For human societies, the most fundamental and important economic question is why resources (or wealth) are distributed the way that they are. Some would object that an equally or more important question is how to increase the total amount of resources available to humanity.

These are both very important issues. But I maintain that the former is a much more important question for humanity today, simply because human societies have in general done such a poor job of addressing it. There is plenty enough food today to feed the world, for example. Yet because food is so unequally distributed, 820 million people, 12.5% of the world’s population, are undernourished today. And something similar can be said about every other resource required by humans to lead decent lives.


Why the question of resource distribution is so important

Distribution of wealth within and among human societies is not something that “just happens”. Human societies choose the laws, policies and customs under which they operate, which in turn determines who gets what. The answer to the question of WHY wealth is distributed as it is determines whether or not attempts should be made to change our nation’s laws so as to alter wealth distribution.

Inequality of wealth in the world and in the United States is truly astounding – and it is increasing at a fast rate. In the United States in 2001, 1% of the population controlled 38% of the wealth, whereas the bottom 40% owned just 1%. That means that, on average, individuals in the top 1% owned about 1,500 times more wealth than individuals in the bottom 40%. Wealth between countries is also severely unequal. The United States, with only 5% of the world’s population, owns 27% of the world’s wealth, whereas Africa, with 11% of the world’s population, owns only 1.5% of the world’s wealth.

Some will object that the question of why wealth is unequally distributed is blatantly obvious and needs no discussion. That is true. To wealthy hard core conservative ideologues it is blatantly obvious that the current state of unequal wealth distribution is necessary in order for society to function or that the wealthy are wealthy because they earn their wealth and the poor are poor because they don’t. To many liberals, on the other hand, it is obvious that the current unequal distribution of wealth is a moral abomination, serves no useful purpose whatsoever, and exists simply because of some variation of the phrase “might makes right”.

As a liberal, I am much more inclined to the latter explanation. However, I don’t believe that merely stating the situation like that is an adequate way to address the issue. That statement is bound to be convincing to liberals, since they already believe it. But I believe that it’s much more important to discuss the issue in a way that relates to moderates – for what I hope are obvious reasons.

So, why is this question so important? Well, the fact is that the degree of wealth inequality in the world and in our country today is a moral abomination. People shouldn’t have to starve when there is enough food for everyone. People shouldn’t suffer and die of curable diseases when the means to treat them is readily available. People shouldn’t have to live in the streets when there is enough shelter for everyone. And people shouldn’t have to be jobless when there is plenty of work that needs to be done….
Unless… there is some overriding reason for all this, as the conservative ideologues who run the Republican Party tell us.


CONSERVATIVE ARGUMENTS TO JUSTIFY WEALTH INEQUALITY

Virtually all conservative arguments used to justify the status quo make use of slightly different variations of the same theme.


Productive efficiency – making the economic pie bigger

Their first argument is that all of society benefits from a great amount of income inequality because the lavish incomes bestowed upon the wealthy provide the incentives that they require in order to produce what society needs. In this view, whereas the economic pie is divided unevenly, the uneven division of the pie causes the pie to expand so that ultimately everyone gets more. Everyone benefits.

Another way to explain the situation from this point of view is that the huge amounts of money received by the wealthy get to “trickle down” to everyone else. That is called “trickle down economics”, and it was introduced to our country on a mass basis by the Ronald Reagan Presidency.

That explains why it is fitting that the average CEO earns 431 times the amount of annual salary as his average worker. A multi-million dollar salary is required to give the CEO the incentive to produce what he produces. With a more equal distribution of wealth, the CEO would produce less, and all his workers would suffer for that.

What about CEOs who run their company into the ground, cause it to go bankrupt, and bail out with millions of dollars in bonuses? Well, uh, that looks bad on the surface, but… Well, the truth is that I don’t know exactly how they explain that. Maybe giving the CEOs a huge bonus for bankrupting their company incites them to do better next time.


Fairness

A slight variation of the above theme is fairness. This argument asserts that it is only fair to reward the most productive members of society, even if it isn’t absolutely necessary to do so in order to make the economic pie bigger.

I agree with that general principle, and I believe that most liberals agree with that. But the question is where to draw the line. And how is it determined, for example, that some individuals should have two thousand (or a million) times as much wealth as others?


The free market

As an answer to the above question, conservative ideologues say that the “free market” decides. It is not necessary for any government or individuals to make decisions about wealth distribution because the “invisible hand of the free market” makes all those decisions.

That is why conservative ideologues are vehemently against progressive taxation or any taxation of inheritance whatsoever. They aren’t totally against any taxation, since they recognize the need for their government to have a strong military (if nothing else), but they believe that current systems of taxation are unfair to the wealthy and that they disrupt the role of the “free market” in determining wealth distribution.


“Socialism”

The attitude of conservative ideologues towards “socialism” was expressed during one of the Republican primary debates when John McCain was asked about his opinion of universal health care for our country. In a voice dripping with contempt, McCain simply said that universal health care is out of the question because it would constitute “socialism”. No further explanation was needed because the word itself denotes evil to an American conservative ideologue. That’s why I put the word in quotes.


LIBERAL COUNTER-ARGUMENTS

Productive efficiency – making the economic pie bigger

To put it quite simply, the economic theory of “trickle down economics, which is at the heart of the argument that unequal distribution of wealth leads to a bigger economic pie, is a myth with no basis in reality. There never was a basis in reality for it. It is simply an ideology.

Right wing conservatives have warned of dire consequences from any attempt to increase taxes on the wealthy ever since the idea was first voiced. From those warnings you would think that the very high rates of taxation on the wealthy starting with FDR’s presidency, and lasting for half a century, would have resulted in catastrophic economic consequences, notwithstanding the reductions in income inequality achieved in part by that taxation. However, just the opposite turned out to be the case.

This chart shows median family income levels, beginning in 1947, when accurate statistics on this issue first became available. With the top marginal tax rate approaching 90% at this time, median family income rose steadily (in 2005 dollars) from $22,499 in 1947 to more than double that, $47,173 in 1980. Then, for the next 25 years, except for some moderate growth during the Clinton years, there was almost no growth in median income at all, which rose only to $56,194 by 2005 (85% of that growth accounted for during the Clinton years). However one wants to interpret those numbers, nobody could possibly conclude that they indicate overall bad financial consequences accruing from high tax rates on the wealthy. To the contrary, as economist Paul Krugman notes, this period coincides with “the greatest sustained economic boom in U.S. history”.

So much for trickle down economics.

It is also of interest to consider the effects on our national debt, which has currently reached unprecedented levels, and which really does portend a financial crisis in our country. This graph, which shows change in our national debt by year, says it all:



Note the two huge mountains of increasing national debt in this picture. One began with the Reagan administration and went on for the 12 years of Reagan and Bush I presidencies. Then following 8 years of precipitous decrease in the rate of debt accumulation, the onset of the Bush II presidency was marked by another, even more precipitous increase in debt accumulation than was the Reagan presidency. In other words, where we have seen huge tax reductions for the wealthy we have concurrently seen huge increases in our national debt, with no compensatory rise (and even a slowing) of median income.

What do you think those mountains of debt are likely to mean for the quality of life of our children, grandchildren, and great grandchildren?


Fairness

Let’s go back to the question of why a CEO who drives his company into bankruptcy, ruins the company, and wipes out the life savings of most of the company’s workers gets a multi-million dollar bonus when he leaves the company. Does that happen because he has the power to make it happen or does it happen because he deserves the money?

The issue of what is fair and what is unfair is, of course, very complicated, so I don’t want to be dogmatic about the issue. I personally feel that driving a company into bankruptcy and ruining peoples’ lives in the process doesn’t warrant a multi-million dollar bonus. But hey, if anyone can give me a good argument for it I’m ready to listen.


The free market

I am all for the general principle of competition to provide an incentive for providing a good product at a reasonable price. At its best, that is what the free market is all about. However, there are numerous situations in which the free market does not apply very well or is not the best means of providing goods or services. I discuss those situations in detail in this post.

Furthermore, there is really no such thing as a pure free market. Our whole economy is based on a gigantic legal system that is backed up by the power of the state. A nation’s economy could not run without such a system. The question is not whether a nation’s economy can exist without state enforced rules. It can’t. The question is what the rules will be and whom they will benefit. One good example of this is the North American Free Trade Agreement (NAFTA), an agreement that established a sort of international “free market”. Greg Palast, in his book “Armed Madhouse”, describes how that worked out:


William Greider provides another great example in a recent article in The Nation titled “Economic Free Fall”. In that article Greider discusses how Congress has attempted to ameliorate our economic crisis by providing economic assistance to … ahem … those who need it:



Socialism

It is worth asking why the words “socialism” or “communism” inspire such negative connotations in our country that the mere use of the word is enough to explain why a particular policy is bad or evil. Our nation’s economic system actually contains many elements of socialism – though the word dare not be used. Medicare, Social Security, public education, and even our military all operate at least partially on socialistic principles, in that tax dollars are used to pay for programs that are meant to benefit large portions of our population.

So why is “socialism” such a dirty word in our country? Very simply, it is this: When tax money is used to support social programs such as public education, health care, welfare, or Social Security, the poor, working and middle class benefit at the expense of some reduction in the wealth of the wealthy. Consequently, the wealthy use every means at their disposal, which is considerable, to demonize “socialism”.

It is true, of course, that socialism has similarities to communism, and that our 46-year Cold War was fought against a Communist nation that was also a brutal dictatorship, especially in the years when it was ruled by Joseph Stalin. Thus, “Communism” became synonymous with brutal dictatorship in our country. But that is a gross oversimplification of the situation. Most brutal dictatorships are not Communist or socialist. And there is no reason why a democratic political system cannot co-exist with a socialist or even a communist economic system. There are Socialist and Communist political parties in many nations of the world. In a democratic political system why shouldn’t they have the same right as any other party to run for elective office? I am not a communist. But I believe in democracy, and if my fellow countrypersons choose to elect a socialist or a communist president, I don’t see what right I’d have to complain about that. There is no prohibition against either socialism or communism in our Constitution.


HISTORICAL ARGUMENTS ABOUT WEALTH DISTRIBUTION

The current rationalizations used by wealthy conservative ideologues to justify the status quo, including their enormous share of the world’s wealth, are not new to history. These rationalizations are as old as civilization itself. Let’s consider some of historical examples with the view that they may shed some light on our current controversies. The questions we should consider are: What determined the distribution of wealth and power in the past? And how did the wealthy and powerful justify their disproportionate share of wealth and power?


Overuse of resources by absolute rulers

Since the onset of civilization about 5500 years ago, and even several thousand years before that, human societies have been ruled by ruling elites. Until very recent times, the vast majority of those ruling elites have been absolute rulers, i.e. dictatorships.

Jared Diamond, a professor of geography, evolutionary biologist, and Pulitzer Prize-winning author, writes about how various historical societies have died out, in his “Best Book of the Year”, “Collapse – How Societies Choose to Fail or Succeed”. Diamond explains that there are many reasons for societal failures. Chief among these reasons is the over-use of resources, leading to resource depletion. That often occurs when a society’s rulers require the working/productive portion of the population to utilize a highly disproportionate amount of resources for the sole benefit of the ruling elite:


Significantly, Diamond found not a single example of a society that collapsed because too small a share of resources went to the ruling elite.

Ruling elites have used many rationalizations to justify their power over other people. Chief among those rationalizations has been the citing of supernatural forces, including God, gods, or demons. Only in relatively recent times, with the partial displacement of the supernatural by scientific research, have these rationalizations turned from the supernatural to other things, such as “the free market” and other justifications discussed earlier in this post.


Examples from U.S. history

Europeans settled the present day United States by displacing and nearly exterminating the native population. Every excuse in the book was used to justify this, including self-defense, the claim that Native Americans didn’t deserve the land they occupied because they were “uncivilized”, and the God-ordained paradigm of “Manifest Destiny”.

Much of the early U.S. economic system was based on slavery. Again, this was justified for all the “best” of reasons, mostly involving claims that black people were inferior, uncivilized, savage, etc. etc. etc. The idea was also advanced that black people benefited from being slaves and owed their masters a debt of gratitude for giving them the chance to “serve”. Even today some Neanderthals continue to advance that point of view. Take for example, Pat Buchanan, in his enthusiasm for criticizing the presumptive Democratic nominee for President, for not being gracious enough:



And Buchanan is a full-fledged talking head and representative of our so-called “mainstream media”!


The dominance of the Indo-European language family

Going further back in history, Jared Diamond discusses in his latest book, “The Third Chimpanzee – The Evolution and Future of the Human Animal”, how it was that the Indo-European language family became the dominant language in the world, as it is today. It should be kept in mind that the dominance of their language was undoubtedly accompanied by many other forms of dominance by the original speakers of that language family.

Diamond provides evidence that the original proto-Indo-European (PIE) language began in the Russian steppes, east of the Dnieper River. It was about 5300 years that the inhabitants of that area invaded Europe, in the process imposing a culture and language upon large areas of the world that has remained dominant to the present day. What enabled them to do that was the domestication of wild horses:


Therefore, it was not any innate superiority that allowed these people to spread their influence and domination throughout the world. Rather:



CONCLUSION

A review of human history shows us that: grossly unequal distribution of resources and wealth has been commonplace throughout history; that the elites on the high end of that distribution have used every explanation imaginable to justify their privileged position, with little or no concern for the truth of their claims; and that the results have tended to be disastrous for the bulk of humanity.

There have been improvements. For example, most of the world today recognizes the immorality of slavery and wars of aggression. Nevertheless, those who hold monumental wealth and power continue to come up with new rationalizations to justify their privileged positions. The most powerful nation on earth invades weaker nations with valuable resources, not for selfish purposes but for reasons of self-defense or to “spread the benefits of democracy” to the “uncivilized” nations of the world. At the same time, the wealthy and powerful of the world justify their claim to grossly disproportionate ownership of the world’s resources with every lofty rationalization they can think of, while hundreds of millions of the world’s inhabitants starve. In the wealthiest nation in the world, unemployment is purposely kept high so that its wealthy corporations can reap the benefits of a desperate work force, while they convince the majority of their fellow citizens that the main cause of unemployment is the laziness of those who refuse to work. To justify the withholding of needed social services from the population, the word “socialism” is demonized, while the wealthy exhibit no reluctance to benefit from their own brand of socialism. As William Greider explains, with respect to our current economic crisis:


There is a very good reason for all the rationalizations of the rich and powerful, to justify their privilege, especially in a democracy. Once a large enough proportion of the population recognizes the fraud being perpetrated upon them, they are unlikely to stand for it any longer. A problem cannot be satisfactorily addressed until it is exposed. And it can’t be exposed until it is at least viewed as a potential problem that is worthy of discussion.

These issues need much more discussion than they currently receive.