The Disastrous Effects of Economic Equality

The final result of economic equality makes everyone equally poor. What’s the best way to get wealth in the hands of people? There are several methods. The most popular (and destructive) is for the wealthy to be taxed so their “excess” wealth can be redistributed to the less fortunate. This works for a time until productive people tire of working for other people at the behest of a third party – the State.

This is the thesis of Ayn Rand’s Atlas Shrugged. What would happen if all the productive people decided not to be productive anymore? I’m not a supporter of Rand’s overall philosophy, but on this point she is on the money.

Another method is private charity. People with money are encouraged to help the less fortunate. There’s a lot of this going on in America. There always has been. Americans are a charitable people. Of course, charity can also create the often unintended consequences of dependency and entitlement. Years ago, my company published George Grant’s book Bringing in the Sheaves: Transforming Poverty into Productivity (free download). It was designed as a manual to show how charity work should be done.

But even charity work has its limitations if the goal is not to get people out of poverty. It’s often hard to accomplish when there are competing government programs that neutralize self-help poverty programs.

Charity programs are best designed for the hard cases and temporary setbacks, and administered by people one step up from poverty who have gotten out of the poverty trap themselves. They’ve heard the excuses and can spot a con job. They are not easily manipulated by guilt. See David Chilton’s book Productive Christians in an Age of Guilt Manipulators. It’s also a great introduction into real world, non-Keynesian economics from a biblical and free market perspective.

The best way to help the poor and disenfranchised is through a freed economy unencumbered by government. The government’s role in economic transactions should be minimal. Adjudicating theft and fraud is the government’s role, not mandating fairness. This would also mean not propping up banks and corporations with special deals through legislation, what’s often called “crony capitalism” which has nothing to do with capialism.

Which is better for the redistribution of wealth, having the government do or letting the market do it? Let’s take the ostentatious private home built by the late TV mogul Aaron Spelling. The Manor is a French chateau-style overbuilt monstrosity with 123 rooms and 56,000 square feet.

It was put up for sale for $150 million and sold for $85 million in 2011.

Let’s say The Manor cost $100 million to build. You and I and a lot of other people might say that the money spent on one house could have been better spent. You and I could be right, but we would be wrong if we took matters into our own hands and had used the power of government to stop the Spellings. If the Spellings could be stopped, so could anyone else, including you and me for any size house we built because some government agency deemed into “unequal.”

Think of the scene in Dr. Zhivago where the Zhivago house has been taken over by the new equalizing Communists. Yes, everybody was equal, equally poor.

But think about the $100 million cost of The Manor. Those millions of dollars were paid to people who worked to build it. They didn’t do it for free. The money they were paid went to help them buy their own homes, food, clothing, while giving them self-respect, work experience, and an opportunity to build a better life for themselves.

While The Manor might be the poster child for conspicuous consumption, $100 million got into the pockets of hundreds, maybe thousands, of people and trickled down to people from whom they purchased goods and services.