virtues of inequality

William S. Lear rael at zopyra.com
Sun Apr 4 11:47:30 PDT 1999


On Sunday, April 4, 1999 at 09:29:50 (-0400) Doug Henwood writes:
>[And now for something completely different...]
>
>New York Times - April 4, 1999
>
>ECONOMIC VIEW
>
>Is the U.S. Income Gap Really a Big Problem?
>
>By SYLVIA NASAR
>
>In economics, the facts alone don't usually tell the whole story.

Nor do asinie "models" employed by economists to explain away the facts.


>Consider inequality, the trendy subject of dozens of books in the last few
>years. ...

So the concern with inequality is "trendy"? I guess Aristotle doesn't count.


>years. The facts are uncontroversial: By any hard measure -- wages, income,
>wealth -- the gap between rich and poor in America has been widening for
>decades. And while there are indications that the gap may have stopped
>growing in the mid-1990s, the disparities between Americans of different
>means are wider today than at any time since the end of World War II.
>
>Sounds like a big problem, right? The conventional wisdom says so.
>Oddly, though, none of the authors who spend hundreds of pages and
>thousands of statistics documenting the phenomenon devote even a few
>paragraphs to rigorously demonstrating that greater income disparities --
>as opposed to, say, the persistence of an entrenched underclass -- is a
>serious problem for the nation. They simply assume that it is.
>...

I guess it was too much trouble to read just 5 pages into Jamie Galbraith's latest book:

A high degree of inequality causes the comfortable to disavow the

needy. It increases the social and psychological distance

separating the haves from the have-nots, making it easier to

imagine that defects of character or differences of culture,

rather than an unpleasant turn in the larger schemes of economic

history, are at the root of the separation. It is leading toward

the transformation of the United States from a middle-class

democracy into something that more closely resembles an

authoritarian quasi democracy, with an overclass, an underclass,

and a hidden politics driven by money.

To put the matter the other way around, economic equality blurs

the distinctions between persons. It makes people feel similar to

other people. In this way, equality casts a veil of ignorance

over the comparative future of individual fortunes. As we know

from the philosopher John Rawls, this ignorance, rather than

equality itself, is the key to fairness in social choice. A just

society, providing for the less fortunate in an equable way, is

one that people would freely choose for themselves, without

knowledge of their own position within it.

Inequality lifts the veil. Inequality is information; it is

knowledge. With high inequality, of income and of wealth, it

becomes easy to know whether one is likely in the long run to be

a net gainer, or a net loser, from public programs of family

assistance, pension security, and health care. The more

inequality there is in the present, the more definite is each

person's sense of his or her own position, both in the present

and for the future. The rich feel more secure; the poor feel less

hopeful. High inequality therefore weakens the willingness to

share at the same time that it concentrates resources in hands

least inclined to be willing. In this way, and for this reason,

inequality threatens the ability of society as a whole to provide

for the weak, the ill, and the old.

The rise in inequality is the cause of our dreadful political

condition. It is the cause of the bitter and unending struggle

over the Transfer State, of the ugly battles over welfare,

affirmative action, health care, social security, and the even

uglier preoccupation in some circles with the alleged

relationship of race, intelligence, and earnings. The "end of

welfare as we knew it," to take a recent example, became possible

only as rising inequality ensured that those who ended welfare

did not know it, that they were detached from the life

experiences of those on the receiving end.

Crisis is a misused word, particularly by alarmists who have

presented us in recent years with a budget crisis, a Medicare

crisis, and a social security crisis. None of those alleged

crises really is. They all rest on specious claims about

financial abstractions, on scare stories about impending

bankruptcy --- whether of the government as a whole or of

particular government trust funds. They all fade when the

economic news is good, only to return when hard times make the

public receptive. But they serve the same underlying purpose: to

legitimize the reduction of social welfare and social security

programs, to withdraw resources from the social to the private

realm. And they all enjoy support from the same social quarter:

the financial and commercial interests of the wealthy. The real

crisis is the underlying attack on the elderly, the poor, and the

ill, and the tragic willingness of many working people to join

it.

What brought this crisis into being? According to popular

perception, rising inequality is a kind of black rain, a curse of

obscure origin and no known remedy, a matter of mystery covered

by words like downsizing deregulation, and globalization. There

is a view that capitalism has simply become more savage, a matter

of the temper of the times and a new brutality of markets.2 Many

speak of a paradox in which the social evil of rising inequality

accompanies rising average incomes and general prosperity for the

country as a whole, a single dark cloud in a silver sky.

But is higher inequality, as many believe, something that "just

happens"? Or does it serve a deeper purpose, one that is to be

expected and accepted? Is the splitting apart of America an

accident, or is it the inevitable incident of technological

progress and the spread of free markets, a by-product of change

and modernity? Is it the cost we must pay for the efficiencies of

worldwide production and trade? Is it the price of comparatively

low unemployment? Is it a side effect --- disagreeable perhaps

but a necessary aspect of our development toward a better future?

The idea that rising inequality serves a deeper purpose emerges

from the economics profession, which has produced a kind of

instant wisdom on the subject --- a set of views, usually presented

as orthodox, but in fact established with great haste and in

considerable disorder in recent years. To a predominant faction

within the economics profession, the "why" of rising inequality

has been answered by a single, all-encompassing phrase:

skill-biased technological change.

---James K. Galbraith, *Created Unequal*, pp. 3-5.

Bill



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