Inequality in a Socialist World

By Sydney M. Williams The United States is not a Socialist […]

Image by © Dreamstime

Image by © Dreamstime

By Sydney M. Williams

The United States is not a Socialist country, but it has been trending toward paternalism for decades. About 35% of the nation’s GDP is a product of federal, state and local spending. Dependency on government has grown. Two-thirds of the federal budget is now dedicated to entitlements. Excessive regulation has hampered small-businesses, and annually costs consumers billions of dollars in hidden fees. Nanny state antics have had little effect on youth obesity, but have made a significant dent in their parent’s wallets.

While purporting to keep people safe from themselves, regulatory rules’ real function enables favored industries and provides job security for federal employees. The complexity of our tax code benefits America’s largest businesses and its richest citizens. One impediment to simplifying the code is the large numbers of people who have a vested interest in keeping it complicated. Our universities inculcate credulous students into a one-sided political philosophy. Overly sensitive students are taught politically-correct courses from syllabi that contain trigger warnings against microaggressions. It’s a narcissistic world, grown narrow.

And yet the Left insists that the negative consequences of what they (and the Right) created – inequality, unfairness and a lack of transparency – are somehow the fault only of the Right! (All positive results – civil and women’s rights – are the exclusive province of the Left.) But have not both Parties been responsible? Consider: Would GE have paid no federal corporate income tax were it not for specially designed loopholes? Would the Clinton Foundation have been able to raise billions of dollars to fund unemployed Democrat campaign workers and pay the Clintons hundreds of million of dollars without the special tax treatment the Foundation received? (What is true for the Clintons has also been true for some Republicans. However, the Lois Lerners of the world want to make political charity exclusive to the Left.) Has it been fair to all parties that the Federal Reserve has kept interest rates at abnormally low levels for an extended time, using the “Great” recession – a recession not as bad as that of the 1970s or early 1980s – as the excuse?  Low rates have benefitted banks, hedge funds, corporate acquirers and government at the expense of the elderly and thrifty. Was it right-wing zealots that pressured the Federal Reserve? Was it fair and equitable that Condoleezza Rice and Ayaan Hirsi Ali were disinvited from speaking at universities? Does blindness to alternative ideas discourage or encourage a university student’s chances for future economic success?

The Left claims that inequality is “the issue of our time.” Yet, is not elitism that emerges from bureaucrats on the Left every bit as inegalitarian as that which they condemn in so-called one-percenters? Inequality in outcomes is a fact of life. Equality of opportunity, on the other hand, is basic to an enlightened society. If one wants to see true inequality, look to societies such as China, Cuba, Russia and the Islamic world. Totalitarian regimes are not only unequal in outcomes, they are unequal in opportunities. There is no social or economic mobility. As governments assume more power, the gap widens between governors and those governed.

Mr. Obama has been President for six and a half years. For six years his Party held control of the Senate. For two years they held both Houses of Congress. He has claimed to fight for the poor and middle class. Yet income and wealth gaps have widened under his watch. A Gallup poll, released in late April, tells that the number of Americans who identify as middle class has fallen ten percentage points since 2008 – from 61% to 51%. Social mobility in terms of the economic ladder, according to a recent series of articles in The New York Times, has been flat for many years. Obama’s policies have not reversed these trends. That Gallup Poll also said people are less confident of the future than they were when Mr. Obama took office.

One explanation for the wealth gap is that financial success (apart from the cronyism that has enriched so many in public life) is a consequence of virtues now seen as dated and thus under attack: aspiration diligence, hard work, perseverance, thrift and a willingness to take risk. Success also requires intelligence and creativity, traits that are innate, not acquired. Successful people make the most of what they are given. We are stuck with inequality. What we need strive for is mobility and ensuring that opportunity is open to all. That means better education and the encouragement of those virtues that have been shunted aside in today’s sensitive world where admiration for Caitlyn Jenner’s courage supersedes that for uniformed police, the military, and even for those entrepreneurs who dream and are willing to bet big.

Entitlements and dependency did not begin with Mr. Obama. They are part of our culture. As long ago as 1965, in his report of that year, Daniel Patrick Moynihan wrote that the American people had become corrupted in a “tangle of pathologies.” Those included, he wrote, welfare dependency, flight from work and family breakdowns. In the years since, none of those factors have improved; in fact they have worsened. Those “pathologies” enable, not defuse, inequalities.

We are in a difficult place. At home, we have mounting government debt we can ill afford. Public-sector unions risk bankrupting our states. Our health system is broken. We have given in to central bankers who have cheapened money, with consequences yet to be foretold. We are a nation divided for political expediency. Helped by C-Span, identity politics and extremists from both sides, political partisanship has made collegiality in Washington (and now in State Capitals) a relic of the past. Overseas, we have enemies’ intent on destroying our way of life, from Islamic terrorists, Russian aggression, to Chinese hackers. We need a stronger economy and a stronger military. As Louisiana Governor Bobby Jindal said last week: “Weaker economies hurt everyone in them.” Stronger economic growth requires less onerous regulation and a simplified tax system. It means increasing trade and defending trade routes, which means increasing – not decreasing – our military presence, especially naval.

Inequality exists in all societies, especially those run by autocrats. Inequality does not just mean income and wealth; it can be manifested in privilege and personal freedoms. Polls show that social and economic mobility is more important to people than gaps in income and wealth. In Socialist countries, it is the elite who run government and bureaucracies, who live freer and more enriched lives than those they oversee. A fair society is one that has a moral sense, which allows mobility – that rewards aspiration and hard work. That is only possible in a democratic system that operates under the rule of law, defends human rights, protects private property and which practices free market capitalism. It is work, not government that is the answer to inequality.

The Opinions expressed above are mine alone, and do not represent those of the firm Monness, Crespi, Hardt & Co., Inc., or of any of its partners or employees.


The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

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