May 1 2013
Income Inequality Not Just an Issue for the Left
Should the Right engage in the income inequality debate, or is it better to let the anti-capitalists fret over that one? The Weekly Standard’s Jay Cost thinks advocates of limited government should talk about it, because government corruption and cronyism is a leading cause of the problem in the first place.
The Left would have us believe that extreme income inequality is a necessary byproduct of capitalism. The Right admits that a certain amount of inequality is simply a manifestation of differences in talent, industry, and work ethic. Cost notes that the Right tolerates such inequality in part because capitalism raises the standard of living for everyone over time. The same system that enables talented and hard working individuals to amass wealth brings a higher quality of life to the poor.
Cost notes, dissatisfaction with income inequality, however, is growing in the United States:
First, a study by the Pew Research Center found that the net worth of the upper 7 percent has risen by 28 percent since 2009 while the net worth of everybody else has dropped by 4 percent. Second, a recent poll conducted by Gallup found that 52 percent of Americans—an all-time high—think the government should ‘redistribute wealth by heavy taxes on the rich.’
If capitalism is the sole cause of income inequality, one would expect the gap between the super-wealthy and everyone else to decrease during an economic slowdown. These numbers indicate that something other than the market economy is at work here. The astronomical growth in government, crony capitalism, and the massive influx of liquidity into the market via quantitative easing has enriched the well-connected despite overall economic sluggishness.
Cost urges the Right to engage in the debate over income inequality, as the Left has successfully convinced half of the country that federal redistribution of wealth is the appropriate policy to combat it. An effective counter-argument would acknowledge the growing chasm between well-connected and ordinary Americans and offer policies to level the playing field between Main Street and Wall Street. Cost does a great job of showing how the American Founders loathed the idea of a central bank, not because they opposed capitalism but because they saw it as a means for the “moneyed interests” to exert undue influence over government policy:
Thomas Jefferson, James Madison, and their allies did not see wealth per se as a problem, but they worried about the potential for moneyed interests to tilt policy in their direction, at the expense of the public good….They worried that the Bank was creating a ‘Praetorian Guard’ of financiers who depended upon government favor and would do anything to protect their rents.
It wasn’t that long ago that the stock market presented an adequate picture of the overall economy. No more. The stock market goes up and up despite rising unemployment and weak GDP, as if disconnected from the rest of the economy. The American people are keenly aware of this recent phenomenon, and the Right should not be afraid to address it.