(I’m not writing this essay as a response, but I want to note that its timing and trajectory have been influenced by the release of a Cato Institute analysis called, “Thinking Clearly About Economic Inequality,” and also by an interesting reaction to that analysis at The American Scene Blog.)

Dreams of GINI

We have been cheated.

If we examine the sum total of American wealth, we find that just 5% of the population owns 68% of the wealth. The poorest 80% own a piddling 9% of the wealth. Economic equality has deteriorated for 29 years – a trend that begins with President Reagan, but which continues through the Clinton years before peaking during Bush II’s second term.

Like any cheater caught in the act, the top 5% insist that it’s fair.

They say that, in America, we have equal access to wealth. They reference the Rags-To-Riches model, which says that even a poor black female can achieve economic success. Everyone, therefore, is responsible for his or her own destiny. Everyone can reach the top.

These inequality numbers prove, however, that such wonderfully-American dreams only come true for a fraction. The masses have crowded at the door, pushing and shoving. But only a handful will burst through.

Moral Implications

As an outcome, inequality isn’t automatically immoral. If we play a game, and you win, that can be fair. But if the game has been rigged – if the referees have been bought – then the outcome cannot be considered just.

So it is in America.

We expect our refereeing institutions, those that have final authority, to treat all citizens equally. That is the democratic function, for instance, of our educational system, our government and our Media.

But higher education, undergraduate and up, requires significant attendance costs and often favors “legacy” applicants. While there is widespread access to financial aid, much of it is comes in the form of loans. The average undergraduate borrower accumulates $20,000 in debt.

Government also has barriers. A candidate can’t even dream of competing if he doesn’t have private wealth or the support of big donors. Even then, if he campaigns outside of the two-party structure, he is basically unviable.

Similarly, Media – especially traditional media like television and print – restrict participation because of ownership costs. They also favor elite interests because of their business model.

Unequal treatment persists in these crucial institutions of power, and so we must conclude that the resulting inequality is unfair.

Liberty vs. Equality

Let’s imagine that each citizen of the United States was treated equally by the refereeing institutions. If, despite that equalized opportunity, the same distribution occurred, it still wouldn’t necessarily be fair – though it’s obviously more so.

If this is a basketball game, and if the opportunities are equal, then we must examine the consequences of winning and losing. Surely you wouldn’t agree to a basketball game if the rules called for the loser to be beaten. Similarly, we shouldn’t agree to an economic policy in which the costs of losing (“externalities”) include starvation, homelessness and a lower life expectancy.

As a society, we have the resources to guarantee food, shelter and health care. These protections should be classified as Rights – a codification which would benefit any American who finds himself suddenly losing the game. If we remember that wealth has declining marginal utility as it increases, we will not bemoan progressive taxation.

Conclusion

Our political system should allow for the maximum realization of individual human potential. Our creativity should be cultivated – along with our differences. As such, we should reject any system that would impose perfectly equal outcomes. After all, we are inherently varied.

But human liberty cannot flourish – except for a privileged few – without equal opportunity first. Enormous wealth gained in a rigged system is not an example of freedom. It’s an example of cheating. If economic policy is indeed a matter of public policy, then we shouldn’t tolerate a system of life-threatening inequality.

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Part 2 of “Americans Getting Skewed” will explore causes and solutions to the inequality problem. It will be published Thursday.