We are at a cross-roads in our country and it’s time to force the issue. We face a generational decision on the kind of economy we want for ourselves—and so the degree of individual freedom we want for ourselves. We made a choice in the 2010 elections, and it’s time to confirm or repudiate that choice this fall and in the election cycles to come.
There are two basic types of economies available to us: wealth redistribution by government fiat or wealth redistribution by individual choice in a free market. In this post, I’ll write a little about each type.
Wealth redistribution by government fiat:
When redistribution occurs by fiat, it occurs by taking wealth from some and giving it to others. I won’t go into the class warfare that this sort of thing can engender, regardless of good intentions. I’ll write, instead about the outcomes of such redistributions.
This taking of wealth from some necessarily caps the wealth of that some. Indeed, reducing income inequality often is the explicit goal of this sort of wealth redistribution as that transferred wealth represents “income” to the recipients.
Reducing income inequality, though, ignores a fundamental aspect of human endeavor: we are not endowed with the same degree of talent, of work ethic, of luck. We do not even have the same desires for what we want out of life. Thus, income inequality is an inevitable outcome of the application of men to their own efforts and goals. Capping this—which wealth redistribution necessarily does—in the name of “fairness,” then, prevents those with greater talent or ethic, or even luck, from enjoying to the fullest the fruits of their labors. By this, it denies those men the equality of opportunity promised them by our social compact.
Worse, this prevents those men even from achieving their fullest potential, because knowing they will have some portion of the results of their efforts taken from them, there is no incentive to excel, to do their best. Their reach will no longer exceed their grasp.
At least as bad, this also saps the morality of those men: they lose both the incentive and a portion of the means to satisfy their obligation to their fellows. Government has taken this obligation and the responsibility for its satisfaction away from them and arrogated these to itself.
But what of the recipients of the redistribution: are they not enough better off (the other major purpose of government-forced redistribution) to offset the loss to the successful? No. In fact, they’re not any better off at all; they’re worse off.
At this end of the spectrum, incentive to do better is lost: they’ll receive a measure of wealth regardless of their effort. They lose their sense of obligation to do their best and thereby to not be (or to be as much less of as they can) a burden on the duty (or wealth) of others. Government as arrogated this responsibility to itself.
These men, also, are denied their promised equal opportunity; they are denied their chance to show the best that is in them—morally as well as economically.
Wealth redistribution by free market individual choice:
The case concerning this is quite straightforward. First, the answer to an obvious question: how is this redistribution, at all? The rich get richer, with the seller collecting his price for his good or service, and the poor get poorer for having had to pay those prices. Actually, not. That description looks, too narrowly, only at the pecuniary aspect of an exchange of money for a good or service; there is, though, a much broader picture.
Economically, it’s simple. The desire for those goods and services is demand that stimulates production. That increased production represents both increased hiring and lower prices. Those lower prices and higher employment increase demand. Which generates jobs…. Obviously this won’t go on forever; there will reach a point where the price of labor, which has been increasing as its supply becomes scarcer, makes it uneconomical to continue hiring and producing. However, that level of full employment is a far higher level of employment than that which obtains in an economy where the wealth passed on to people is as relatively independent of effort as it is in an economy driven by government-forced redistribution.
Thus, wealth is redistributed as a result of the free—voluntary—exchange that exists in a free market. Those exchanges ultimately create additional jobs, which is increased wealth for all participants.
This voluntary wealth redistribution is short and direct on a personal level, also: rather tautologically, both parties to a (voluntary) transaction are made wealthier by that transaction: each party has obtained something of value to him that he didn’t have before. After all, if it wasn’t of value, neither party would have been interested in the exchange. And by completing that exchange, each party now has that thing.
All participants in a régime of free market redistribution are enriched morally, also. It is in this environment that equality of opportunity is preserved. It is in this environment that everyone, rich and poor, is able to work to his fullest potential. It is in this environment that everyone is able to enjoy all of the fruits of his labor. It is in this environment that everyone retains his moral obligations, the ability to satisfy them (including the obligation of each to help his less fortunate fellows), and by doing so improving themselves.
These men, then, are guaranteed their promised equal opportunity; they are guaranteed their chance to show the best that is in them—morally as well as economically.