Equal but Separate

We appear to be back having to talk about "income inequality" again, which is not terribly surprising.  After all, having been soundly thrashed a couple Tuesdays since and then embarrassed mightily by the expanding "stupid voter" scandal, the left needs to grasp at the nearest available straw to try to pull itself out of the hole its unworkable policies have dug.

And once again, having lost their appeal to the mind of the voter, they try to appeal to their hearts and sympathies.  Trot out the minimum wage, for example, a classic piece of feel-good-over-outcome misguidedness.  And create something from whole cloth that is the natural consequence of the fact that we're not all created the same -- "income inequality."

Now, first we need to remember that a capitalistic society is not a utopian one.  We're not all going to lay on the beach all day with ever-filled margaritas; someone has to pour them and someone has to pay for them.  Capitalism is not perfect, but it does work.  Of course, how near to or far from perfection any system lies depends on your view of what perfection actually is.

Here's my view:  Inasmuch as we're not all created equally, the best economic model is that one which allows the citizen to reach his or her best level of economic success relative to talent, intellect, drive and work ethic.  To me, that is a capitalistic economy that maximizes the return on those qualities and, at the same time, provides for those incapable of participating -- without encouraging non-participation.

Income inequality is, of course, the natural consequence of the differences in capabilities and self-motivation across the labor force.  Accordingly, I have to ask those crying over it, "When will you be happy? (i.e., what level of inequality is OK with you)"  And there, my friends, is how you know that they are redistributionists of the first order.  Here will be their answer:

[crickets ...]

The problems with crying over income inequality and, worse, doing anything at all to change it are two:

(1) In order to do anything at all, you have to have a specific metric for when controls end
(2) You are trying to overcome market forces.

The first is the telling case.  The Marxists will say that everyone should earn exactly the same, so the goal is zero inequality.  The run-of-the-mill leftists will say nothing.  They will say nothing, because if they were to legislate some kind of target, then once it passed and became the law of the land, they'd have to stop acting like closet Marxists and shut up, when in truth, complaining about those overpaid CEOs (to keep the attention of the masses) is their preferred motivation.

At the same point, however, there are actually constraints on CEO pay, called "market forces."  There is no reason that a company actually wants to give its executives gargantuan sums, and try to argue their rationale to their Boards of Directors, unless there is a logical reason.  That logical reason has to relate to the executives' capacity to bring value to the shareholders through their efforts.  I have known CEOs personally who were people of amazing capacity, absolutely paid in proportion to their value to shareholders.  If they no longer have that value, and the same value can be obtained for less, in the free market it will be obtained for less, whether it is I, buying a bag of navel oranges at store X because they're cheaper than the same bag at store Y, or ABC Corp.'s Board canning its overpaid leadership because cheaper competence is available elsewhere. There certainly are overpaid CEOs, but they don't last, far more often than you read about.

But that's not it!!!  It is about the left's desire to control everything in the economy, including salaries, and those bad overpaid CEOs are simply the bogeyman they use to justify their intrusion.  This is why you will never get the left to provide any metrics that say that they will shut up when the measure of income inequality has reached some specific level.  It's why they will never answer the question "What is the highest percentage of an earned dollar anyone should ever have to pay the government?"

Controllers control.  They can never tell you when they will say things are OK, because then they lose control.  God forbid that they ever get their way.

Copyright 2014 by Robert Sutton