demagogues income-inequality taxes poverty

Understanding Income Inequality

world leaders, income inequality is the greatest challenge of our time

Overview

Like global warming, the issue of “income inequality” has become an obsession for world leaders, who use it to rally the masses for greater government control. Whether you believe it is good or bad, fair or unfair, it cannot be ignored except at your own peril, because the resentment building in much of the world’s population, whether justified or not, will eventually boil over in legislative or revolutionary efforts to redistribute wealth by force that will destroy the forces driving innovation and increasing prosperity.

Income Inequality around the world based on the Gini Coefficient

DennisWikipediaWiki, CC BY-SA 4.0 , via Wikimedia Commons

Most people, including world leaders, are convinced that income inequality is the result of greed rather than a natural byproduct of an advancing civilization. And they are partly right because some inequality is the result of greedy business men and politicians that take wealth by force, the TAKERS. But it is also the result of entrepreneurs that make wealth that improves everyone’s lives, the MAKERS. Unless they learn the difference, they will end up supporting policy measures that limit the makers while enriching the takers, making the real problem even worse.

Problem

Income inequality has clearly been increasing over the last half century from both fair and unfair causes. Exactly how much it has changed is debatable, but the fact that the very rich have been getting relatively richer compared to the poor and middle class is indisputable based on a variety of Standard of Living Data.

If history is any guide, high income inequality is a problem because it feeds the flame of envy which has been easily fanned by demagogues into a conflagration of hatred that has consumed many previous civilizations. And, as Will and Ariel Durant found, history has an uncanny way of repeating itself.

Although some leaders may be ignorant and sincerely believe in what they are doing, they appear to be doing everything they can to exploit envy by declaring that greed and the free market, not government favoritism, are the causes of income inequality, hoping to ride the tide of envy to greater power. If they end up attacking fair income inequality instead of the unfair, the engine of prosperity will be throttled back and growth and prosperity will diminish. Whether you are or poor or not, the question of inequality’s significance and what is done about it is going to have a profound effect on your life and the lives of the rest of the world’s population.

World Leaders

The world’s leaders, almost unanimously - and in very divisive, emotionally charged terms -see income inequality as very bad, without considering both the fair and unfair causes of income inequality.

The following is a sampling of the world’s leaders rhetoric:

International Monetary Fund

An International Monetary Fund (IMF) study of World Income Inequality quotes Nobel laureate Amartya Sen, “… the sheer magnitude of inequality and poverty on a world scale … is unacceptable.” It concludes, “The concentration of world income in the wealthiest quintile (fifth) of the world’s population is indeed shocking and cannot meet any plausible test of legitimacy.”

CNN Report

A CNN Money Report maps out inequality among the world’s nations, ranking equality as the highest virtue. America ranks in the bottom third of the 90 countries in a study by an economist at the World Bank who authored “The Haves and the Have-Nots.” It also points out that income inequality has soared in former Communist countries like Russia and China that are shifting toward market economies.

World Economic Forum

The World Economic Forum holds an annual winter summit at Davos in the Swiss Alps, where the ultra-rich and famous meet to discuss ideas for “improving” the world. In preparation for the 2014 meeting, the forum declared that the “… gap between rich and poor is yawning wider, posing the biggest single risk to the world in 2014,...”

President Obama

President Obama has declared, that “… increasing inequality is most pronounced in our country … ” and that it is the “… defining challenge of our time.”

Obama: Income Inequality a Defining Challenge

Associated Press

Pope Francis

Pope Francis denounced economic inequality, describing the gap between right and poor as the result of ideologies that defend the autonomy of the market place and financial speculation, saying, “I beg the Lord … to grant us more politicians who are genuinely disturbed by the state of society, the people, the lives of the poor.” He also decried huge salaries and bonuses as symptoms of an economy based on greed.

Pope Francis Attacks Wealth Gap

GNC Global News Channel

Lesson

The famous historians, Will and Ariel Durant tell us in their Lessons of History that economic inequality creates an atmosphere in which the poor arise and revolt, either by taking control of the government in democratic countries or through revolution where they don’t have a vote. This scenario is beginning to be played out again in the Western world with many politicians using wealth inequality to foment angry rebellion, replacing reasoned debate with revolutionary hate. Whether they're sincerely fighting for a just cause or simply grasping for power doesn’t affect the result, and history shows that any reform or revolution that fails to differentiate between fair and unfair income inequality ends up destroying both prosperity and freedom.

Clearly, many of the world’s leaders believe inequality is a big problem. But if they try to eliminate inequality without understanding the difference between good and unfair income inequality, they may end up destroying the prosperity upon which the well-being of all depends. Unfortunately, the above statements by world leaders demonstrate a complete lack of understanding of the difference.

Poverty and unfair income inequality needs to be remedied but the current indiscriminate attack on income inequality by world leaders is not a good sign. The people are going to have to be smarter than their leaders.