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Sunday, February 9, 2014

And another thing...

This is one that has be "a-brewin'" in by feeble mind for a while. I wanted to address the idea of income inequality and opportunity. (not exactly right, but I am at a loss of words - read on and see)

First, your lessons for the day - there are many posts on this site which cover this, so look around if you don't understand or want more -

 1) There is no government money. If you have questions on this point, I have many posts here where I expound upon this thought. Just suffice it to say that ultimately all money comes from the public (you and me).

2) Corporations and businesses do not and cannot pay taxes. Same comment here - lots of posts explaining this. Bottom line - only people pay taxes. Businesses just get the taxes by raising prices on their customers (you and me again).

3) Term limits are critical to any meaningful changes to be made in our government. This includes the bureaucracy that exists today in Washington that holds a lot of the real power.

Now for the post:
There are news reports and stories quite often now talking about how the income inequality, especially in the U.S.A., is "the worst it has ever been"; or something similar. I just wanted to weigh in on this and say "BS"! Income inequality is, has been, and probably always will be a part of the human condition. In fact, I am willing to say that the time we live in is probably close to the best that income equality has ever been. Are there a small number of people that hold a LARGE portion of wealth? Yes! No doubt. But, that is as it always was. Do you not think that in the U.S.A. in 1860 that there was not greater inequality? Approximately 14% of the population were slaves! They essentially had ZERO wealth. Do you not think that during Egyptian times of the Pharaohs there was not greater inequality?  It is estimated that 10 - 15% of the population was either a slave or an indentured servant. Again, their wealth was close to ZERO. The Roman empire is estimated to have had as many as 30% of the population living in slavery. Add another 10% as indentured servitude and you can see our times look pretty darn good.

The U.S.A. does not have the worst, or even a particularly bad (as compared to the rest of the world) income inequality. There is tremendous disparity between the top earners and the lowest. But, on average, our "poor" are well-off compared to the rest of the world. Do the top .01% of income earners here make a lot compared to the rest of the population? Yes. But although the CEOs make a lot, a large portion of this is skewed higher due to entertainers and pro athletes. For the record, I too think that CEO pay has gotten ridiculous over the past couple of decades. I also feel that the pay for entertainers and pro athletes has as well. However, I do not feel that I or any other person has the knowledge, perspective, or wisdom to decide what the "correct" pay should be. When the government or some other appointed body starts deciding correct incomes for any class or employees we have a serious problem. The market should decide. FYI, that is why the minimum wage is wrong, and a very bad thing for the free market. An employee should be able to accept or deny any wage they are offered by any legitimate employer. If I, as a business owner, can hire a cashier for $5 an hour, that should be fine. If it takes $20 an hour to get a suitable employee, that too is fine. But, that is another subject.

The "worst" income inequality since the Civil War in the U.S.A was from approximately 1903 to the crash of 1929. The disparity between the lowest and the highest wealth was much greater than it is now. In fact, until the late 90s, there was no comparison. We have had some widening of the spread, but it is still less than it was then. The Great Depression did a lot to "equalize" things as did the "Great Recession" of recent memory. The stock market and housing booms have contributed greatly to the other side (more inequality). CEO pay is tied to the stock market in a lot of cases, so it is understandable that that would be the case.

Bottom-line - it would be great if we could equalize things out. However, as I said above - I do not think we humans have the ability or wisdom to do so. In no small measure because of the following.

The other issue I wanted to tackle is the one of "fairness". We also hear and read many reports and comments about how our society is not fair. I am not blind nor naive, I understand that discrimination, bias, and bigotry exist and are part of our society. I also recognize that they have gotten tremendously better in my lifetime. I also understand that although I tend strongly towards Libertarianism and small government, that regulations and laws have helped in this regard. If a business hires a person of a certain race and/or ethnicity due to a law, that they might not have done, it is still a good thing. I concede this fact. I do however feel that a lot of the racism and/or racial divide that exists today does so because of regulations and laws. For example, why should my race matter when reporting anything to the government. Government and laws should be gender, race, ethnicity, creed, and sexual orientation neutral. However, race is one of the first bits of information asked for in almost every transaction.

The real problem as I see it today is one of understanding. The general population does not seem to understand the difference in equality of opportunity and equality of outcome. Neither can be guaranteed 100%. The former can be to an extent, and should be as much as is humanly possible. The latter can never be in any reasonable and fair manner. The U.S.A. offers as good of a offer of equality of opportunity as there is in the world. That is proven day in and day out as new entrepreneurs, businesses, and even millionaires are made. These successful people are all colors, creeds, nationalities, and any other label we can lay on people. However, they flourish while others languish. 

The biggest indicator of success would seem to be effort and hard work. Guaranteeing equality of outcome is not really possible because of this. Now, I am not saying that all hard work is rewarded with riches and/or success. I am saying that most successful and/or wealthy people have worked hard to be there. They have set goals and worked towards them. They have educated themselves and put themselves in position to succeed. That also does not mean that some people in good circumstances aren't put there by nature of their birth or inheritance. However, even most familial fortunes were originally earned by hard work and/or revolutionary ideas. Not all, I understand, don't shoot them messenger. 

The problem with trying to achieve equality of outcome is it marginalizes and de-emphasizes effort and hard work. Most people that are driven at all have worked with someone that is a slacker. (if you cannot remember one - you may be that slacker) A co-worker that is always taking breaks, late for work, standing or sitting around, asking for help doing their work, etc. Is it fair that this employee would be paid and/or promoted the same as someone that is always on-time, works hard, takes initiative, etc? Most would say no. That is why we cannot guarantee equality of outcome.

This has been a bit long. I know from my past long posts they don't get read as often as the others. If you are reading this, you made it to the end. If you skimmed it, go back and read it. Comments are welcomed along with discussion.