Something called the Organization for Economic Cooperation and Development recently published a study that claimed nations with the most “economic inequality” showed the slowest rates of growth between 1990 and 2010. The whole purpose of this exercise, of course, was to provide a justification for government-forced wealth redistribution – the sort of thing that mainly empowers the politicians who get to decide who gets what.
In last week’s Wall Street Journal, Matthew Schonfeld wrote a convincing rebuttal to the OECD, demonstrating very clearly the five most “unequal” nations during that period – the U.S., Israel, Turkey, Mexico and Chile – actually had the best growth rates.
I’m not surprised that the numbers back this up, but common sense alone should tell you the alleged connection between “inequality” and slow growth is a fraud. Even more so, that the worst thing you could possibly do in response to inequality is to have the state confiscate honestly earned income and redistribute it.
First, let me make an argument that focuses on why people work hard to earn wealth, and how it’s achieved. Liberals tend to confuse money with wealth. They think that if Party A get $1,000, that must mean Party B lost $1,000. They don’t understand that by producing things that represent value, you can create wealth. So they think that every time someone gets rich, that’s unfair to someone else. The truth is that people who get rich do so by producing goods and service that people want and are willing to pay for. Another part of that truth is that people seeking opportunity need to seek it from people who have already achieved – because you can’t provide an opportunity for anyone if you don’t have wealth of your own.
Taking away the rewards for hard work and productivity will give you less of it. So will limiting those rewards. That’s Economics 101. Politicians may think they can decide how much is enough wealth for anyone, but they don’t understand how much others benefit from the productivity that makes rich people rich.
Remember, the gross domestic product measures the production of goods and services. Limiting the rewards of producing goods and services – which is what you do when you redistribute wealth – will by definition limit said production.
Now let’s talk about the real problem behind inequality. The problem here is not that some people have too much opportunity where others have too little. The problem is that too many people don’t know how to access opportunity, and wouldn’t know how to take advantage of it if it was handed to them.
It’s an extreme example, but consider the familiar and all-too-common situation with lottery winners. We’ve all heard the stories of lottery winners who end up within a few years in worse financial shape than before they won. That’s not hard to understand at all. I don’t care how much money is handed to you. If you don’t embrace good habits – not just in money management but in your daily life – you will not be able to hang onto wealth. And if you don’t know how to formulate and stick to a good long-term plan for your financial future, being staked with a bunch of cash isn’t going to be of much value to you over the long term.
The way to help people who are at the lower end of the economic spectrum is not to take from others and give to them. It’s to help them learn how to do the right things. That starts, to be sure, with no longer telling them they are poor because other people are rich. As long as they think that, they probably figure there’s no point in even trying. Liberals are fond of claiming that “the game is rigged,” by which they mean no one can get rich unless they’re already rich because the rules are written to benefit only the rich. I am living proof that this isn’t true.
But more to the point, the liberals fail to understand that there really are no rules. Anyone who is determined enough, and learns how to do the right things, can find opportunity and can do well with it. If America stops treating poor people like victims and starts teaching them how to change their fortunes, then those who want to learn will enjoy newfound prosperity.
And by taking that approach, we boost our economic growth because people’s improving fortunes are the result of their own greater productivity – not the result of taking from those who have already achieved and giving it to those who don’t know what to do with it. This is the most compassionate way to help those who have too little. It’s also the only way that actually works.
Something called the Organization for Economic Cooperation and Development recently published a study that claimed nations with the most “economic inequality” showed the slowest rates of growth between 1990 and 2010. The whole purpose of this exercise, of course, was to provide a justification for government-forced wealth redistribution – the sort of thing that mainly empowers the politicians who get to decide who gets what.
