The prince and the pauper

“The rich are getting richer at the expense of the poor” is oft stated in casual discourse. There is a general sentiment that wealth inequity is a significant issue affecting American society. In fact, there has even been a recent viral video on YouTube called “Wealth Inequality in America” that has garnered over 5 million views. Unfortunately, reality does not support this vision of unjust inequality. Our free enterprise system makes America the wealthiest country in the world, and that system must endure if we hope to continue being a prosperous and free people.

The aforementioned video is entertaining but nonetheless logically unsound and perniciously misleading. The first point made is that the actual distribution of wealth in the U.S. is remarkably different from what the average person thinks it should be. So what? Is it surprising that the ideals of hoi polloi aren’t reflected by reality? No, and they ought not be. The average person has absolutely no idea what sort of economic system promotes his or her individual interest and the collective interest of the nation. At one time, people supported Marxist economics because of its similar allure. It didn’t play out well in actuality, as we all know. Similarly, the idea that each quintile of society should accrue roughly the same wealth, although popular, is an absurd and backward idea.

Second, the video makes the case that the rich have become disproportionately wealthier over time. Again, so what? This is simply an example of Pareto’s principle that a small minority generates the majority of production. As such, they receive the majority of the wealth created. The key point to understand is that both the rich and the poor have become wealthier over time. According to data from the U.S. Census Bureau, from 1967 to 2009 the real mean household income of the top quintile increased by 71 percent. Over the same period, the real mean household income in the bottom quintile increased by 25 percent. So yes, the rich are richer, but so are the poor. The difference in the percentage of growth can be attributed to changing economic landscape for technology and globalization. Those who are in the top quintile are probably better-prepared to adapt to and take advantage of these trends. Furthermore, the video ignores the fact that there is constant economic flux in our dynamic economy. The people in each quintile change both inter and intra generationally. Thus, as long as there is economic mobility—as long as even the poorest are getting richer—it shouldn’t matter that the richer are getting wealthier at a higher rate. Just as Adam Smith once remarked that the poorest European peasant was better off than the richest African king, likewise, even the poorest Americans are better off than the majority of the rest of the world and certainly better off than they were 50 years ago.

Finally, the video makes numerous logically fallacious, specious statements. Just as an example, it shows that the average CEO makes 380 times the adjusted wage of the average worker. It then sarcastically asks, “Do you really believe that the CEO is working 380 times harder than his average employee?” The implication is that CEOs do not deserve to be paid what they’re paid. First, wages are not predicated upon how hard you work in the sense of how much effort you exert. The singular relevant variable is how much output you generate. If I were the chairman of Apple, I would certainly trade 380 average laborers for Steve Jobs in a heartbeat. While we’re on this note, the philosophical notion of desert is frequently flung around. For some reason, people have a concept that they are deserving or entitled to certain things. In the words of Milton Friedman, “A society that aims for equality before liberty will end up with neither. … What ultimately happens when you aim at equality is that A and B decide what C shall do for D.” It’s painfully obvious why centrally enforced equality should be avoided.

The political philosophy underlying wealth inequalities is known as the field of distributive justice. It is the study of what system a society should use to justly allocate its resources. While this is a wildly complex field, a key idea is the entitlement theory as espoused by Robert Nozick. Basically, results that arise from just means are necessarily and sufficiently just. Thus, even if the 1 percent possesses 24 percent of the country’s wealth as the video claims, as long as the relevant individual transactions were voluntary, it is a just outcome. I encourage you to read Nozick’s “Anarchy, State and Utopia” for more information.

The outcry over wealth disparity is simply a case of the pauper being jealous of the prince. It really is rather unbecoming and unfitting for anyone educated to champion such a cause. Inequality is simply a necessary product of a free society.

Jonathan Zhao is a Trinity freshman. His column usually runs every other Thursday.