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Hornberger's Blog is a daily libertarian blog written by Jacob G. Hornberger, founder and president of FFF.
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What’s Wrong with Income Inequality?

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For the life of me, I just don’t understand why leftists are so concerned with income inequality. What’s wrong with some people having more income or wealth than other people? It seems to me that the obsessive concern about income inequality might have something to do with envy and covetousness, something that God says we shouldn’t be engaged in.

The real issue is the manner in which people earn their money, not the fact that some have more while others have less. In the type of economic system in which we live — a welfare-warfare state and a regulated society — many people earn their money and get wealthy in morally illegitimate ways, e.g., through political plunder and political privilege. If people are getting wealthy that way, that’s something we should object to. But that’s a different issue from income inequality.

For example, consider all the big corporations that receive multi-million dollar grants from the federal government. Agricultural subsidies come to mind. The bailouts of big Wall Street firms or automobile companies are another example. Or big construction firms that are involved in building public-housing projects. Or big weapons manufacturers and other big companies that receive contracts from the warfare state.

Those are all people or companies who receive millions of dollars from the welfare-warfare state way of life under which we live. All that income and wealth is morally illegitimate. It necessary involves taking the money from those who produce it, including young people, the poor, the middle class, and everyone else who pays taxes, and giving it to politically privileged people.

Or consider the drug war. There are countless drug dealers and drug lords who are making millions of dollars in drug deals. If drugs were legalized, those people wouldn’t be drug-war millionaires because drugs would be reasonably priced and would be provided by reputable firms.

Or consider economic regulations, which protect wealthy, well-established firms from competition from new firms. The new firms are precluded from coming into existence because they’re unable to meet the costs of the burdensome and expensive regulations. The well-established firms are able to handle the costs of the regulations and thus are able to maintain a privileged status in the economy.

What we should do is to rid our economy of all those welfare-warfare, regulatory distortions of income and wealth by repealing them. We should ditch the enormous panoply of welfare-warfare state and regulatory programs and let a genuine free market economy reign.

In a genuine free market, people are free to engage in economic enterprise without government interference. That’s what the “free” in the term “free enterprise” means — free from government interference. Thus, people can engage in any occupation without a license or other form of government permission. People are free to enter into economic transactions with people all over the world. They are free to accumulate the fruits of their earnings and decide for themselves what to do with them.

How do people get wealthy in a genuine free-market economy? By providing goods and services that other people are willing to pay for.

Thus, in a genuine free market the consumer is sovereign. Through his buying habits, the consumer decides who is going to be wealthy. That’s why a rock and roll singer or a football player ends up earning millions of dollars while a college professor earns in the thousands. That’s the result of consumer preference.

What’s wrong with that type of system? Why shouldn’t consumers, not politicians and bureaucrats, be the determinants of who’s going to be wealthy?

There is also something important to note about a genuine free-market society: Even though there are vast disparities of wealth, the poor are better off than they would be in a society in which the government equalizes wealth by taxing and spending. History and experience have shown that the poor live better lives in societies where the government taxes and regulates less than those that tax and regulate more.

Here is a hypothetical: Which society would you prefer: (1) one in which the rich earn hundreds of millions, the middle class earn $200,000, and the bottom 10 percent earn $40,000 or (2) one in which everyone receives the same amount–$10,000 a year—by virtue of a government tax-and-spend equalization decree?

For us libertarians, the answer is a no-brainer. For us (1) is the way to go, assuming that a genuine free-market is in effect. My hunch is that for leftists, however, answer (2) is their solution because they simply cannot stand the fact that someone has more when someone has less. That’s the problem with envy and covetousness, not to mention the fact that when such sins are enshrine into a nation’s legal and economic system, the amount of income to be equalized inevitably continues shrinking until starvation and death ultimately set in. Just ask the people of North Korea.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.