economic inequality has exacerbated in America (Toyama).
Friedman supports allowing inequalities to naturally occur and keep as a norm in the economic system. One reason to let economic disparity flourish is the validity of our judgment. Friedman questions our ability to justify choosing, when force is or is not used to extract other’s means we feel entitled towards (Friedman, chapter 10). Moreover, we are much more hasty to feel entitled when profit is made from merit as opposed to profit acquired by chance. Friedman acknowledges these tendencies of human nature and it makes economic inequality seem potentially better off naturally taking course than dictated by individuals.
Irregularities in the economics of Americans can lead to further problems, beyond the few rich controlling the majority. When tax policy is engineered to reduce the share upper class and corporations must pay, the middle class takes on a greater burden. Now these working individuals have to wage more in both taxes and public services, such as public higher education (Kirsch).
Combating the great economic gap in America is a moral obligation of the society. However, the extent to which it is controlled approaches a fine line. Only when there is an absence of equal opportunity, should there be this obligation to impose. The imposition of the government should not be to merely evenly redistribute income, but rather bring back the option for its society to achieve economic success. As Nozick concluded from voluntary exchange, the only way to maintain equality is through the persistent interference from government. Friedman and other liberals believe government involvement is unnecessary and unjustifiable because individuals have an inherent right over their property. A capitalistic society is an undeniable producer of inequality (Muller). Because of the way this system works, a variance in economics will continuously occur. Economic inequality is acceptable, except for the moment when the public as a whole is no longer benefiting.
Kirsch, Richard. “The Politics of Responsibility, Not Envy.” The Huffington Post. 12 Feb. 2015. Web. .
Muller, Jerry. “Capitalism and Inequality.” Global. Council on Foreign Relations, Apr. 2013. Web.
Toyama, Kentaro. “What Moral Philosophy Tells Us About Income Inequality.” The Atlantic. Atlantic Media Company, 02 Feb. 2012. Web.
We should not blame ourselves for the prevalence of inequality
Inequality is inevitable within our society and should not be treated as a problem of morality but rather of a prevailing social construct. In order to live in a capitalist society, one that breeds innovation and growth, inequality must take shape. A systematic redistribution of income is whats morally stagnant because it de-incentivizes individuals in their plight to innovate. Some people simply shouldn’t have the opportunity to take the reins of our society based on the merit they possess and produce (Thomas, 2015, 2).
The preservation of economic inequality is crucial. It’s clear that economic inequality in the United States must diminish in order for us to continually evolve economically, however, the total elimination of economic inequality is impossible without massive societal repercussions.
I tend to outwardly deny the findings of Milton Friedman and Robert Nozick in their assessment of economic inequality. This is due to their lack of monetarily feasible plans for eliminating or curbing inequality. They paint in brush strokes that fail to account for the amount of money it would take in order to revert into a system of more equally distributed wealth. I am committed to freedom, but I am also fully committed to a society that strives to balance achievement and compassion. Compassion is charity but should never come at the cost of ones earnings. We can’t rely on the people of this nation to subsidize those in a lower income bracket without the presence of government intervention.
What we as producers and consumers in our society must do to curb the negative externalities that come with inequalities is to focus on “social mobility” as a avenue for greater change (Cowen, 2015, 1). Economic immobility and economic inequality must be viewed as entirely separate. Economic inequality comes with many problematic externalities but what keeps individuals from traversing across the fiscal rungs of our society is mobility. There is a correlation between inequality and immobility but in no way is there a causation (Cowen, 2015, 1). It is not obligatory that we respond to inequality. It is however obligatory that we respond to the needs individuals who are ailing in our communities. I staunchly support government mandated programs as avenues for correcting some of the negative externalities associated with inequality. Public housing, taxation, and medical care are all programs that increase the quality of life for many americans and help to diminish social immobility.
Cowen, Tyler. “It’s Not the Inequality; It’s the Immobility.” New York Times, 04 Apr. 2015. Web. 15 Apr. 2015.
Thomas. “How Poor Are the Poor?” New York Times, 24 Mar. 2015. Web. 15 Apr. 2015.
Capitalism and Inequality
When considering inequality, it is necessary to define what equality is and how it is achieved or perceived. As defined by Milton Friedman in Freedom and Capitalism, there are two ways that equality can be expressed; through equal treatment and treatment as an equal. Equal treatment is taken to be as payment for product; or to each according to what s/he has made of their lives and with their personal endowments. On the other hand, there is treatment as an equal, where every person is seen as an equal moral agent; each wo/man is treated as an equal sentient human. Equal treatment and treatment as an equal aren’t morally exclusive, you can have no respect for a person of lower moral standing (a rapist) but still treat them as a human being. Economic inequality becomes morally problematic when wealth isn’t perceived to be acquired through fair means or at fair prices. Recognition of inequality can cause some to attempt to solve the problem themselves an example is Dan Price, Gravity Payments CEO in Seattle. Mr. Price surprised his employees in a meeting by telling them that they would all get paid a 70,000 dollar salary, while he took a 930,000 dollar pay cut(Cohen). This is a perfect example of Nozick’s “Philanthropies” Chapter in Anarchy, State, and Utopia. Nozick posits that taxes are unnecessary because those compelled to give don’t do it because it’s compulsory but rather because it is the morally right thing to do.
There are two different types of inequality inherent in society: inequality of personal endowments, and property/wealth inequality. Inequality is expressed in personal endowments, due to genetic differences humans all inherently have different capabilities and aptitudes, making us unequal from birth due to random factors. Acquired property/wealth is seen to be morally permissible because a man acquires what he is capable of getting through a fair exchange. Inherited wealth brings up a moral dilemma, since a person inheriting wealth never worked to have acquired it, how are they entitled to having more than the others? But if the man who made the money wills it to his family he should be allowed to dispose of his income as he dictates. If inequality arises naturally through the benefits that come from the fruits of everyone’s talents then is it that wrong? Not necessarily, economic inequality incentivizes people to work hard and attempt to progress in the capitalist market. Economic Inequality should only be regulated if it translates directly to political power, because it would create a systemic externality reducing the political freedoms of the rest of the polity. Another reason to check against economic Inequality would be because it keeps the polity from being sufficiently educated to participate in the democratic process (some too poor to pay for education). Inequality can perpetuate inequality if allowed to run unchecked, much like how monopolies are considered to be a negative side effect of the market, too much power at the hands of the few keeps competition out of the market(Anti-Trust Laws).
Anti-Trust an Overview: Cornell University Law School, WEX. https://www.law.cornell.edu/wex/antitrust.
Cohen, Patricia. “Owner of Credit Card Processor Is Setting a New Minimum Wage: $70,000 a Year.” New York Times: Page B3 New York edition; April 14, 2015. http://www.nytimes.com/2015/04/14/business/owner-of-gravity-payments-a-credit-card-processor-is-setting-a-new-minimum-wage-70000-a-year.html?_r=1.