Tuesday, June 9, 2009

"Income Inequality"

Perhaps the central fallacy of liberalism/socialism is that capitalism causes the rich to get richer while the poor get poorer. This is simply impossible in a free market economy, because it is the capital of the "rich" which makes possible jobs which lift people out of poverty.

Since jobs must be financed with capital, more rich means more capital, which provides more jobs, so there are fewer poor. It's really that simple.

Anyone who doubts that formula should look at the overwhelming evidence. The wealthiest countries have the most rich people and the fewest poor. According to Marx and his benighted followers, it should be just the opposite.

However, their mantra, ignorant as it is, is still powerful among the economically illiterate, which includes essentially all liberals. As the great development economist Peter Bauer pointed out, it's quite possible for economists to get PhD's by studying some point of arcane minutia without having an understanding of basic economic principles. One must assume that most liberal economists fall into this category.

This article points out a number of the fallacies in the way income distribution data is typically presented. However, it seems to miss one very important point. Even if the top income bracket increases its share of total income, that doesn't mean the lower brackets receive less absolute income. To the contrary, that is an artifact of basic arithmetic.

By definition the lowest income brackets are closest to zero, which forms one end of the scale, since income statistics don't go below zero. By contrast, there is no limit on the upper end of the scale, so billionaires can make twice as much while all the other brackets earn more as well. In fact, when the richest percent of Americans make substantially more, that means they have substantially more to invest providing jobs for people in the lower brackets.

So taking money away from the richest percentage directly reduces the amount they have to invest in providing jobs, thus reducing income growth and increasing unemployment across the board. The socialist program of reducing income inequality by heavily taxing the rich inevitably creates higher unemployment and poverty, just the outcomes socialists say they oppose.

As their modern alliance with environmentalists shows, socialists really don't have the slightest concern for the poor. Virtually every environmentalist initiative, cheered on by socialists, hurts the poor. But the economic ignorance of the voting public allows their mindless mantra "the rich get richer while the poor get poorer" to continue to do its incredible damage to the very poor they claim to be helping.

In fact, both the environmentalist and socialist movements are all about gaining power, not about helping people or the environment. With the help of the supine major media, they're both much more successful in that endeavor than in achieving their stated goals.

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