10 Out of 10 Progressives Are 95% Wrong About Inequality

The population of the United States is only 4.4% of the world total.
The population of the United States is only 4.4% of the world total.

We’ve been hearing a lot about inequality lately. From Robert Reich to Russel Brand, our media streams are full of people denouncing its presence in the western world. This video has been particularly effective. The story that all these media are telling is real. There is real pain out there, and it should be documented. We should be grateful for their efforts. The answers these folks are proposing, however, are inadequate. The story seems to be that the one percent, and their foul corporations have banded together to use capitalism and ideology to crush the little guy. Capitalism has stopped working. If we could only go back to the mid 20th century with its vigorous labor movement, and more re-distributive government, we could make things good again. This story is incomplete, however, and therefore the solutions it presents are likely to fail.

Capitalism has not stopped working. Over the past ten years it may not have been working well for the majority of the people in the United States and Western Europe. What Capitalism has done for the rest of the world over the past decade, however, is a miracle.

It is every bit as significant as the 1st industrial revolution experienced by Europe in the 19th century, and the 2nd experienced by the United States in the 20th. World-wide poverty is falling. There are now less poor people in the world than there were in 1980, despite the fact that we have added 2.3 billion people. China is doing better than most, but things are improving almost everywhere in the developing world. The world could be at the beginning of an unprecedented golden age. Capitalism did that. Globalization did that.

Any story that talks about inequality without talking about globalization and the incredible fall in world-wide inequality is fundamentally flawed. We can’t turn back the clock. We do, however, have the power to screw it up for everyone. The archaeo-progressivism of Robert Reich could be much more disastrous for the world than the neo-conservatism of Bush and Obama. The US and Europe could try to re-construct a new deal consensus. It might even work, for a little while.

What that would require, however, is an end to globalization. You can’t recreate a world with happy, prosperous factory line workers and fast food professionals in Michigan and Marseille without massive protectionism and an end to immigration to the US and Europe. What it would require would be a closing of the West. This would be a set-back for China, for Africa, and for the rest of the world. It would be an affront to the middle classes just being born across Latin America and Asia. This is a lot of suffering to ask for, just because we can’t think of a new path forward.

There is a precedent though. In the 1630s one of the most advanced countries in the world decided that it had had enough of outside influences, and would be happier and more stable if it cut them off. It worked surprisingly well for 200 years or so. Japan’s forcible re-integration into the world system came with nuclear bombs.

So yes, inequality is a problem, and it is one that we need to work on. Before we can do that, however, we need to be honest about why it exists. We need to be honest about globalization, and we need to be honest about capitalism. We need to be honest about the fact that our solutions will have world-wide effects.

Robert Morris tries to be honest in videos, essays for the kindle, and general bloggery.

Robert Morris

Robert Morris Tweets @TheFederalGovt, posts video as the More Freedom Foundation, and has written a quick pamphlet on the drug war that can be found here.

  1. capitalism does not work in a post industrial society
    capitalism did not bring up the living standards of anyone- globally

    free trade just made the profit margins of corporations to go up at the expense of humanity

    1. History, Karl Marx and even Robert Reich would disagree with you buddy, but hey, enjoy your bubble.

  2. Typical conservative overreach. I agree that some people are wrong about some things, but 10 out of 10? You’re 100% wrong about that.

  3. You’re creating a straw man here. First, those of us concerned about inequality growth aren’t arguing against capitalism. There is no capitalism without the state. What we’re arguing is for a type of capitalism that works. The fact that capitalism has lifted hundreds of millions of people out of poverty (maybe billions?) is certainly true. But each country practices its own unique brand of capitalism. Is India’s capitalism the same as China’s? Hell no. Saying that the rest of the world has benefited from “capitalism” is both obvious and uninformative.
    What I find fascinating is that many other countries–Germany, for one–seems to have been able to attain strong economic growth WITHOUT the massive levels of inequality that we experience. You think that liberals need to look at other countries to see how great capitalism is, as if we’re opposed to capitalism. But in truth, it is you that needs to look at other countries to understand that the choice between equality and growth is a false dichotomy. Many countries have health systems like Obamacare, they have great health care. Many have strong labor unions, and they still have strong economic growth. Many have a large welfare state and high tax rates, and they still have entrepreneurship and innovation. When you start looking around at other post-industrial countries, you realize that all this American blather about the evils of democratic socialism is all pretty silly.

    1. Ethan, in my old age I am getting closer to you on some things, but not by much. In this post I am not just arguing against the well thought out arguments of folks like you and Robert Reich, but also against the occasionally over the top rhetoric of that video, and the un-balanced but oddly compelling blatherings of Russell Brand. I may be unfairly conflating a bit but, as you can see from other responses to this post, some folks aren’t as convinced as you are about the virtues of capitalism. Not obvious to all, and informative to some.

      I don’t think the dichotomy between equality and growth is as false as you think it is. The different models that have worked in Europe have included a lot of free-riding on US growth and innovation. It makes me want to shower with brillo pads to admit it, but there may be more that government in the US can do to help those who have not benefitted from globalization. To rush whole-heartedly into European models, however, is a really bad idea. Those models are serving 20 million Nordics very well, and are keeping the Germans ticking along. I am not seeing a lot of other success over there right now.

      International models are endlessly fascinating, but what I am arguing with this post is that people should be more aware that what we choose to do with our model of capitalism has international consequences, both positive and negative.

    2. Rob, I think Ethan has you dead to rights here.

      You argument trades on a false statement of the position: either you’re for capitalism and pro-inequality or anti-capitalism and pro-equality. And this is just a false choice. We’ve had plenty robust capitalist economies without income inequality disparities highlighted in this videos — our own country in the 60s, 70s and 80s (hardly a marxist system) or Germany in the present-day.

      The broader question you pose, how to build a middle class in America without falling back on manufacturing, is an important one. If Reich’s line is that we need to transition back to a manufacturing-heavy economy with a strong labor movement, that’s probably a pipe dream (I don’t know if that is his position).

      However, this one option is not the only one for dealing with the inequality problem. On one hand there is the attempt to put the infrastructure in place for America’s labor force to benefit from the immense rise of the rest of the world, primarily by preparing students to work in an economy built around services. On the other, there is a need to address the way that the top percent of income earners exploit the tax code and use other forms of rent capture to keep a higher percentage of their wealth.

      I don’t see why a self-professed capitalist would not be in support of these latter initiatives.

      1. What the piece doesn’t state, because I incorrectly found it so obvious as to not need stating: Is that the reason the rich are so disproportionately richer over the past 20 years is because of globalization. The Bush tax cuts were helpful of course, but they are a small part of the story. The principle is pretty simple. US capital was well positioned to take advantage of the past decade’s boom, US labor was not. US labor was replaced.

        You and maybe Ethan, I think, are not as far from the position of “capitalism just lies” below as you think you are. You persist in a belief that the current inequality stems from exploitation of the tax code and rent capture. There is a fair amount of that, but that’s not the main story. Current inequality exists because there is a much bigger global pie than there has ever been, and we haven’t figured out the way to give the lower parts of the US income distribution a slice yet. The more equal and robust economies you mention were from a very different, and more Autarkic era.

  4. While I agree that capitalism has been hugely important for wealth creation historically, its record in the developing world, even in the last 30 years, is uneven at best. Most of the reduction in poverty during that period has come from one country–China–which many can argue is a special case that offers few lessons for other nations. You should acknowledge that there are a lot of factors that contribute to economic growth and that free market policies are only one of them. (In fact, China’s impressive poverty reduction record has come while being slotted 91st in the World Bank’s Ease of Doing Business ranking, behind such noted economic powerhouses as Rwanda, Ghana, Sri Lanka, and Namibia). Also, growth comes in many different forms in the developing world–an export-driven manufacturing sector, which you seem to tout, is only one, and a precarious one at that.

    On another note, and perhaps most saliently for your argument, study after study after study has shown that high levels of income inequality are bad for growth (for what should be obvious reasons). Income inequality in the U.S. isn’t just a moral concern; it’s a practical one as well.

    1. 1. Explain to me how China’s growth is possible, no matter how dirigiste and business un-friendly, without the uber capitalist US Culture of consumerism of the past 30 years. Comparative advantage baby! One of the points of the piece is that the world is a collection of systems that make one system. There are certainly different approaches, but they all make one whole.

      2. China’s out-size growth has had a distorting effect on the perceptions of a lot of commentators. Don’t be fooled. The growth experienced by Africa, Latin America, and the rest of Asia is truly extraordinary in historical terms. When compared to China it may look small, but that doesn’t mean it isn’t impressive. The fact that Africa is growing at all, let alone at paces of 6% a year in certain countries is fantastic news. Sitting here in Turkey, whose GDP has more doubled in the past decade, it is hard to agree with you that growth outside of China is insignificant.

      3. I’d love to see some of those studies. All of history’s great periods of capital accumulation, the third and greatest of which I believe we are in now, have involved vast inequalities. Unless you compare the average( median) American with the median Chinese person, you are not going to get anything that closes in on Victorian England or 1920s America, today, and that may be a problem. Yes I know that some figures say that the current US is supposed to have similar levels of inequality to the 1920s but that seems to me fail a pretty basic sniff test. The difference between Hearst and a rail-riding dust bowl Okie seems a lot wider than the one between Bill Gates and your average Iphone sporting inner city dweller. I could be wrong.