Wealth Inequality Is Detrimental To Democratic Ideals Essay

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The 4 biggest reasons why inequality is bad for society

Jun 3, 2014 / T. M. Scanlon

It’s safe to say that economic inequality bothers us. But why? Harvard philosopher T. M. Scanlon offers four reasons we should tackle — and fix — the problem.

The great inequality of income and wealth in the world, and within the United States, is deeply troubling. It seems, even to many of us who benefit from this inequality, that something should be done to reduce or eliminate it. But why should we think this? What are the strongest reasons for trying to bring about greater equality of income and wealth?

One obvious reason for redistributing resources from the rich to the poor is simply that this is a way of making the poor better off. In his TED Talk on “effective altruism,” Peter Singer advances powerful reasons of this kind for voluntary redistribution: Many people in the world are poor, and the improvement in their lives that richer people can bring about by giving money is enormous by comparison with the small sacrifice that this would involve.

A justification for reducing inequality through non-voluntary means, such as taxation, needs to explain why redistribution of this kind is not just robbery.

These reasons for redistribution are strongest when the poor are very badly off, as in the cases Singer describes. But there will always be some reason of this kind as long as redistributing assets increases the well-being of the poor more than it decreases that of the rich. These reasons for eliminating inequality are also based on an idea of equality, namely that, as Singer puts it, “every life is equally important.” This can be seen as a combination of two ideas: the general principle of universal moral equality, that everyone matters morally in the same way, and the idea that, because all people “matter morally,”  there’s a good reason to bring about increases in their well-being if we can.

It’s important to note, though, that there is another sense in which these reasons are not egalitarian: They are, fundamentally, reasons to increase the well-being of the poor rather than objections to inequality, that is to say, objections to the difference between what some have and what others have. The fact that other people are better off is relevant in Singer’s argument only for the reason Willie Sutton was said to have given when asked why he robbed banks: “That’s where the money is.”

The possibility of making the poor better off does not seem to be the only reason for seeking to reduce the world’s rising level of economic inequality. Many people in the United States seem to believe that our high and rising level of inequality is objectionable in itself, and it is worth inquiring into why this might be so. This inquiry is important for two reasons. The first is because a justification for redistribution needs to include some response to the claims of the rich that they are entitled to keep what they have earned. What Peter Singer argues for powerfully is voluntary redistribution. A justification for reducing inequality through non-voluntary means, such as taxation, needs to explain why redistribution of this kind is not just robbery, like the activities of Willie Sutton and Robin Hood.

Second, if inequality, in itself, is something to be concerned about, we need to explain why this is so. It is easy to understand why people want to be better off than they are, especially if their current condition is very bad. But why, apart from this, should anyone be concerned with the difference between what they have and what others have? Why isn’t such a concern mere envy? I will mention four reasons for objecting to inequality, and consider the responses they provide to the charge of mere envy and to the claims of entitlement. The first three:

1. Economic inequality can give wealthier people an unacceptable degree of control over the lives of others.

If wealth is very unevenly distributed in a society, wealthy people often end up in control of many aspects of the lives of poorer citizens: over where and how they can work, what they can buy, and in general what their lives will be like. As an example, ownership of a public media outlet, such as a newspaper or a television channel, can give control over how others in the society view themselves and their lives, and how they understand their society.

2. Economic inequality can undermine the fairness of political institutions.

If those who hold political offices must depend on large contributions for their campaigns, they will be more responsive to the interests and demands of wealthy contributors, and those who are not rich will not be fairly represented.

3. Economic inequality undermines the fairness of the economic system itself.

Economic inequality makes it difficult, if not impossible, to create equality of opportunity. Income inequality means that some children will enter the workforce much better prepared than others. And people with few assets find it harder to access the first small steps to larger opportunities, such as a loan to start a business or pay for an advanced degree.

None of these objections is an expression of mere envy. They are objections to inequality based on the effects of some being much better off than others. In principle, these effects could avoided, without reducing economic inequality, through such means as the public financing of political campaigns and making high-quality public education available to all children (however difficult this would be in practice).

A fourth kind of objection to inequality is more direct. In Paul Krugman’s review of Capital in the 21st Century by Thomas Piketty, he mentions these stats from the US Bureau of Labor Statistics: “Real wages for most U.S. workers have increased little if at all since the early 1970s, but wages for the top 1 percent of earners have risen 165 percent, and wages for the top 0.1 percent have risen 362 percent.” (Krugman calls those “supersalaries.”) Again, the idea that this is objectionable is not mere envy. It rests, I believe, on this idea, my fourth point:

4. Workers, as participants in a scheme of cooperation that produces national income, have a claim to a fair share of what they have helped to produce.

What constitutes a fair share is of course controversial. One answer is provided by John Rawls’ Difference Principle, according to which inequalities in wealth and income are permissible if and only if these inequalities could not be reduced without worsening the position of those who are worst-off. You don’t have to accept this exact principle, though, in order to believe that if an economy is producing an increasing level of goods and services, then all those who participate in producing these benefits — workers as well as others — should share in the result.

No one has reason to accept a scheme of cooperation that places their lives under the control of others.

Peter Singer’s powerful argument for altruistic giving draws on one moral relation we can stand in to others: the relation of being able to benefit them in some important way. With respect to this relation, to “matter morally” is to be someone whose welfare there is reason to increase.

But the objections to inequality that I have listed rest on a different moral relation. It’s the relation between individuals who are participants in a cooperative scheme. Those who are related to us in this way matter morally in a further sense: they are fellow participants to whom the terms of our cooperation must be justifiable.

In our current environment of growing inequality, can such a justification be given? No one has reason to accept a scheme of cooperation that places their lives under the control of others, that deprives them of meaningful political participation, that deprives their children of the opportunity to qualify for better jobs, and that deprives them of a share in the wealth they help to produce.

These are not just objections to inequality and its consequences: they are at the same time challenges to the legitimacy of the system itself. The holdings of the rich are not legitimate if they are acquired through competition from which others are excluded, and made possible by laws that are shaped by the rich for the benefit of the rich. In these ways, economic inequality can undermine the conditions of its own legitimacy.

As Singer shows, the possibility of improving the lot of the poor is a powerful reason for redistribution. But it is important to see that the case for equality is powerful in a different way.

T. M. Scanlon is Alford Professor of Natural Religion, Moral Philosophy, and Civil Polity at Harvard University.

Illustration by Dawn Kim.

MORE than any other country, America defines itself by a collective dream: the dream of economic opportunity and upward mobility. Its proudest boast is that it offers a chance of the good life to everybody who is willing to work hard and play by the rules. This ideal has made the United States the world's strongest magnet for immigrants; it has also reconciled ordinary Americans to the rough side of a dynamic economy, with all its inequalities and insecurities. Who cares if the boss earns 300 times more than the average working stiff, if the stiff knows he can become the boss?

Look around the world and the supremacy of “the American model” might seem assured. No other rich country has so successfully harnessed the modern juggernauts of technology and globalisation. The hallmarks of American capitalism—a willingness to take risks, a light regulatory touch and sharp competition—have spawned enormous wealth. “This economy is powerful, productive and prosperous,” George Bush boasted recently, and by many yardsticks he is right. Growth is fast, unemployment is low and profits are fat. It is hardly surprising that so many other governments are trying to “Americanise” their economies—whether through the European Union's Lisbon Agenda or Japan's Koizumi reforms.

Yet many people feel unhappy about the American model—not least in the United States. Only one in four Americans believes the economy is in good shape. While firms' profits have soared, wages for the typical worker have barely budged. The middle class—admittedly a vague term in America—feels squeezed. A college degree is no longer a passport to ever-higher pay. Now politicians are playing on these fears. From the left, populists complain about Mr Bush's plutocratic friends exporting jobs abroad; from the right, nativists howl about immigrants wrecking the system.

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A global argument

The debate about the American model echoes far beyond the nation's shores. Europeans have long held that America does not look after its poor—a prejudice reinforced by the ghastly scenes after Hurricane Katrina. The sharp decline in America's image abroad has much to do with foreign policy, but Americanisation has also become synonymous with globalisation. Across the rich world, global competition is forcing economies to become more flexible, often increasing inequality; Japan is one example (see article). The logic of many non-Americans is that if globalisation makes their economy more like America's, and the American model is defective, then free trade and open markets must be bad.

This debate mixes up three arguments—about inequality, meritocracy and immigration. The word that America should worry about most is the one you hear least—meritocracy.

Begin with inequality. The flip-side of America's economic dynamism is that it has become more unequal—but in a more complex way than first appears (see article). America's rich have been pulling away from the rest of the population, as the returns for talent and capital in a global market have increased. Even if American business stopped at the water's edge, Bill Gates and the partners of Goldman Sachs would still be wealthy people; but since software and investment banking are global industries, Mr Gates is worth $50 billion and the average pay-and-benefits package for Goldman's 22,400 employees is above $500,000.

On the other hand, the current wave of globalisation may not be widening the gap between the poor and the rest. Indeed, the headwinds of the global economy are being felt less by Americans at the bottom than by those in the middle. The jobs threatened by outsourcing—data-processing, accounting and so on—are white-collar jobs; the jobs done by the poor—cleaning and table-waiting, for example—could never be done from Bangalore.

Those at the bottom have different fears, immigration high among them. Their jobs cannot be exported to rival countries perhaps, but rival workers can and are being imported to America. Yet there is surprisingly little evidence that the arrival of low-skilled workers has pulled poor Americans' wages down. And it has certainly provided a far better life for new arrivals than the one they left behind (see article).

A long ladder is fine, but it must have rungs

To many who would discredit American capitalism, this sort of cold-hearted number-crunching is beside the point. Any system in which the spoils are distributed so unevenly is morally wrong, they say. This newspaper disagrees. Inequality is not inherently wrong—as long as three conditions are met: first, society as a whole is getting richer; second, there is a safety net for the very poor; and third, everybody, regardless of class, race, creed or sex, has an opportunity to climb up through the system. A dynamic, fast-growing economy may sometimes look ugly, but it offers far more hope than a stagnant one for everybody in the United States.

This is not to let the American system off the hook when it comes to social mobility. Although the United States is seen as a world of opportunity, the reality may be different. Some studies have shown that it is easier for poorer children to rise through society in many European countries than in America. There is a particular fear about the engine of American meritocracy, its education system. Only 3% of students at top colleges come from the poorest quarter of the population. Poor children are trapped in dismal schools, while richer parents spend ever more cash on tutoring their offspring.

What, if anything, needs to be done? A meritocracy works only if it is seen to be fair. There are some unfair ways in which rich Americans have rewarded themselves, from backdated share options to reserved places at universities for the offspring of alumni. And a few of Mr Bush's fiscal choices are not helping. Why make the tax system less progressive at a time when the most affluent are doing best?

That said, government should not be looking for ways to haul the rich down. Rather, it should help others, especially the extremely poor, to climb up—and that must mean education. Parts of the American system are still magnificent, such as its community colleges. But as countless international league tables show, its schools are not. Education is a political football, tossed about between Republicans who refuse to reform a locally based funding system that starves schools in poor districts, and Democrats who will never dare offend their paymasters in the teachers' unions.

The other challenge is to create a social-welfare system that matches a global business world of fast-changing careers. No country has done this well. But the answer has to be broader than just “trade-adjustment” assistance or tax breaks for hard-hit areas. Health care, for instance, needs reform. America's traditional way of providing it through companies is crumbling. The public pension system, too, needs an overhaul.

These are mightily complicated areas, but the United States has always had a genius for translating the highfalutin' talk of the American Dream into practical policies, such as the GI Bill, a scholarship scheme for returning troops after the second world war. The country needs another burst of practical idealism. It is still the model the rest of the world is following.

This article appeared in the Leaders section of the print edition

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