What Really Causes Inequality?

Few topics invoke a maddening response like income and wealth inequality does. Just as Pavlov’s dogs salivated in response not only to food but also to stimuli (like lab coats and bells) associated with food, the mere mention of inequality causes many of us to salivate at the opportunity to make our ideological opponents look stupid or immoral.

Too many of us try to prove our self-proclaimed intellectual or moral superiority by describing our political adversaries either as jealous of the rich or as greedy. Both sides accuse the other of thievery.

It seems that underneath the anger lie the assumptions that the battle is about capitalism and socialism or about justice and fairness.

There really isn’t much discussion about inequality because both sides hijack the concept to argue their ideology.

Hear No Evil

When deeply held beliefs are threatened, our tendency is to conveniently ignore the arguments of those who disagree with us. Emboldened by our ideology, we give much consideration to the real evil we see in others but dismiss as imaginary the evil they see in us. We validate our arguments by focusing only on the facts that support our case or by drawing inferences while neglecting facts that undermine our worldview. And so, with civil discourse a thing of the past, we speak evil of others.

Inequality’s Lessons

Wealth and income inequality reveal the natural outcomes of human action, both good and evil.

Inequality validates the fact that we reap what we sow.

The more we work the more we produce, the better we work the more we produce per unit of time. Over time, skilled and diligent workers will attain more wealth than unskilled and lazy workers.

Inequality results from voluntary transfers of wealth.

If you produce something that large numbers of people want to buy at a price that gives you profit, you will attain much wealth as purchasers willingly give you their money to obtain your product. Even some monopolies involve voluntary wealth transfers. For example, you may have a monopoly because you have patented an invention. This is a monopoly we accept because it rewards innovation that benefits society and involves voluntary transactions. Likewise, we accept the monopoly that NBA and MLB players have because we want to watch the best athletes. The key point is that these wealth transfers are voluntary choices made with sufficient information.

Inequality results from involuntary transfers of wealth.

The Bible clearly states that God brings judgment on those who steal by force or deception. Our government grants monopolies and rents to special interests, bails out banks, practices financial repression and champions our trade deficit—all of which result in involuntary transfers of wealth from the non-rich to the rich.

But this is where defenders of capitalism and the conservative cause sometimes go off the rails. It is not sufficient to blame unjust inequality on government intervention in the economy. We must also hold accountable those who benefit from those interventions and those who take advantage of lax government oversight of the markets to transfer wealth to themselves. We must not use the fact that voluntary (and moral) transfers of wealth are commonplace to absolve the sins of the rich and powerful.

Here’s the problem as I see it. Capitalists err when they think that immoral wealth transfers to the rich only occur because of government intervention in the markets (because of crony capitalism). So, in their minds, the rich who don’t have a direct connection with government officials are off the hook. Many capitalists have imagined a self-regulating, laissez-faire free market in which no one can get away with financial sins. Therefore government regulation, particularly in the financial markets, becomes an object of scorn instead of a protection sanctioned by God.

Socialists make an equally grave error. They incorrectly see the government not as a major cause of inequality, but as its solution. This leads to the ludicrous conclusion that wealth transfers from the rich will solve the problem of inequality their big-government policies caused in the first place.

Hiding in Plain Sight

Increasing inequality is a red flag, warning us of impending danger. Increasing inequality, much like a dead canary on the floor of our economic mine, beckons us to heed its warning that our economy is poisoned. Sadly, we either ignore the dead canary or we misdiagnose the cause of death. Debt, theft and corruption poisoned the canary. It will poison our society if we don’t wake up. We need to call out those who have done this, irrespective of their ideology. We need to reverse course.

What Really Causes Inequality?

The Bible doesn’t hide the answer to this question, but boldly proclaims it for all to see. Sin causes inequality. Our greed and our laziness cause it. So do covetousness and theft. Oppression, indebtedness, and deception cause it. Defending transgressors with our ideology instead of defending the weak and needy they subdue cause it.

The Bible tells us how to deal with economic sin. It tells us to reject the “eat drink and be merry for tomorrow we die” attitude. It tells us to be rich toward God and acknowledge that he owns everything.

The Bible warns us to stop excusing our economic sins while vilifying others for theirs.

Will our society listen?

What do you think?

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