economics

Income Inequality Is Not Our Biggest Problem

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Is income inequality one of the most significant threats to justice in our age? Some voices in the marketplace say so. They argue that the wealthy are becoming wealthier at the expense of the poor. If this were true, it would truly be one of the most significant justice issues of our day. However, this version of reality relies on the zero-sum myth of economics.

Debunking the Zero-Sum Myth

In her book, More than Enough, Lee Hull Moses illustrates the zero-sum myth with the scarcity of sleds during a surprise North Carolina snow storm. There weren’t enough sleds to go around (inequality) until those with sleds yielded their sleds to those without sleds. Everyone was able to have a good time once the inequality was leveled.

Moses shares this illustration to make a point about the broader economic world. One person’s wealth comes at the the price of another person’s poverty.

Hull’s example works for the narrow example of sleds during a Southern storm. It works because of extreme scarcity of sleds and the fact that the desired wealth in this limited scenario is entirely material. Hull’s illustration is not, however, a good example of the problem of poverty in the broader economic world because economics is more complicated than a few sleds in a snowstorm.

Jay Wesley Richards debunks the zero-sum myth by noting it relies upon the notion that all wealth is bound to matter. Thus, he argues in Money, Greed, and God, according to the zero-sum myth, when someone has wealth, she is directly depriving others of that wealth. For activists like Lee Hull Moses who are grieved by economic inequality, this is the source of great guilt. However, Richards explains it just isn’t true.

For example, Richards tells the story of a simple trading game. In this game, each child in a classroom is given a trinket of approximately equal cost, such as gum, candy, toys marketed to girls, toys marketed to boys and more. Each child is asked to score the value of their trinket. Next, they are offered the opportunity to trade and then to score the value of the trinket again. Interestingly, if you add the children’s scores together, the scores go up after the trade.

The total cost of the toys stays the same, but the value of the toys increases.

Why? Because value is not always tied to the number or configuration of molecules. The boys in Richards’ classroom are much happier when they trade their Barbie memorabilia for the boys’ toys (that the girls were only too glad to get rid of). The total value goes up because nearly everyone either likes what they started with or has something they like better.

However, in this situation, absolute equality remains out of reach because the value of objects is not fixed. There will be always be inequality when someone prefers what another person has.

Though he views income inequality as a justice issue, Ryan Avent of the Economist offers another illustration of the non-materiality of wealth in his book, The Wealth of Humans. He argues that one of the most significant forms of capital in our present age is “social capital.” For the individual worker, social capital can take the form of a network of family and friends, a set of behaviors or a knowledge of how a system works. For a company social capital is the ethos of the company, which includes its brand and the culture of the company.

Both for the individual and the corporation, there is something immaterial that adds value. Clearly having a culture of productivity at one company does not mean that another company cannot have the same, nor does it mean that the other company is impoverished because its rival has a better internal vibe. There may be some competitive advantage involved, but this merely proves that value is not limited to molecules.

Income inequality is not necessarily the cause of poverty.

Income Inequality is Not Our Biggest Problem

There are a couple of clear lines of evidence that demonstrate that income inequality isn’t as much of a problem as some would like you to believe. First, despite the rapid growth of wealth at the top end of the income scale, the percentage of the world population living in abject poverty has actually drastically decreased over time. Second, though income inequality is growing, the life expectancies and per capita gross domestic product have gone up drastically for the entire world since the Industrial Revolution.

The world still has many problems, but income inequality is not necessarily the cause of poverty. In fact, though income inequality is on the rise, the poor are significantly better off now than at any time in human history.

As we work for a more just society, we need to ensure we are seeking the appropriate solutions to existing problems. If income inequality does not result in direct deprivation of the poor, then eradicating inequality is not a worthy goal. Instead of trying to take down the top income bracket, our energies would be better spent in providing greater opportunities and just social structures for those in lower income brackets to enable them to improve their standards of living.

Alleviating poverty is a worthy goal that reflects true justice. We should look for ways to accomplish that goal that encourage cooperation by all stakeholders rather than inciting guilt and conflict.

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  • economics
  • wealth and poverty
Andrew J. Spencer

Andrew J. Spencer holds a PhD from Southeastern Baptist Theological Seminary. He is a member of CrossPointe Church in Monroe, MI. Spencer writes often at www.EthicsAndCulture.com and recently published 'The Christian Mind of C. S. Lewis.'

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