Income inequality is one of those features of life that drive the Left crazy, as evidenced by Charles Blow’s recent New York Times op-ed “Santorum’s Gospel of Inequality.” The impetus for this headline was the Republican presidential candidate’s statement in a speech to the Detroit Economic Club that “I’m not about equality of result when it comes to income inequality. There is income inequality in America. There always has been and, hopefully, and I do say that, there always will be.”
Fiscal conservatism may not be Candidate Santorum’s strongest point, at least judging from the 2012 analysis compiled by the Club for Growth. But the former senator certainly aroused Mr. Blow’s ire for pointing out something that just a little philosophical and economic reflection might have caused Blow to pause before venting.
Granted, these aren’t always sufficient justifications for particular income inequalities. They do, however, provide some important moral rationales for income inequality.
Economically speaking, income inequality reflects the workings of several factors, many of which are essential if we want a dynamic, growing economy. Even your average neo-Keynesian economist will acknowledge that, without incentives (such as the prospect of a higher income), many entrepreneurial projects that create wealth — not to mention jobs and often greater incomes for others — may lie dormant forever. Either that or the entrepreneur will simply leave for a more friendly economic environment in which his ideas, willingness to assume risk, and potential job-creation capacities are taken more seriously.
But Detroit’s well-documented economic problems have little to do with income inequality per se. They have far more to do with decades of corporatist collusion between bailed-out car companies and the UAW, rampant political corruption, and assorted crony-capitalist arrangements — the same arrangements that recently helped, as a recent University of Illinois study illustrated, the Chicago metropolitan region merit (yes, merit) the unenviable title of “the most corrupt area in the country since 1976.”
What many people forget is that crony capitalism invariably breeds its own form of income inequalities. Economic success tends to gravitate towards those who cuddle up to an entrenched (usually corrupt) political class for favors (subsidies, tariffs, preferential tax treatment that the rest of us pay for) instead of those who ask for nothing more than the liberty to innovate, compete, and bring a service or good to open markets where consumers can assess the product’s worth for themselves. Leaving aside Chicago politicians, the average AFL-CIO career trade union official, or your run-of-the-mill General Electric CEO, does anyone think this is just?
— Samuel Gregg is research director at the Acton Institute. He has authored several books including On Ordered Liberty, his prize-winning The Commercial Society, Wilhelm Röpke’s Political Economy, and his 2012 forthcoming Becoming Europe: Economic Decline, Culture, and America’s Future.