Is income inequality a bad thing? Most people would say so. It seems obvious that income inequality is based on greed and corporate welfare, right? Some of it certainly is. But some of it is based on the fact that certain people hit on an extremely useful idea at the right time, take the necessary risks, and capitalize on it.
The stories of this occurring are more common in American history than the history of probably any other country in the world. The iconoclastic entrepreneur is one of our national stereotypes. Yet there are many who think that the rich should not be allowed to enjoy the fruits of their labors, as if that is all the rich do with their money.
Monopoly profits are social blessings when they “signal to the ambitious the wealth they can earn by entering previously unknown markets.” So “when the wealth gap widens, the lifestyle gap shrinks .” Hence, “income inequality in a capitalist system is truly beautiful” because “it provides the incentive for creative people to gamble on new ideas, and it turns luxuries into common goods.” Since 2000, the price of a 50-inch plasma TV has fallen from $20,000 to $550.
Henry Ford doubled his employees’ basic wage in 1914, supposedly to enable them to buy Fords. Actually, he did it because in 1913 annual worker turnover was 370 percent. He lowered labor costs by reducing turnover and the expense of constantly training new hires.
There’s a little-touted fact at the heart of these thoughts: the only honest way to make money is to provide something of value to others. And the only way to succeed in business in the long term is to treat your employees and customers very well. It seems like that would go without saying. But many people are under the impression that there isn’t any honest way to make money. They’re wrong. The richest entrepreneurs in the world got that way because they produced something that a lot of people wanted. And punishing them actually hurts everyone.
If income inequality has become an issue, it is because people at the economic bottom don’t have as much incentive to leave it. Wealth redistribution only exacerbates that issue. Which is why it is worse now under pseudo-socialism than it ever has been. Perhaps it’s time to rethink this whole income inequality thing.