the __earthinc

The issue of wealth redistribution and inequality in wealth can be overly stressed by many in Malaysia. Up goes the Gini coefficient for Malaysia and there goes the alarmists. These alarmists, wealth egalitarians do not quite understand that it is poverty that matters, not wealth inequality.

Individuals are different and different persons follow different paths in their life; that rationalizes the difference in wealth; the difference in wealth is synonymous to difference in outcomes. Egalitarians effectively demand all to achieve the same outcome; the best way to achieve such equality is to force everybody to be the same — uniformity is cherished while difference is scorned upon — or to forcefully redistribute wealth after differences manifest itself in the society. For this, egalitarianism violates liberty. Communism and socialism seek this egalitarianism and in the past, as history has noted, the results were disastrous. Yet, communists and socialists still roam this earth, seemingly ignoring lessons in history.

Despite failure of systems that hold wealth equality close to heart, egalitarianism has been identified by the masses as an idea markedly friendly to the poor while non-egalitarian free market advocates are recognized as the manipulative monsters ever-hostile against the poor. This stereotype is beginning to annoy me especially when egalitarianism is increasingly becoming more about hating the rich than about helping the poor. In 1999, economist Martin Feldstein recognized these people with such thinking as spiteful egalitarians.

Wealth inequality is not necessarily, or usually the problem in a society. There are several factors that contribute to wealth inequality; the sources of inequality must be identified to demonstrate why inequality is not an issue one should be concerned about.

At the very top, those factors can be categorized into two groups: deterministic and non-deterministic factors.

For deterministic factors, for example, it is a case of when one is born into the world. One cannot choose their parents, so to speak. And it is not too rare for one to be born without a limp, or be blind or deaf or endowed with any other unfortunate deformation that later affects one’s ability to wade through this life, which can be beautiful or cruel, at birth. It all comes down to one word: luck. Inequality caused by these factors may justify wealth redistribution under pragmatic terms. I am comfortable to suggest that this inequality is the unfavorable type for it adversely affects opportunities; liberty-conscious affirmative action to overcome inequality caused by deterministic factors is essentially action to create equality in opportunity.

Another cause of inequality is the one determined purely by wit and effort by the human spirit. Inequality arises by this group of factors is a direct consequence of success and failure; of reward and punishment. One of the greatest lessons in economics is that individual responses to incentives. In order to encourage success, reward must be granted to those that succeed while failure is punished; in many instances, lack of reward itself suffices as punishment. For one to be successful, effort is required and for effort to be there, the reward must justify the effort. As long as there are winners and losers; as long as we cherish meritocracy, there will be inequality in outcome. Meritocracy is meaningless amid egalitarianism.

If losers are granted that same reward as granted to the victors in the name of egalitarianism, or for any reason for that matter, the victors would have not the incentive to work to be successful. Equality in outcome, equality in wealth means one gets rewarded regardless of effort, even for no effort at all. If fruits of effort could be plucked without effort, why commit effort at all?

Consider education level; it has been well documented that on average, greater years of education increases income level, given everything else is the same. Consider further two persons of the same gender enjoying the same endowment granted by their parents or some entity but have different attitude or capability to mental prowess. The person (let us call him, or her, E) with the greater mental capability will be able to endure longer years of sitting on in front of desk, in front of a book or a computer, working on theses, enriching his, or her, faculty, compared to another person (person F) whom invests less in education. The end result: E will have greater income that F. In the long run, wealth inequality will exist; what was a scenario wealth equality at the beginning is modified by difference in education which leads to difference in income level and finally, wealth inequality. It is the result of meritocracy.

This pattern could be expanded internationally. Different levels or paths of investment will lead to different levels of income. This differences lead to inequality among countries. Luck does have a role but luck, or in a more respectable term, history, can be overcome with enough will. Where there is a will, there is a way.

For this reason, it is far more helpful to concentrate on fighting poverty rather than dreaming for wealth egalitarianism. To achieve an egalitarian society, it is necessary to slow down growth of all people, waiting for those at the bottom to play catch-up; it brings everybody down instead of raising all boats. More worryingly it is becoming a fad lately among self-proclaimed wealth egalitarians to express clear hostility against the successful in hope of achieving an egalitarian society; they seeks to bring the top down rather than the bottom up.

One need not be spiteful to create a better society. For a better society, poverty fighting is enough; egalitarianism is unhelpful in many cases. We should fight for equality in opportunity, not equality in outcome. If one is really concerned for the poor, one should concentrate on fighting poverty, not on achieving an egalitarian society.

p/s — this entry was first published at Bolehland.