Income inequality: what is ‘fair’?


Although I disagree with much that was written, I enjoyed reading Professor Williams’ op-ed piece (“Is inequality fair?” May 8, 2019). Policy considerations are critical to decision-making and Professor Williams was very clear with regard to his favored policy position.

He begins his thesis by stating that if the means for earning a living was represented by “piles of money on the ground” and the rich took an unfair share, then it would be appropriate to push for redistribution.

I think a more apt analogy would be the one most of us heard our parents say on many occasions – money does not grow on trees. If Professor Williams was to use this analogy, it would be closer to reality, if the trees (the very means for earning a living), were a metaphor for capital, technology, finance, communications, and land and those “trees” were controlled by a very small class of elites.

Professor Williams’ underlying thesis in his thought piece on inequality could be interpreted, as follows: The wealth that a person is able to accumulate is an outcome of, and directly proportional to, one’s “service to society.”

Theoretically his assertion could be true if it applied to decentralized commercial, industrial, retail, and financial sectors with vibrant local economies that were locally controlled, which is one of the defining characteristics of a strong bourgeois economy.

Going back to its 18th century roots, such an economy is the foundation of a liberal democracy, which purportedly is the system we operate under. His assertion could even be true in an economy that is open and counter-balanced with an active electorate and strong regulatory provisions.

Milton Friedman stated in his book, “Capitalism and Freedom,” that “the kind of economic organization that provides economic freedom directly, namely competitive capitalism, also promotes political freedom because it separates economic power from political power and in this way enables one to offset the other.”

The problem is that this statement might work in the application of a sterile economic model, but does not apply in real life. Business entities under the guise of free markets run this country, while most of the competition that occurs within our economy is the competition for dwindling opportunities to obtain employment at a living wage with benefits that can support a family.

At the risk of stating the obvious, there is no political freedom without economic freedom. As our economy continues to consolidate and choices available for a means to make a living constrict, so too does political freedom. And it is bound to get worse.

We have gone through a long, sustained period of historically low interest rates. Having made and kept money cheap for so long, this, combined with technological advances, has provided substantial opportunity to invest in labor-saving technology.

And if the projections regarding artificial intelligence are any guide, we will be turning an even more substantial portion of our labor force not, as suggested by Marx, into a “surplus labor” force but as characterized by Dr. Yuval Noah Harari, into a “useless class” of economically unneeded people.

When I was growing up (in the 1950s and 1960s), we were taught that technology was going to improve all of our lives and that there would come a time when nobody would have to work even 40 hours a week to make a living. With reduced work hours, we would have more time to devote to family, civic and community activities.

Instead, we have developed an economic system where many households require multiple jobs to make ends meet, while many others cannot find adequate employment. (I believe the official rate of labor force participation in two or more jobs is a low of 5 percent, but there is much, beyond just common experience and common sense, to suggest that the number is understated.)

Contrary to what my teachers projected, the Labor Participation Rate has increased since the fifties, and since the mid-sixties average hourly wages, adjusted for inflation, has increased by about 10 percent — that is an annual growth rate of about 0.2 percent each year. During that same period, productivity growth has increased by about 100 percent.

This is the basis of our inequality – the labor force has been neutered economically and, as a consequence, politically, and has lost its share of the last half century’s productivity gains in direct proportion to its loss of economic and political power.

Aside from the morality, or lack thereof, of inequality, studies have shown the negative impacts of inequality on mental health, drug use, drop out rates, incarceration, obesity, homicide, life expectancy, and infant mortality. Furthermore, according to the OECD, inequality is bad for economic growth.

To address Professor Williams’ question head on – “Is income inequality fair?” – it should be beyond debate that a person should be fairly compensated for his or her labor. But that begs the question of what is fair.

It should be considered indisputably unfair that labor has lost so much of its share of national output over the past 50 years. It is unfair that citizens lack real voice in our political system, while too many government officials, through campaign contributions, regulatory capture, speaking engagements, post-public sector board, employment, lobbying, consulting opportunities, and other perks have become handmaidens of big business.

And while it is true that there are those who would prefer to live off the labors of others, we must be careful not to overstate the legitimacy of an economic rule of equivalence. There are many things that society needs that no one of us can accomplish or should be able to accomplish on our own.

As such, there is a need for a common treasury into which each of us contributes in order to provide for common needs, such as security, education, infrastructure and more.

There is also the need to recognize and accommodate the disparate capacities – physical, mental, situational – of all people in a given society. Addressing all of these issues can only be accomplished within our current political economy through progressive taxation, which also would preclude such vast disparities in income and wealth inequality.

Harold DeRienzo
Fayetteville, Ga.