The allure of equality is an enticing vision for many. Many see socialism as a solution for achieving equality because it effectively redistributes wealth from the rich to the poor. Many trials of socialism have been attempted, and many have failed. Nonetheless it is seen as an important experiment to run. For if someday we could create a fair sustainable system that achieves income equality, this would surely be one of humanity’s crowning achievements. Or at least it would be perceived that way. How valuable would achieving income equality actually be in the grand scheme of human history?

The following critique will attempt to determine the economic value of achieving hypothetically “Perfect Socialism” on a global scale. For this exercise, perfect socialism will be defined as universally uniform distribution of income. This discussion will assume a perfect implementation of the redistribution process (no corruption). After identifying the value that an absolutely perfect implementation of socialism would imply, the argument will be made for why even perfect socialism at its optimal outcome is insignificant for human progress.

Disclaimer 1: The following argument will address “Perfect Socialism” as it hypothetically exists in a vacuum. It will assume all other variables/incentives remain constant.

Disclaimer 2: There is no implementation known to achieve “Perfect Socialism.”

Disclaimer 3: GDP is an imperfect measurement for many reasons related to purchasing power and purchasing power parity across cultures. In this exercise, GDP is used as a rough relational comparison for income distribution.

Perfect Socialism Assumptions

1. Socialism is defined as redistribution of wealth from asymmetric to symmetric.

2. A hypothetical uniform redistribution of wealth would benefit all those below the average income level, to the disadvantage of all those above the average income level.

3. Given that more people exist below the average income level in today’s asymmetric distribution, a hypothetical uniform redistribution of income would be to the benefit of the majority of people.

4. Redistribution of income is a zero-sum game. No new wealth is created in this process.

Theory: Redistribution of income has a finite ceiling in terms of increasing the commoner’s standard of living. (Illustrated below)

The chart to the left displays the current GDP/capita within each income quintile and the required growth factor to achieve the global average income. The chart is used for relational comparisons of nominal income. It is important to note that nominal income does not equate to purchasing power. Purchasing power is the quality/quantity of tangible products the consumer can actually purchase. Growth in purchasing power is not necessarily related to growth in nominal income. For example, in 1990 a $3000 computer offered relatively poor performance by today’s standard. In 2019 a $3000 computer offers relatively good performance. The consumer’s nominal income of $3000 has not changed, but the real income of that $3000 has changed due to the growth in computer technology. It is this growth in purchasing power that we are measuring. For example, in the chart to the left, it would take the middle 20% a 257% growth in purchasing power, to attain the same level as the global average.

The chart to the right displays the number of years of economic growth each income quintile is behind the Global Average. In other words, it illustrates how many years of asymmetric economic growth perfect socialism is equivalent to.

For example, in the chart to the right:

It will take an asymmetrically distributed economy with a 5% annual growth rate, 26 years for the middle 20% to achieve the same level of growth that switching to perfect socialism would enable. In other words, the value of perfect socialism is equivalent to 26 years of human progress, for the middle 20% — The relative income inequality will still exist 26 years later, but the middle 20% will be at what used to be the global average income level 26 years before.

Depending on the assumed growth rate of purchasing power and which income quintile you are comparing, the value of perfect socialism is equivalent to 20–80 years of economic growth. It must also be noted the progress for the bottom ~80% comes at the direct expense of the top ~20%. Reasonable people will come to differing conclusions on the value of such a tradeoff. The important distinction to be made is that perfect socialism is a one-time return. When all incomes are uniformly distributed, there is no additional growth that can be returned from perfect socialism. It is maxed out. That being said, a discovery which improves human prosperity 20–80 years for the bottom 80% of participants would be a blip on the radar in terms of human progress. There is a long list of human discoveries which have progressed human prosperity by a far greater margin. The impact of discoveries such as the printing press, agriculture, electricity, computers, the Internet, and countless others have had on the human standard of living dwarf anything perfect socialism is capable of accomplishing.

Many may question the validity of the numbers, assumptions, and calculations made in the two tables above. For those people, consider the following anecdote: Would you rather be a member of the top 20% of income earners in the year 1900, or be a member of the bottom 20% today in 2019? From the perspective of a human lifespan, income inequality seems to be a social catastrophe, but from the perspective of not even 100 years ago, income inequality is entirely a moot point. The purchasing power of each successive generation in most cases universally exceeds the purchasing power of all prior generations. From that perspective, the only income inequality that exists is inter-generational income inequality.

In that sense, income inequality can more or less be viewed as the time it takes human progress to propagate across the entire population. This propagation seems rather slow to the individual’s lifespan, but is exceptionally fast from the perspective of many generations.