Inequality

It is worthwhile to take a closer look at the oft-expressed desire to reduce inequality.

If by inequality one means the existence of poverty among riches, would it not be more prudent to work toward a reduction of poverty rather than of inequality? Reducing inequality won’t necessarily reduce poverty. In fact it could exacerbate poverty.

As reported in the Washington Post, the poor actually enjoy higher life expectancies (and thus higher standards of living) in cities where inequality is highest. San Francisco has gross inequalities due to the tremendous number of tech millionaires and billionaires, yet relatively low poverty rates. One reason is that wealthy people put their money towards starting businesses (and thereby employ poor and middle class people); towards charitable causes; towards savings where the money in turn is used to provide car loans, student loans and home loans for poor and middle class people; and/or towards consumption which in turn keeps businesses afloat and employees employed.

Perhaps one could justify wanting to curtail inequality because of the danger of envy and resentment among the less fortunate toward the more fortunate (this even includes millionaires toward billionaires). But in that case, why not just work toward a curtailment of envy and resentment? Envy and resentment are actual moral failures. Inequality is not, provided one earns one’s money honestly and justly, and gives substantially to charitiable causes. Moreover almost all agree that a brain surgeon should be paid significantly more than a janitor. Were they paid the same, there would be a shortage of brain surgeons; few would devote the time and expense necessary to become one. So pay differentiation is not a moral failure.

In fact, excessive focus on inequality actually could have the perverse effect of stirring up envy and resentment. To combat this, when one talks about inequality, one should always admonish one’s audience not to harbor ill will toward the more fortunate.

So in this humble observer’s opinion it is much more effective to work toward an end to poverty and envy.

Envy/Jealousy Behind Virginia Tech and Newtown Shootings?

Arguably the worst evil committed in the world stems from the dual emotions of envy/jealousy. The tens of millions of people who died under Communism during the 20th century did so at the hands of people who largely were motivated by envy against the rich or at least against those better off than them. That same emotion in large part brought about the murder of millions of Jews under National Socialism, as they typically were wealthier (thanks to their emphasis on education).

At the individual level as well, terrible crimes have been committed based on envy/jealousy. For example, particularly in Asian countries, there are instances of women throwing acid on other women’s faces in order to erase their physical beauty.

The Virginia Tech shooter in 2007 was motivated in part by envy. His so-called multimedia manifesto was laden with expressions of hatred for the rich. “Among the materials was a DVD with 27 QuickTime video files, totaling about 10 minutes, showing Cho talking directly to the camera. He does not name anyone specifically, but he mentions ‘hedonism’ and Christianity, and he talks at length about his hatred of the wealthy,” according to an MSNBC article.

Envy/jealousy is an incredibly powerful emotion and explains a lot of evil in this world. It could help explain one of the most evil actions of recent times, when 20-year-old Adam Lanza shot to death 20 mostly first graders along with many of their teachers and administrators. According to FoxNews, “Two law enforcement sources said they believed Nancy Lanza had been volunteering with kindergartners at the school. Most of Lanza’s victims were first graders sources believe Nancy Lanza may have worked with last year….Adam Lanza believed she cared more for the children than she did for him….”

If the report is accurate, then it appears Adam Lanza thought his mom loved him less than she loved the kids, prompting him to kill them.

That’s what jealousy does. That’s what envy does. That deadliest of the seven deadly sins gets nowhere near the media attention it deserves. There should be a national discussion on the evil that results from envy, in an effort to try to tamp down on some of the emotions that drive people to do terrible deeds.

Envy and Resentment Often Lurk Just Below the Surface

Envy is one of the most pervasive human emotions, yet it’s rare that you find someone who admits to it. But someone just did. In a WSJ article the author, Lee Siegel, compares the rise of Asian-Americans with that of Jewish-Americans. He writes,

Some of the more vehement attacks on Amy Chua’s deliberately provocative 2011 memoir of child rearing, “Battle Hymn of the Tiger Mother,” were perhaps fueled by resentment of Asian-American ascendancy, especially in the context of raising “perfect” children. Confession: I was one of the book’s more vocal detractors. Was I, a Jewish-American writer, driven to pique, in part, by a member of a group that threatens Jewish-American cultural domination, just as American Jews once threatened the WASP mandarinate? Well, maybe.

Wow. Thank you Mr. Siegel for your honesty in admitting that your earlier criticism of Amy Chua’s style of child-rearing was partly fueled by a resentment (i.e. envy) of Asian-American ascendancy. (And it’s a bit ironic that this is coming from someone who’s part of a group that often itself is a target of envy and resentment.)

This is so revealing – and not just in Siegel’s case. One extrapolates that many opinions and observations that one comes across in the media and elsewhere actually derive from selfish and petty human foibles, rather than from substance. It shows that everything should be taken with a grain of salt. The next time one comes across a scathing criticism of Mitt Romney or whoever, one should ask whether the person doing the criticizing has too much envy running through his or her veins.

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On another but related subject, the article points out that Asian-Americans, to their credit, enjoy the highest incomes of any racial group in the United States. And as well they should, thanks to their admirable focus on education and hard work. (One example is that, in my local area and I’m sure elsewhere, Asian-Americans far more than Americans of other extractions send their children to academics-focused summer school. And that makes perfect  sense. Three months of summer vacation is an anachronism – based on the desire to let children work on the farms back when we primarily were an agricultural society. America never fixed that, and now it’s practically impossible because the teachers unions would be so resistant. Even though they mostly enjoy good salaries for working only nine months of the year — like Chicago where they earn $75K — were we to propose a 10 or 11 month school year, the unions would of course demand a big salary increase to compensate for it. And that would be too expensive so it’s unlikely that it ever would fly.)

The statistic in the article that Asian-Americans enjoy the highest incomes reminded me of a class-warfare-laden “infographic” about a year ago in LiveScience focusing on the top 1 percent (yes, it was class warfare in what should be a science-focused publication), which I wrote about previously. It included a bar graph of average incomes of racial groups in America: white, black, and Hispanic. It showed that whites had the highest incomes – and the tone of the graphs did not put people with high incomes in a favorable light. But it conspicuously left out average incomes of Asian-Americans.

That no doubt was because the writers and editors of the publication wanted to convey the impression that the inequality and other ills of America stem from the actions of upper-income white Americans. In the context of that infographic, it would have been very politically incorrect to show that a minority group actually has higher average incomes than those of European extraction. So they simply left out that inconvenient fact. It was one of the most blatant examples of journalist malpractice I had ever seen.

Why the Status-Conscious Would Want to Tax the Rich

Three common reasons for wanting to raise taxes on the rich include: 1) that’s where the money is, 2) envy, and 3) envy-avoidance.

A fourth reason for wanting to raise taxes on the rich: to boost one’s social status. Or more accurately, to mitigate one’s (perceived) inferior social status.

Lots of people are status-conscious. They strive for more and better material goods (and services) and/or higher pay in an effort to gain more respect and feel good about where they stand in relation to others. “Money often translates into the respect of others and high social status, and so even those who don’t want many worldly goods may want a high income for the respect it brings,” write Ed Diener and Robert Biswas-Diener in their book Happiness: Unlocking the Mysteries of Psychological Wealth.

In a study, Harvard economists David Hemenway and Sara Solnick asked respondents if they would rather earn $50,000 a year in a society where others are making $25,000, or earn $100,000 a year when others are making $200,000. Fifty-six percent chose the former – i.e. being relatively poorer at $50,000 a year, only because of the higher social status that would entail.

This implies that lots of people no doubt hate it when other people earn more than them, not necessarily because of envy, but because it means they feel less respected than the person earning more. It’s a type of inferiority complex. In order to gain more respect – or more accurately, in order to feel less disrespected – they’d really like to bring those wealthier persons down a notch or two.

What better way to do that than to – you guessed it – raise taxes on the rich?

My hypothesis is that this is another reason why you find a lot of wealthy Democrats: because even though they’re wealthy or upper-middle class, there are still a lot of folks wealthier than them. And they may desire higher taxes on the rich particularly if their taxes would stay the same or wouldn’t rise as much. Of course, this doesn’t apply to all wealthy Democrats, but it likely applies to some of them. They’re just like the people in they study who wouldn’t like to be earning $100k while others are earning $200k.

Another implication: while the left would have you believe that left-leaning people don’t care as much about wealth or materialism or staying ahead of the Joneses, a lot of them surely do. The more you care about such things, the more likely you are to be status-conscious, and therefore the more likely you are to want to reduce the higher status of others in order to gain more (perceived) respect for yourself.

Of course, in addition to wanting to raise taxes on the rich because of envy, this “status inferiority complex” as I call it would be a selfish, shallow, and immature reason for wanting to do so. That’s why I suspect that testing this hypothesis would be difficult: few people would admit to it. But it still could be possible, perhaps by surveying psychologists based on what they’ve gleaned in therapy sessions, or by surveying people themselves with the hope that some of them would be brutally honest in their answers. This is a long shot but hey reader, if you’ve ever felt that way, please share your thoughts in the comment section below.

On the flip side, if the above is true, then it’s plausible that some wealthy folks resist higher taxes on them due to a status superiority complex, a.k.a. snobbery. And they likely would harbor both a status superiority complex and a status inferiority complex simultaneously, assuming there are still people richer than them. But if raising taxes on the rich is bad policy anyway – which it usually is because it disincentivizes production thereby harming economic growth and thus harming everyone – then the societal consequences of a status superiority complex aren’t near as harmful as a status inferiority complex.

Meanwhile, in the first paragraph of this article you’ll note that I didn’t include “reducing inequality” in the list as to why people want to raise taxes on the rich. This is because it’s implied in the other items in the list.

Surely inequality would be bad if we lived in a zero-sum society where the rich get richer through wealth coercion – i.e. stealing from the poor and middle class and thereby making the poor poorer. But we live in a positive-sum society where the vast majority of those who are rich got that way through wealth creation, not wealth coercion. The history of America is the story of the rich getting richer and the poor and middle class getting richer. (Of course there have been some years where the poor have gotten poorer, like now during the Obama years, but it’s certainly not because of wealth coercion by the rich, but because of a relative lack of wealth creation.)

So regarding inequality, who cares if the rich get richer as long as everyone else gets richer as well?

I’ll tell you who cares: the envious, the envy-avoiders, and the status-conscious.

The Ironies of Elizabeth Warren

Apart from initially wiping out any mention of “God” from the party platform, one of the biggest manifestations of the Democratic Party’s lurch leftward is the elevation of the “wealth-is-theft” school of thought.

The notion that the wealthy got their money through institutionalized theft used to be championed just by people on the far-left fringe, like Bill Ayers and Bernardine Dohrn. But at their national convention earlier this month, Democrats not only featured a speaker championing this school of thought, but gave her a coveted, prime-time slot – right before Bill Clinton.

Folks, it’s not your mom and dad’s Democratic Party anymore.

The speaker was Elizabeth Warren, who’s running for Senate in Massachusetts (and infamous for her claims of being part Cherokee Indian).

For more on the demagoguery, click here.

The ultimate irony? That Ms. Warren and her cohorts on the left are protectors of actual wealth transfer from the poor to the rich. As explained in the post below, the 15.3 percent payroll tax on the working poor, perversely, helps fund Social Security and Medicare payouts to middle- and high-income retirees. Whenever Congressional Republicans propose “means-testing” so that transfer payments don’t go to the rich, Democrats balk.

Yet another irony: Awhile back, lefties swooned over Ms. Warren’s comment along the lines that job creators should pay more taxes because of the government services provided to them like roads, police, education, etc.

But as explained in an earlier blog post, we’re getting less of those essential government services because of people like Elizabeth Warren!

The left is fueling the biggest crisis in government: the crowding out of things like law enforcement, fire protection, transportation infrastructure, education, environmental protection, etc. by wealth redistribution. Fully two-thirds of federal government spending goes toward entitlements and other redistribution programs – up from about 25 percent several decades ago. And with Obamacare, it’s on track for 70 percent in a few years. For a short video on the subject, click here.

Basic government services are getting squeezed out. Yet Ms. Warren and her allies relentlessly call for more wealth redistribution, tightening the squeeze.

Repubs Finally Waking Up on Envy

It’s about time Repubs started stating the obvious about Dems.

Mitt Romney said that bashing Wall Street and the top 1 percent is largely driven by envy.

While few people admit to envy, ask practically any psychologist and they’ll tell you that envy is one of the most prevalent and powerful of human emotions. Even Repubs harbor envy but they’re better about keeping it in check.

Of course, the Washington Post writer who reported Romney’s comments is skeptical that envy is a motivating factor. But want evidence of envy? Why, see the Washington Post: “That Wonderful Woman! Oh, How I Loathe Her” by Ann Hornaday.

Next time there’s a counter-protest at an Occupy Wall Street event, the counter-protesters should set up a booth offering free couseling to OWSers on envy management. Envy is a terrible thing for one’s mental and physical health, you know. Yes, it’s a medical fact that too much envy and resentment lead to diseases like cancer and heart disease!

Further Insight on Why the Rich Get Richer

You’ll never believe who presented a good explanation of why the top 1 percent’s income has risen faster than that of other groups: Bill Moyers.

Moyers cited one Dieter Braeuninger, who points out that rapid technological change is resulting in a shift to more technology-intensive production methods, i.e. automation, and thus higher demand – and higher pay – for for highly-skilled workers who are able to operate such technology. Those smart enough to invest in such technology enjoy a higher payoff as well. Braeuninger adds, “The supply of basic labor has increased enormously… As long as less-skilled workers cannot shift to more productive tasks, increasing income inequality remains a threat.”

In other words, it’s differences in education levels, and an oversupply of low-skilled labor, that explain inequality, not sinister plots by the rich.

And even then, in the U.S. the lower-income groups’ incomes have risen over the past few decades – just not as fast as the higher-income groups. If people are all bent out of shape over the poor getting richer while the rich get richer faster, then your problem is an oversupply of envy. The solution isn’t taxation, but education – not only educating people to acquire the skills of the modern technological world, but also educating the enviers on why they should let go of such a destructive and useless emotion.

Moreover, the rich have been getting richer at least since the dawn of agriculture, some 10,000 years ago. Since then, and especially in the past few hundred years, humans have been continuously adopting more technology-intensive methods requiring higher skill levels. We’ve gone from hunter-gatherer societies where people’s incomes were more equal than today – and equally poverty-stricken – to a highly complex economy requiring an immense differentiation of tasks and skill levels (and thus pay levels).

That said, Moyers also turned to a usual suspect, Robert Reich, who preposterously implied that the rich get richer at the expense of everyone else – by taking away the money of the nonrich. Reich writes, “Now, when they’re taking home that much, the middle class doesn’t have enough purchasing power to keep the economy growing.” Of course he doesn’t explain how such a process would work. The absence of such explanations is a common occurrence among the left. It’s one of the things the prompted me to abandon them long ago.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

You May Be In the Top 1 Percent of the World

I have a confession to make.

If you’re a fan of Occupy Wall Street, I hope you’ll cut me some slack, once you learn of my status.

Here goes (takes a deep breath):

I’m in the top 1 percent of income earners – of the world.

Yes, we’re talking about the big leagues, here. When I set my sights on something, I aim for the world. None of this USA-only stuff.

I bet you’re thinking, “Tax the heck out of him.”

But actually, you may be a 1 percenter, too.

You definitely are, if you take into account all the people who’ve ever lived.

For the scoop, click here.

 

The New Demagogues

Have you ever come across people who trumpet statistics saying that Jews have a disproportionate share of the wealth? Those statistics may be right, but usually the person spouting them is prejudiced against Jews.

What they do is tout certain statistics without providing the right context or explanation, such as the fact that Jewish parents really emphasize education more so than people of other religions, resulting in their children having higher incomes when they become adults. They should be admired, not vilified. It’s a similar situation with Asian-Americans.

Now, media outlets, as well as President Obama and many others, are trumpeting statistics showing that in recent decades, the top 1 percent’s income has risen much faster than that of the other 99 percent.

To tout statistics like this without providing the right context is like anti-Semitic people touting statistics showing that Jews have a disproportionate share of the wealth. The people in the media and the President are prejudiced against the rich.

Just as the demagogues of old whipped up envy, prejudice, and hate against the Jews, President Obama and his enablers are doing the same against the rich.

(For context regarding the top 1 percent statistics, click here.)

 

The Rich Get Richer and the Poor Get Richer

Here’s a comment I posted in response to an article in The Economist, “The 99 Percent”:

It’s surprising, and encouraging, to see that the income of even the lowest quintile rose over the past 30 years. You’d think with the millions of low-skilled, non-English-speaking immigrants pouring in, the income of the lowest quintile would have declined, since income inequality is mainly a function of differences in education/skill level. The question is, will rising incomes of even the lowest quintile be a thing of the future, as it was of the past?

If it doesn’t last, it certainly wouldn’t be the fault of the top 1 percent. If wages of the lowest-income groups decline, the culprit would be an oversupply of low-skilled (many of whom are non-English-speaking) labor.

Meantime, if everyone’s incomes go up – as has happened over the past 30 years – then that’s a good thing. Only the envious are troubled by the fact that the incomes of the rich have risen faster than everyone else.

If you earn $20,000 a year, and your real income goes up to $25,000 a year, that’s good, right? But what if you hear that someone else’s income goes from $100K to $150K? If you’re the envious and resentful type, you’d be troubled. If you’re emotionally mature, you wouldn’t be troubled.

Moreover, rising incomes of the rich isn’t happening at the expense of everyone else (except perhaps in the case of those who get their wealth through wealth coercion as opposed to wealth creation, such as certain members of the legal profession). It isn’t a zero-sum economy. It’s a positive-sum economy where many wealth creators get rich themselves, and in the process make everyone else’s life better through life-enhancing products (software, electronics, appliances, foods, etc.) and services. So the top 1 percent not only provide the jobs to the 99 percent, but also the life-enhancing products.

Factors causing the 1 percent to get richer faster include globalization, where markets are now much bigger than they were in the past and where one can therefore sell many more products than before. Another factor is population growth – now there are 7 billion of us. If you make an inexpensive product costing $1 and sell it to just one-seventh of the population, you’re a multi-millionaire, perhaps a billionaire if your costs are low.

Is it the top 1 percent’s fault that powerful forces such as globalization and population growth are changing the income dynamics?

The enviers want to raise taxes on the rich in order to try reverse the income inequality statistics. But the rich provide the jobs. They provide the products that enhance our lives. They provide the money so that we can get loans to by cars, homes, and education.

Punish the rich, and you punish us all.

For more on this topic, click here.