The issue of income inequality has been a pernicious social problem in every country, except for the United States. Most nations have resorted to socialism in order to combat this problem, to no avail. Why is it that America, long lambasted by its critics and its friends alike for its incredible wealth, has never experienced social divisions along class lines to the fundamentality of other nations? Despite the efforts of many Americans, America has succeeded where others have failed because Americans have always clung to the cliché of the American dream—pulling oneself up by one's bootstraps, rags to riches, and the Horatio Alger story. Moreover, Americans have understood the nature and source of wealth on a scale that other nations have not. This is not to say that there have not been detractors; in fact, there have been times in American history when its detractors have succeeded. More and more people are coming over to the idea that the government should forcibly redistribute income from the rich to the poor. In order to get a broad perspective and understanding on these issues, we must understand the moral premises that underlie them and the practical application of these premises.
Anyone who believes that the State should take money from one person does so from within the moral confines of altruism. They may call it Christianity or Good Samaritanism or any of a host of other names. The essential nature of the doctrine they are upholding is altruism, nonetheless. This moral code states that no man has the right to exist for his own sake, that service to others is the standard of value, and that self-sacrifice is the highest value and virtue. To use a popular platitude, you are your brother's keeper. Politically, the doctrine of altruism lends itself to statism; the State supplanting the role of "others." You have no rights except that which the State grants you and your duty is to the State. Therefore, you have no moral right to your income or your wealth, others do. Since the State is the only instrument that can achieve the equal distribution of wealth, it is morally required to seize anything you make over your fair share.
The only consistent moral system that supports the capitalist system is that of Objectivism, the philosophy of Ayn Rand. Capitalism has been defended for centuries now, but the defense bought into the same premises as the attackers: altruism. Ayn Rand's is the first system that successfully integrates an ethics of egoism with the premises of capitalism. Her premises follow. The Law of Causality obtains. That is, every action has a cause that has a specific nature which limits the actions possible. Man, therefore, has a specific nature. Survival is specific for man in that he must perform a certain set of actions in order to survive. He cannot acquire nutrition and energy using the method of survival of the plant, i.e., using chlorophyll. He must get food and consume it to provide the energy necessary for continued existence. Food, however, does not just appear in his mouth. He must engage in a certain species of action, goal-directed action. The goal, in this case, being life itself. Life is the ultimate value because life is the precondition of all values and that which all lesser goals are the means.This goal-directed action presupposes a process of thought, since it is necessary to detail within the mind the steps necessary to enact in order to acquire the food. Granted, the process of thought involved in such an effort is low-level, but it is most clear at this level. Because a process of thought is necessarily the precursor to any action, we can say that reason is man's means of survival. A man can act without thought, but it amounts to mere motion, and a man can think without action, but it amounts to mere daydreaming. So, more properly, we should say that reason is man's basic means of survival. From the above, we can derive the good. If man is goal-directed and life is his ultimate value, then life must also be the standard of value, of good and bad. That which furthers man's pursuit of life, the life proper to man, is the good and that which hinders his quest of life is the bad. Therefore, since man has a certain means of survival and the good is that which furthers survival, we can say that which allows reason to flourish uninhibited is also the good. This is the derivation of the rights to life, liberty, and property. Man's mind, his means of survival, cannot function if man is condemned to death at whim, i.e., if the right to life is not secured. Similarly, man's mind cannot function if its content or expression in action is limited or restricted, the right to liberty. Finally, man's mind is inextricable from man's body, they are an inseparable whole. Man must be able to occupy corporeal space. Moreover, man must be able to own the fruits of his mind's labor. How can life be pursued if one cannot own or ingest the food that one has acquired. This also hints at the fundamental evil, the initiation of force. The initiation of force is the only means by which man's mind may be limited or constricted. Possession of more money than someone else does not restrict the right of their mind to seek out means to even greater achievement than you. The government exists to secure and protect these three rights. The principle here is: you can do whatever your mind requires you to do so long as you do not infringe on other people's right to do the same. The assertion that the government should change its role from policeman to highwayman is repulsive to the notion of individual rights and reason. A compulsed mind is not free.
How is a fair and equal distribution of wealth to be achieved in American society? Sam Pizzigati, in his book The Maximum Wage, believes that "[n]o person in the United States shall be permitted to earn more than ten times the income earned by any other person."1 People earning less than the maximum wage, but more than the minimum would pay taxes on a scale from one to ten percent, depending on the distance of their wage from the minimum. Then, anything over the the maximum wage would be taxed at a marginal rate of one hundred percent. The rich pay their fair share and the poor don't have to scrounge for meals. Another redistribution scheme, promulgated by Milton Friedman, is the negative income tax. In this system, each taxpayer is allowed a certain amount, a personal allowance. Any income above this allowance is taxable, same as it is now. Any income below this allowance is subsidized to raise it up to this personal allowance. Thus, you've got the welfare system in that people are given money based on need, but you don't have the bureaucracy that comes with it. The solution to redistribution most often chosen is the welfare state. Every nation of the world that is not outright socialist or fascist has enacted the welfare state, to differing degrees. The American model of the welfare state guarantees a minimum wage, free (or cheap) medical care for the elderly and poor, cash payments to the elderly, the disabled, the unemployed, and poor families. It is based on a progressive tax, one whose marginal rates increase with income. It was originally envisioned as a safety net, whereby those displaced workers or temporarily poor could use it until they got back on their feet, but has since grown to become as comprehensive as the modern socialist states of the United Kingdom and Sweden. In fact, Sweden is heralded as the representative of equality. It guarantees a job at a living wage, provides free health care for all, free child care, and, sometimes, free housing and transportation. It has low unemployment, a high standard of living, little income inequality, and no overt signs of poverty.
The antipode has never really been enacted. The closest it ever came was during the Industrial Revolution in America. Freedom was well-respected, but upheld on unstable ground. There are four things that would have to occur in order to erase the welfare state. One, repeal the welfare state. End all aid programs, all handouts, and all social security programs. Two, eliminate taxation. The forcible robbery of the American citizenry must cease. To paraphrase Dworkin, a government that does not respect man's inalienable individual rights is insincere. Third, properly understand rights. If we do not, the welfare state will be back at the next populist legislator. Fourth and final, pare government down to its three functions that protect individual rights: legislature, police, and military. These three functions are the only proper ones of government. Everything else, from OSHA to the EPA, must go. Then, and only then, will you have a government dedicated to the original intent of the Founding Fathers and respectful of individual rights.
The welfare state and other redistributionist incarnations seek to acquire what others have produced without following the necessary causal sequence. They destroy the incentive to produce and undermine the only chance the poor have of rising above their situation. In a free market, "income is not distributed, it is produced."2
The advocates of an equal distribution of wealth say that the poor have no way to get out from under the weight of the rich. The very society they inhabit prevents them from doing so, from the quality of education they get to the opportunities available to them. Since private individuals and corporations have not fulfilled their duty of charity, it is up to the government to compel them to do so.
1 Pizzigati, Sam. The Maximum Wage. New York: The Apex Press, 1992. p. 77.
2 Skousen, Mark. Economics on Trial. Homewood, IL: Business One Irwin, 1991. p. 196.