What’s So Bad About Inequality?
Three reasons to rethink an inevitable and unsolvable issue
Economic inequality is the natural, inevitable, and for the most part, benign by-product of economic development. At least that is what I will argue in this post.
In fact, inequality can be good for society in some respects. I’ll explain why I believe that, but first I want to clarify a few things.
When I say that inequality can be benign or good for society, I’m talking specifically about the inequality that comes about as a result of wealth creation/accumulation in a reasonably free market.
There are other types of inequality, like that created by restrictive policies that hold back one group while favoring another. That inequality is not what I’m discussing and the solution to it should be straightforward — get rid of those restrictive policies.
Nor am I talking about inequality before the law. Any policy that treats people as if they are less deserving of dignity, respect, or compassion than others on is unacceptable.
Lastly, I’m not using inequality as a synonym for poverty. Poverty is terrible. But a society need not be unequal for it to have a problem with poverty. On the contrary, some of the societies throughout history that worked hardest at equality only managed to make everyone equally poor. And in the United States, income inequality is high, yet its rate of absolute poverty is lower than that of the UK, Sweden, and Finland, all of which have more equitable economies. Poverty and inequality are distinct issues, and as I will argue, the former is not caused by the latter.
With those clarifications out of the way, I will lay out three reasons why inequality is either inevitable, benign, or even beneficial, starting with #1…
Reason #1: Money is a Tool for Societal Wealth Building
One of the most important distinctions to make when talking about economics is that between real-world wealth and money. Money is nothing more than a medium of exchange which simplifies economic transactions. Wealth on the other hand is the level of access one has to goods and services. If your money didn’t get you things that made your life better…