Why Inequality Matters

Notable increases in inequalities in income and wealth in the U.S. over the past quarter century have led to or renewed an ancient debate about the desirability, fairness, justification, and implications of inequality, and whether there is a level beyond which it becomes unacceptable and destructive to a society . Some argue that inequality is the inevitable consequence of forces over which no one and certainly no government has any control, in particular the drivers of technology and globalization. Furthermore the same people who claim that inequality no matter how great is inevitable also often say that it is good and necessary because the prospect of great wealth inspires individuals to take risks and become entrepreneurial innovators from which everyone ultimately benefits. A rising tide lifts all boats even if a few of them are luxury yachts and all the rest are humble dinghies. In this perspective any attempt to limit the potential rewards of risk takers through taxation or programs to transfer some of their wealth directly or indirectly to others will stifle and in the extreme dry up the creation of added value and wealth.

I would like to frame this discussion of the issue around a clear distinction between equality of opportunity (or ex ante equality) and equality of outcome (or ex post equality).  Both are unattainable in an absolute sense for different reasons. However the former should be an aspiration of a civilized society and of public policy. Inequalities of opportunity can be reduced by intelligent public policies and initiatives. In contrast equality of outcomes is not a reasonable or desirable (or practical) goal because beyond the satisfaction of needs such as food and shelter people want different outcomes for themselves based on their diverse  individual skills, talents, values and motivations.

Nevertheless the two categories of equality are connected. The silly argument during the recent U.S. Presidential election between “You didn’t build it” versus “I built it” could have been clarified if President Obama had added one word to his statement as in “You didn’t build it alone.” Many people contribute both directly and indirectly to any success (financial or otherwise) that we achieve, from teachers and parents, to other family members, friends, colleagues and employees, doctors and public safety personnel etc.  It is therefore a matter of enlightened self- interest that each of us should want everyone who has the talents, skills and motivation to fulfill these roles to have every opportunity to do so, and not be blocked by circumstances beyond their control such as preventable diseases, insufficient financial resources of their caregivers, or appalling living conditions. It is surprising in all the heated debate about the future of health care in the U.S. that the obvious point that we are all better off if everyone around us is as healthy as possible is drowned out by the heated rhetoric that Government’s unwarranted interference in our freedoms if it requires everyone to have access to health care. The famous slogan on New Hampshire license plates “Live Free or Die” is not the same as “Live Free and Die.”

Human beings are impressively diverse in their skills and how they would prefer to apply them. All our lives should be richer (spiritually, culturally, and emotionally as well as materially) if everyone has a reasonable opportunity to use those talents as best as they can. Public policies in areas such as education, health, transportation, research and development, and communications among others can help those among us who face formidable obstacles because of no fault of their own (where and to whom they were born, the financial resources of their caregivers, or exposure to a debilitating disease at a young age) overcome them. As the saying goes policies should focus on a hand up, not a hand out.

Inequality and the Supreme Court

It is instructive in the context of inequality  to contrast the very different attitudes of Associate Justices of the Supreme Court Sonia Sotomayor and Clarence Thomas that are apparent in their autobiographies towards the role that affirmative action programs played in their lives. Both encountered the reaction from some that they only enjoyed their positions in prestigious institutions to their membership of a minority group, not because they were worthy based on their talents and hard work.  Sotomayor realized that she had not been exposed to the same sources of ideas and information because of where she lived and the school she went to as her contemporaries from wealthy backgrounds who had attended prep schools whose graduates traditionally went to Ivy League universities. She appreciated the path that affirmative action opened up for her which she has gone on to exploit with great success and effort on her part. While it may be time to revise the rules of the game of such programs given all the changes that have occurred over the last three decades ( for example I would like to see the emphasis placed on economically disadvantaged youth rather than on ethnic categorizations) Sotomayor is of the opinion that understanding the situations in which people find themselves through no fault of their own should be a factor in judicial decisions. She agrees that programs aimed at helping specific groups of people – if properly designed – can be beneficial. They should not be rejected as discriminatory or unjustified or as taking away the dignity of those who benefit from them.

In sharp contrast Clarence Thomas has written that affirmative action made his law degree from Yale worthless, citing as proof that he was rejected by multiple law firms who refused to hire him after he graduated. I do not know whether these rejections were the result of beliefs that any member of a minority group who attended and graduated from a prestigious university must be unworthy compared to someone who did not enter through affirmative action (including presumably as a “legacy”, which is another form of affirmative action). As she relates Sotomayor encountered this very attitude when she was at Princeton. If such was the case for Thomas, and his rejections by law firms were not based on his relative inferiority as a candidate for hire on legitimate grounds then indeed his experience was deplorable, illustrating how critical it is to show that affirmative action and other programs operate as a hand up and not as a  hand out. Whatever the rights and wrongs of Justice Thomas’ personal history it is distressing that it has imbued him in his role as Supreme Court Justice with a seemingly embittered or hostile attitude toward programs that are designed to help genuinely disadvantaged people find opportunities for themselves that their more fortunate peers enjoy automatically. Unlike Sotomayor Thomas seems incapable of applying his own experiences to draw broader lessons than the extrapolation of what he encountered or felt to decisions that affect a much broader population.

Justification of Policies to Reduce Inequality of Opportunity

Objections to public policies such as progressive tax policies and social programs that benefit the poorer segments of the population are based on the grounds that this redistribution of wealth and income to mitigate inequality of outcomes discourages individual efforts and entrepreneurs and encourages laziness.  However these objections are unconvincing  with respect to policies aimed at mitigating harm to our fellow citizens and residents from factors beyond their control and/or equipping them with tools they need to exploit their talents that are not otherwise available to them. There are market or societal failures engendered by very one-sided power (unbalanced and unchecked) structures that lead to unreasonably unequal allocations of the income and wealth that are generated among those who make significant contributions to the work and efforts involved. In feudal times the lords of the manor could take as much as they wanted from the fruits of the sweat of the peasants, and often did. Trade unions were founded to make sure that workers in factories received a fair share of the wealth produced by the products they built, and were not forced to accept whatever harsh conditions of employment were imposed on them with no recourse.

Sometimes government intervention or other forms of collective action are needed to redress the imbalances created by the actions of a few with the otherwise unilateral power to dictate terms to the majority of the population. These few may try to justify the inequalities that result on the basis that they deserve their huge rewards which are by themselves irrefutable proof of their superior worthiness and talents over others for which the rest of us should be grateful. The self-referential or tautological nature of this assertion is obvious. It flies in the face of the realities of the dynamics of human organizations and power relationships. It is no more sustainable than is the divine right of kings confronted with the historically remarkable American proclamation of “We the People” as the basis for the legitimacy of a society.

Some individuals may be worthy of great rewards, and some who are (and we differ about who is or should be) will not get them while others who are not worthy will.  Life is not fair and to expect equal results for everybody is neither realistic nor desirable.  Nevertheless the vigor and health of societies in which inequality becomes excessive will be eroded. Resentment that can explode into violence will grow against a small “elite” of super-rich, some (not all) of whom are manifestly unworthy while others are visibly exploiters not innovators or wealth or job creators. The potential and hopes of many other people will be frustrated because the obstacles they face are too large to overcome except for a few lucky and very special ones. If the chances of improvement in many contexts become as remote as the percentage of young men from poor backgrounds who will become NBA players then a civilized society will become unsustainable.

The justification for public policies that consciously try to expand the opportunities open to disadvantaged members of American society and in so doing are funded by money that the more fortunate of us provide can and should be based on pragmatic considerations and enlightened self-interest as well as the ideals and values we conceive as being central to a civilized and very American society. These policies are not antithetical to individualism as it should be understood. Individualism is not or should not mean the selfish, “it’s all about me” version that has taken hold in some segments of our society. This other or false “individualism” is driven by greed masquerading behind the invocation of constitutional rights that takes no consideration of our obligations towards and the contributions by many others that come with the exercise and preservation of these rights for ourselves. The objective of opportunity-enabling policies in the service of individualism should be to help as many human beings as possible express their individual talents however they are capable of doing so, as long as they do not harm or infringe the rights of anyone else.


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