Sunday, November 14, 2010

Progressives at war with the facts

In a recent New York Times column calling the United States a banana republic, Nicholas Kristof writes:
The United States now arguably has a more unequal distribution of wealth than traditional banana republics like Nicaragua, Venezuela and Guyana.
According to the United Nations Development Programme, this is simply false. They rank the United States at #42 out of 133 countries. Nicaragua ranks #93, Venezuela ranks #65, and Guyana ranks #57.

However, Kristof's column reflects something I find quite troubling about the left's concern with "economic inequality." Modern-day progressives appear to be far more concerned with the fact that some people are rich than that some people are poor. You see this throughout Kristof's column. He never once uses the words "poor" or "poverty" in the column, however, he repeatedly complains about the rich:
In my reporting, I regularly travel to banana republics notorious for their inequality. In some of these plutocracies, the richest 1 percent of the population gobbles up 20 percent of the national pie. ...

The richest 1 percent of Americans now take home almost 24 percent of income, up from almost 9 percent in 1976. ...

C.E.O.’s of the largest American companies earned an average of 42 times as much as the average worker in 1980, but 531 times as much in 2001. Perhaps the most astounding statistic is this: From 1980 to 2005, more than four-fifths of the total increase in American incomes went to the richest 1 percent. ...

So we face a choice. Is our economic priority the jobless, or is it zillionaires? ...

To me, we’ve reached a banana republic point where our inequality has become both economically unhealthy and morally repugnant.
So, let's clear up a few facts here. First, rich people don't make poor people poor. That would only occur if there was a only a fixed amount of wealth in a country. The truth is that economies grow over time. The rate at which they grow depends on how much a country invests in creating new businesses, expanding existing businesses, educating the public, building efficient transportation and communication networks, etc.

Second, the prospect of becoming rich is one of the main reasons people give up the security of a salaried job in order to create a new business. Starting a new business is risky. Most businesses fail in the first year. Reduce the financial incentive and you will have fewer new businesses, which in turn will create fewer high-paying jobs.

Third, taking money from the rich and redistributing it to the middle class—the progressive agenda ever since Bill Clinton took office—does nothing to help the poor. It's just a modern way of buying votes.

Fourth, Nicholas Kristof's column is misleading because it only focuses on inequality. The problem with Nicaragua, Venezuela and Guyana is not that a few people are rich, it's that the bulk of the population is poor and undereducated. According to the United Nations Development Programme, the United States ranks 9th in the world in terms of per capita income, beaten only by relatively small countries. By contrast, Nicaragua ranks #135, Venezuela ranks #71, and Guyana ranks #128. In terms of education, the United States ranks #5, compared to Nicaragua at #118, Venezuela at #104, and Guyana at #85.

On the overall United Nations Human Development Index for 2010, the United States ranks 4th in the world, beating all 27 members of the European Union.

Personally, poverty troubles me. Inequality does not.

Data source.

1 comment:

  1. A few caveats to this post: I am not making an argument against the progressive income tax. My argument is against the idea that having a few really rich people like Bill Gates, Warren Buffett, Steve Jobs, George Soros, George Lucas, etc., in a society is a bad thing. In fact, if you favor a progressive income tax, as I do, you should hope there are some really rich people to tax!

    And yes, while Nicholas Kristof doesn't mention the poor, he does mention the unemployed. However, America's high unemployment rate is a temporary problem. Are we to believe that when the unemployment rate eventually gets back down to 5% that progressives will no longer complain about a few Americans being really rich?