The fetish of income equality

Professor Thomas Piketty’s book, Capital in the Twenty-First Century, in a way, has extended the lease of life of the empirically discredited ideology of socialism/communism and its various permutations, such as a developmental state, state capitalism, state welfarism and dirigiste state.

The definitive central thesis of the book – bringing about income equality for the sake of socioeconomic and political stability by implementing punitive tax and other policy measures that target the wealthy – while morally obnoxious and economically irrational, is simultaneously attractive politically to policymakers who thrive on controlling the socioeconomic endeavours of individuals and business enterprises.

In this regard these words of the late Hans F. Sennholz, President, Foundation for Economic Education (The Freeman, August 1992) are poignantly noteworthy:

“To pursue the ideal of an equal distribution of the goods of this world is to build on envy and covetousness which jeopardise social harmony and economic peace.  In the final analysis, it is highly immoral because it proposes to steal by political vote”

Regrettably, even in the US, the Piketty thesis seems to have gained some traction. More positively, on the other side of the Atlantic Ocean, Adedayo Thomas, director of the African Liberty Organisation for Development in Nigeria, has a devastatingly simple way of nullifying the quasi-socialist income equality cause. Adedayo’s reasoning is that, to begin, you give a number of individuals an equal amount of money each in whatever national currency that applies wherever they may be, just so long as it is of equal value so that they all start on an equal footing with no socioeconomic differences, advantages or disadvantages to distinguish them. When you pay them a visit after a while, you will find glaring discrepancies in terms of how those individuals will have used the equal amounts of money you gave them and this will be manifested in their current socioeconomic status.

Many of them will have used up the money altogether or have only a little left. A few wily individuals will have used the money as capital to start a business to generate income over and above the initial amount. Others will have invested the money in relatively safe and stable investment vehicles such as banks and asset management enterprises. Money that, in their turn, the banks and finance companies would have used to generate returns for their investors in general, all at great risk and therefore sacrifice as there is no guarantee of success for any business enterprise, big or small; formal or informal. In other words, although all of the individuals would have started on an equal footing, over time, inequalities would have developed as they fulfilled their perceived needs and satisfied their personal choices.

But Adedayo’s theory is not new. Already, centuries ago the Greek philosopher Aristotle (384 BC – 322 BC) cautioned that “It is the greatest inequality to try to make unequal things equal”.

Unsurprisingly, the outcome is an inevitable consequence of the reality of human nature. People are different. They are endowed with different skills and have different priorities, tastes and preferences. Some may be musically, artistically or athletically gifted and, if fortunate to be discovered, able to cash in big time and earn a lot more than others by virtue of their unique attributes.

Social and especially income inequalities mirror the fact that individuals are endowed and equipped differently. There are many different ways to create wealth and work towards improving your socioeconomic circumstances. No wonder then, that there are as many different outcomes. So Lionel Messi, the gifted soccer player, is able to become a multimillionaire as did the late, Michael Jackson, who used his singing and dance expertise to great pecuniary effect and also Muhammad Ali who used pugilistic expertise to pulverise his opponents and earn millions. And then there are the many unequally endowed Hollywood actors who are raking in millions. All of these diversities, inevitably, will naturally result in the income differentials that Piketty and his socialist-oriented cohorts decry.

Karl Marx must be laughing in his grave. Piketty is prescribing exactly what Marx had consistently maintained, “There is only one way to kill capitalism - by taxes, taxes and more taxes.”

It is shocking that people who use their idiosyncratic attributes and personal sacrifices to become wealthy should be penalised. What Piketty propounds cannot be implemented without impacting the freedom of others as they pursue their economic goals.

“Equality before the general rules of law is the only kind of equality conducive to liberty that can be secured without destroying liberty,” so wrote Professor Walter E Williams in his book More Liberty Means Less Government (1999).

If you confiscate the fruits of the labour of economically productive people, you stifle their motivation to produce more. You discourage overall contributions of the wealthy to the economy and demotivate those who are yet in the process of ascending the economic ladder. The equality cause fails any economic litmus test.

The social engineering of socialist countries in an attempt to bring about a levelling of the incomes of their subjects (consistent with the Marxist ideology), essentially resulted in the ultimate, dramatic domino implosions from 1989 and the collapse of the Berlin Wall.

The aura of moral high ground that imbues the social inequality bandwagon appeals to those who vacuously adopt such grossly erratic policy ideas and do not venture so far as to apply themselves to examine what the inevitable and foreseeable consequences of those superficial promises will be.

The words of the late economist and Nobel Laureate, Professor Milton Friedman, speak resoundingly to the issue:

“A society that puts equality – in the sense of equality of outcome – ahead of freedom will end up with neither equality nor freedom… On the other hand, a society that puts freedom first will, as a happy by-product, end up with both greater freedom and greater equality.”

Author: Temba A Nolutshungu is a Director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the FMF.


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