The Negative Effects of Wealth Inequality Owe More to Jealousy than Poverty
The idea that ‘we must fix wealth inequality’ appears to enjoy a growing number of supporters and ‘redistribution’ appears to be the solution they have in mind
I suggest that anyone proposing to fix anything must take care to avoid creating a worse problem. This is as simple as fixing the right thing and not breaking things that’re working well. I argue that redistribution via an increasingly progressive tax regime looks like a poor solution to wealth inequality when you really unpack how wealth inequality works to have negative outcomes.
For the sake or argument, let’s start from the premise that wealth inequality creates problems such as a breakdown in social cohesion which in turn creates mental health crises, increased violence, and so on… and that we are all in agreement that we don’t want society to break down like that.
If we are to fix or avoid these negative outcomes of wealth inequality, we must first understand how it has those negative outcomes. Here’s where the prevailing wisdom gets it wrong. Fundamentally, it’s not because of material deprivation. As our rich are richer than ever before, so our poor are also richer than ever before. Our societies and economies have never been better at meeting the material needs of our poorest citizens. This is because we aren’t living in a zero-sum game. Bill Gates having more does not mean you or I have any less. Indeed, it is the opportunity to achieve unequal wealth that motivates people to work hard, be innovative and creative, and invest well — things that create new and better jobs, stronger economies, governments that can afford to do more[1], and prosperity in general.
So, then, by what mechanism does this good process turn bad? Why has wealth inequality become a pressing concern? How does this ‘rising tide that floats all boats’ reduce social cohesion? Why has wealth inequality become a pressing concern despite our increasing abundance? The answer is simple. It’s jealousy.
We don’t have a wealth problem, we have a jealousy problem
If I have what I need but still feel bad because you have so much more, that’s simple jealousy. This isn’t an economically rational reason; it is an emotionally irrational one.
This jealousy is sometimes dressed up as being morally justified — “we are all humans, each equally valid with existences of equal worth, so how can we justify this wealth disparity?” — but this doesn’t stand up to scrutiny. First, it again depends on the false concept of wealth as being fixed or limited rather than limitlessly created. If your extreme wealth is not depriving me in any way, how can it be an affront to my existence? Second, our long-established concepts of morality explicitly warn us against this way of thinking. I’m not Christian, for example, but I know “thou shalt not covet” is one of its ten primary rules — rules clearly intended to promote social cohesion and deeply embedded in western culture.
Higher and more progressive taxes don’t solve jealousy, they validate it
Since jealousy is the problem, I question why an increasingly progressive tax regime is the go-to solution. It doesn’t resolve the jealousy. Actually, it buys into it and validates it. Once we reach a point where tax rates are simply intended to be redistributive (an end) as opposed to funding public goods and services (a means to an end), that’s feeding jealousy. Once taxes are justified on a “bash-the-rich” or “capitalism-has-failed” basis, that’s feeding jealousy.
Do we really want to build a society based on giving in to negative emotion? Shouldn’t we focus on reducing the tendency to feel jealous rather than giving in and destroying what people feel jealous of?
To me, the necessary solutions look like pride in one’s own achievements, satisfaction in one’s own comforts, a less materialistic conception of success and happiness, and so on. These are not simple fixes, even compared to tax legislation, because we cannot simply put better thoughts into people’s heads. Achieving a society that is stronger than jealousy requires both honesty and hard work. As a society we seem to have convinced ourselves that it’s important to treat all values as equal, but some values work better than other values and we should be willing to put in the effort to say so, explain why, and provide living examples. As a society we seem to have convinced ourselves that competition is hurtful and to be avoided, but it is too beneficial to cast it aside and we should be willing to be hurt by it — and to support those who are hurt by it — rather than taking the easy way out.
Higher taxes on the rich don’t address what’s not working about wealth inequality, but do inhibit what is working about it — the profit motive. The true solution to the negative consequences of wealth equality is to be, and to create, better humans.
This article was first published as a guest post on Kiwiblog on 18 February 2019. This version has been updated based on comments it received at that time. Thanks to David Farrar and Wayne Mapp in particular and all who commented in general.
Camryn Brown is an Associate Partner in the management consulting practice of a large professional services firm and the Northern Regional Policy Chair for the New Zealand National Party. The views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author’s employer, political party, or other group or individual (including those thanked above).
[1] The vast majority of western nations are “compassionate capitalist” states that leverage the positive outcomes of wealth inequality (the incentive to generate wealth) to fund public services and assistance.
