The Ideological and Political Roots of American Inequality

According to John Roemer, rising inequality in developed countries are due to a lack of confidence regarding the effectiveness of governments to build a more egalitarian society.

To address properly the growing inequality in the advanced democracies, particularly in the United States but also increasingly in the UK and continental Europe, I believe it is necessary to review the main arguments for inequality, and to inquire into their legitimacy. There are, today, two main arguments for inequality: first, an ethical
one, that individuals deserve to benefi t from what nature and nurture endows them with, and second, an instrumental one, that inequality is good for everyone. The first argument is presented in its most compelling form by the philosopher Robert Nozick, who in his 1974 book, Anarchy, State and Utopia, advanced the idea that a person has a right to own himself and his powers, and to benefit by virtue of any good luck that may befall him, such as the luck of being born into a rich family, or in a rich nation. Any voluntary exchanges that take place between persons are legitimate, and in this way, it is not hard to imagine that a highly unequal distribution of income and wealth can be built up fairly rapidly from these unequal endowments. Nozick is the first to admit that actual capitalist economies are not characterized by historical sequences of legitimate, voluntary exchanges: there is much coercion, corruption, and theft in the history of all societies. But Nozick’s point is that one can imagine a capitalism with a clean history, in which vastly unequal endowments of wealth are built up entirely from exchanges between highly talented, well educated people and simple, unskilled ones, and this unequal result is ethically acceptable if one accepts the premise that one has a right to benefit by virtue of one’s endowments – biological, familial, and social – or so he claims.

The second major argument for inequality is the instrumental one: that only by allowing highly talented persons to keep a large fraction of the wealth that they help in creating will that creativity flourish, which redounds to the benefit of all, through what is informally called the trickle-down process. In a word, material incentives are necessary to engender the creativity in that small fraction of humanity who have the potential for it, and state interventions, primarily through income taxation, which reduce those material rewards, will kill the goose that lays the golden eggs.

A third argument for inequality, which is currently most prevalent in the United States, is one of futility: even if the degree of inequality that comes with laissez-faire is not socially necessary in the sense that the incentive argument claims, attempts by the state to reduce it will come to naught, because the government is grossly incompetent,
ineffi cient, or corrupt. Thus, better to let the rich keep their wealth and invest it profi tably, than to hope that the state can manage it more fruitfully. Incredible as it may seem, it is now becoming increasingly popular in certain circles of economists in the United States to say that the productivity of government investment is zero.

Many in this audience – and I mean especially the Europeans – may think it somewhat pedantic for me to rehearse these views, which they consider to be self-evidently wrong or false. But I do so because these views have taken a strong hold on the minds of many Americans, and the consequences for the United States, and therefore for the world, will be dire, I believe, if this popular ideology is not successfully challenged. The United States is not Germany in 1931, but it may well be Germany in 1921 – I do not wish to push the analogy too far, because the US is not suffering under a punitive Versailles treaty. The details are quite different in the two periods, but the event of a right-wing populist movement growing in the United States to a dangerous degree has a non-trivial probability. It is incumbent upon us, as intellectuals, to equip ourselves to counter it.

Please click below to read John E. Roemer’s full paper on "The ideological and political roots of American inequality".

The ideological and political roots of American inequality

Source : John E. Roemer, "The ideological and political roots of American inequality", AIAS, Amsterdam, GINI Discussion Paper 8, 2011. Article first published on the Website of the GINI Project.

Photo : Mike Rodriquez (Flickr, Creative Commons)


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21 February 2012

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