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Income Inequality and Legal Plunder

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chartFueled, in part, by the Pope’s passionate appeals, the campaign to reduce income inequality is growing rapidly around the globe.

The income equality movement argues that there is a growing gap between the incomes of top earners and everyone else. This claim is supported by a recent study conducted by the International Monetary Fund. In the United States, the income growth rate for the highest income earners has significantly surpassed the national average over the past 30 years.

Many politicians, including President Obama, have called for policy changes in order to slow the growing divide. However, this concern results from a distorted understanding of the word “income” and disregards the importance of aggregate income growth.

The term “income inequality” is deceptive. It is used to imply that income equality is the norm and anything else is abnormal and harmful to society. Income is payment for services provided. If all income was equal that would mean that all services were equal. Proponents of income equality ignore the definition of income and instead emphasize the word equality. They make the erroneous assumption that equality is always good for society. Inequality has come to imply injustice, but while justice is always good for society, the benefits from equality depend on the circumstances.

A highly skilled neurosurgeon likely makes far more than a recent medical school graduate, and rightly so. It is not unjust for the higher skilled worker to receive a higher compensation for his or her work. Injustice would be two workers receiving different incomes based on racial or gender differences alone. Although the distinction between equality and justice is fairly simple on an individual level, as soon as the discussion becomes nationwide in scope there is suddenly a cry for solutions to this apparent travesty.

This argument also assumes that it is a social harm when one person’s income increases at a faster rate than another person’s income. An equal rate of increase between the lowest and highest brackets would only be positive if that equal rate is greater than the previous rate seen by the lowest bracket.

For example, income in the lowest quintile has increased 18% since 1979, and income for the highest quintile has increased by 65% over the same period. If income for all brackets had increased only 10% there would have been absolute income growth equality. However, nobody will argue that this situation is better for anyone. Who in the lowest quintile would not prefer 18% income growth, regardless of the growth in the other quintiles? Income growth equality is not always better than inequality, and consequently, inequality is not inherently a social harm.

Social activists seem to think income equality should be valued above economic growth. This is rooted in the misconception that one person’s gain is automatically another person’s lose. However, the market is not a zero-sum game, and sacrificing growth for equality would harm everyone, including the lower income earners.

According to the CBO study, incomes at every level are increasing; critics like to emphasize the faster growth of high-earners’ incomes, but they ignore the growth seen by the lower earners. Additionally, critics argue that income inequality hurts social mobility, but a recent study, led by Raj Chetty of Harvard University, found that social mobility has remained relatively stable over the past 20 years.

Equality alone is not enough to justify income redistribution. Proponents of income redistribution have failed to provide a real world impact of income inequality that would justify such “legal plunder,” to use the phrase of Frédéric Bastiat.

The modern push for income equality treats national income like a single income that should be distributed equally to every individual in the United States. Instead, national income should be viewed as a collection of individual incomes which result from the labor of individuals. Redistributing the reward for that labor is not justice; it is “legal plunder.”

According to Bastiat, humans typically want to avoid labor when at all possible and choose to plunder another man’s labor whenever plunder is easier than labor. “Legal plunder” occurs when a nation’s laws are corrupted in order to support this injustice. Possibly the greatest instrument for legal plunder in the United States is the federal income tax.

Although Income inequality is used to justify the progressive tax system, the income tax has done little to decrease income inequality. According to the Congressional Budget Office, income inequality has increased over the past 30 years despite the progressive tax system.

Often the programs intended to decrease income inequality only serve to increase it. Instead of increasing earned income, welfare programs often create incentives to earn less income in order to receive more welfare. After the minimum wage increase in Seattle, some workers asked for fewer hours in order to continue receiving government subsidies. Welfare programs provide the money to solve a problem, but they often ignore the humanity of the welfare recipients whose incentives may not align with government objectives.

The responsibility for removing income inequality should be placed on the workers not the government. “Legal plunder” has shown itself to be an ineffective remedy, and the government should respect the workers ability to increase their incomes without government subsidies. Income must be treated as the result of labor by human beings, not just numbers and dollar signs on a screen.

 

Banking, Justice, and the Common Good

Banking, Justice, and the Common Good

Banking, like any other lawful commercial activity, involves people forming relationships. These relationships are normally with different objectives in mind, but nonetheless they are the fruit of lasting associations formed between one or more individuals.

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Paul Lichlyter

Comments

  • Paul, if I work for a very profitable company that makes a billion per quarter and 90 percent of the income goes to upper management and shareholders is it not a zero sum game for me?

    • Paul Lichlyter

      Dave, thank you for your
      response. The employee is voluntarily exchanging his labor for a salary; both
      parties benefit. If the employee did not benefit then he would not work at the
      company. The income that upper level management receives for their labor is a separate
      exchange. Their salary is not taken from an average employee’s salary just like
      the average employee’s salary is not taken from the janitor’s salary. Each is a
      distinct exchange with each person voluntarily offering unique abilities for
      certain compensation. It is hard to argue that the janitor should receive the
      same salary as upper level management or that the janitor somehow looses out
      because management makes a large salary.

  • Deoacveritatimyfaithsustainsm

    Look Paul income inequality when some people make OUTRAGEOUS amounts of money while others struggle to make a leaving is WRONG.

    Many people in very high positions make way too much money and many whether you like it or NOT or whether you can accept it or NOT get to those positions through connections and many do it through cheating. YES CHEATING!

    It is time that we are honest with ourselves. I am not saying everybody should be paid the same BUT we do have a very greedy, materialistic and hypocritical standards and hypocritical academics in ALL FIELDS, and CEO’s and politicians and lawyers and journalists etc. etc. etc. making money they don’t actually deserve.

    Maybe the wages of many of these people can be adjusted to what they actually deserve. Oh let’s not forget all the treats and in many cases unjust perks companies and governments and corporations give to many of their employees and all the cases of Nepotism as well.

    The only way to make things fair is to be fair with everybody and NO I AM NOT advocating Socialism or Communism ( i HATE both of these philosophies and systems) BUT something is really wrong with a society that has such large income inequality.

    AND THE PROBLEM IS SIMPLY GREED AND SELFISHNESS.

    • If people have earned their wealth honestly, then why is wealth an inequality evil? Abraham and many other Godly men of the Bible were extremely wealthy in their day when inequality was worse than today. And how can you know that wealthy people are greedy and selfish? Do you have God’s power to know the hearts of other people?

      In the past, people thought wealth was limited and one person could not increase his wealth except by taking it from others. I certainly hope that’s not why you think inequality to be evil because educated people abandoned that nonsense over 300 years ago.

      • Deoacveritatimyfaithsustainsm

        The problem is that most have NOT made their wealth honestly.

        That is one of the biggest lies and and fallacies that people want to believe.

        Real life wealth is made with a lot of cheating involved.

        It’s like people blaming the poor for being poor. Ridiculous!

        • That is simply not true! But if it was, that would be an indictment of law enforcement for failing to arrest them for cheating people.

          85% of millionaires got their wealth by growing a business over 30 years. It’s impossible to do that and consistently cheat people. Customers will find out and tell others and drive the cheater out of business.

          Besides, it takes an enormous amount of arrogance to accuse people you know nothing about of cheating. Do you have some version of God’s omniscience?

          • Deoacveritatimyfaithsustainsm

            It is NOT arrogance it is the truth you don’t like and disagree with.

            Christ on earth NEVER touched money because it is the devil dung.

            St. John Chysostom said : the rich is a thief or the son of a thief.

            And I totally believe in that.

          • Clearly you are as ignorant of the scholars of Salamanca as you are of economics. Those Godly men would never contradict the teaching of Christ. They merely applied his teachings to economics.

            You harshly and ignorantly judge the motives of people you have never met and know nothing about and judge the Godly men of Salamanca from a perspective of total ignorance, but you still think you’re not arrogant.

            As for Chrysostom and much of the church teaching on wealth, they got that from pagan Greeks, especially Plato and Aristotle. The Church didn’t begin to recover Biblical thinking on wealth until Aquinas and it didn’t bear fruit until the school of Salamanca.

            Of course, you can’t learn anything about history, the theology of Salamanca, or any economics because it would destroy your ideology and expose your envy. Ignorance is your best strategy for hanging on to your false ideas.

          • Deoacveritatimyfaithsustainsm

            It is NOT arrogance it is the truth you don’t like and disagree with.

            Christ on earth NEVER touched money because it is the devil dung.

            St. John Chysostom said : the rich is a thief or the son of a thief.

            And I totally believe in that.

            Look I am not against people who have money, but the reality is that money makes you greedy if your heart is NOT in the right place.

            And getting back to my original point income inequality is a problem. All I am saying is let’s make it fair to everybody I don’t say pay everybody the same but pay people wages they can live with without struggling too much to pay for their needs.

            AND A NOTE TO THE SITE MY COMMENT WAS ALREADY APPROVED ALL I DID WHEN RE-READING THE COMMENT WAS TO ADD “FOR” THEIR NEEDS IN THE LAST SENTENCE.

          • It is the height of arrogance to judge the motives of people you don’t even know. Nothing in life could possibly be more arrogant! Christ could not have lived without money. Wealthy people gave to his ministry and that enable him and the apostles to eat.

            Money does not make people greedy. Have you heard of the doctrine of original sin? Man is naturally evil and greedy. That natural greed causes him to love money.

            You can’t pay people with no skills or experience the same as people with decades of both. Paying people more than their skills justify is charity. So if you don’t like what people are being paid then give them some of your money. Businesses can’t do charity and survive because people like you won’t buy their products if they charged enough to pay for the charity.

            The best theological work done on wages was written by the Church theologians of the University of Salamanca in the 16th century. They determined that any wage freely agreed upon is a fair wage. They opposed any minimum wage because they knew it would hurt the poor by eliminating jobs that the unskilled could perform.

          • Deoacveritatimyfaithsustainsm

            Matthew 17:27

            Douay-Rheims Bible
            But
            that we may not scandalize them, go to the sea, and cast in a hook: and
            that fish which shall first come up, take: and when thou hast opened
            its mouth, thou shalt find a stater: take that, and give it to them for
            me and thee.

            You have not idea of what you are saying. You are one of those greedy people in our society who is blind to the fact that Capitalism as it is right now is a Capitalism without a conscience.

            The money that companies like McDonalds and other companies pay to their employees is shameful.

            Look at the poor wages of cashiers. They are practically bank tellers and people think that what they do is a low skills job.

            Not everyone can go to University and not everybody can do well in School but that doesn’t mean that they don’t have skills.

            All of us are created with gifts that God has given us and most us can learn to do different things that become a skill to society

            the problem is that not everyone can get to develop those skills or be given the opportunity to developed them.

            Having a degree on a particular science doesn’t always mean that you are skillful at it.

            Take dentists or doctors some of them are good and some of them are bad but many of them if not most them charge outragous amount of money when in reality as the case of dentists and I know many of them they are the ones who in many cases brake or damage the tooth while treating you, but when you get home something happens the tooth is broken or damage then you go back to the dentists and they tell you that it was your fault for not being careful, others blame you for how you eat or how smile even as the reason why your tooth is now broken or fallen off like in the case of implants.

            Look the low wages they pay to many unskilled workers as you called them is not because they are unskilled it is because of the greed of many who own the corporations and the companies.

            The world has always been plague by the greed of those who have power and money.

            And that’s is reality whether you like it or not.

            Take one more example the U.S. wastes 35 million tons of food that could feed many millions of people during the day, oh but that doesn’t matter they rather throw it out than give it to the poor of their own country.

            That is the culture of waste that Francis talks about.

            But why bother talking to you your mind is made up you are one of the many greedy and selfish people walking around today, you yourself can be going through some tough time yet you still will be so DUMB to continue defending those that through their greed are causing you debt problems etc.

            You don’t see the situation for what really is the greed of a few paying low wages to anyone who according to them don’t play by their rules so they deserve to be screw.

            You live with your eyes wide shut to reality.

          • So explain to me why Judas was the treasurer for the team? Yes, Jesus could have performed miracles to feed himself and the twelve, but generally he didn’t. Recall from the incident of the Samaritan woman at the well, the disciples left him and went to town to buy food. So yes, Jesus did depend on the charity of wealthy people for most of his food and clothing and shelter.

            “You are one of those greedy and selfish people…” So you want to continue with the blasphemy that you have the power to know the hearts of people you have never met, a power that only God possesses.

            You live in a fantasy world. Open your eyes to the real world. Learn a tiny bit of economics. The prices that consumers are willing to pay for a product or service determines what wages will be for the workers making those products and services. Would you pay $10 for a MacDonald’s double cheeseburger so that the workers there could earn $15/hour. Not likely.

            You may think you know how much people should earn, but again, you’re just advertising your ignorant arrogance. No one but the owner of a business knows how much he can pay workers.

            As the Church Scholars of Salamanca wrote, if you don’t like the wages people earn then give them some of your own money. Supporting the people is not just the job of employers, but that of everyone. It’s lazy of socialists to place all of the burden of charity on employers while they do nothing for the poor.

          • Deoacveritatimyfaithsustainsm

            First of all I am not a Socialist.

            Second you are the one who is sinning by calling me a blasphemer.

            What I said is true selfish and greedy people fail to see that Capitalism as it is practice today is way too greedy and without a conscience.

            Third Jesus didn’t depend on wealthy people. People who were poor could have given him whatever little they had.

            I mention all of what said earlier in my comment because I know a Traditionalist priest who is a theologian and he mention that Our Lord never touched money. And this priest remind us that poverty is a virtue.

            You see Christ rejected all the power and riches of the world when the devil tempted Him.

            Saints in the Catholic Church have left all their riches behind most of the time by donating everything they have so that they could live a life detached from the material in order to follow in the footsteps of Christ.

            You and others who worship the material easily forget that.

            It is a reality that Christ has in every way rejected riches and encourage all of us to store up treasures in Heaven.

            I called you what you are a greedy and selfish person because you do worship those who have wealth and power no matter how much they steal and abuse the system and those under their feet.

            I am not lying when I say that and one more thing I DON’T eat at MacDonalds.

            I yes I still believe that people you called unskilled DON’T deserved to be ripped off by such low wages even if that means that selfish people like you who suck up to the wealthy have to pay $10.00 for that plastic food which is more garbage than food because garbage is what greedy selfish people like you deserve.

            When there are enormous capital there should be an adjustment in the wages of the workers so that they can pay for their necessities without struggling too much. And with all the money McDonalds make they can afford $15.00 an hour.

            One more thing my economics are good.
            BUT you on have a twisted soul because your selfishness which is vice and not only that your Christianity and your Theology twisted also.

          • You don’t seem to know what blasphemy means. It means 1) to insult God or 2) to attribute to oneself the attributes of God, which is also an insult to God. Calling me greedy assumes that you have the God-like attribute of omniscience. You are a blasphemer.

            You may not like to be labeled a socialist, but you agree with all of the principles of socialists. You live in denial.

            No, your understanding of economics is terrible, as demonstrated by your posts. Modern economics was born in the Church’s university at Salamanca by very Godly and knowledgeable theologians. You demonstrate total ignorance of it.

          • Deoacveritatimyfaithsustainsm

            Look you might disagree with me all you want but NO Theologians from Salamanca can contradict what Christ said :

            “Luke 18:18-23 (with the context of vss. 24-30 also)

            [18] A certain ruler asked him, “Good teacher, what must I do to inherit eternal life?”

            [19] “Why do you call me good?” Jesus answered. “No one is good —
            except God alone. [20] You know the commandments: ‘Do not commit
            adultery, do not murder, do not steal, do not give false testimony,
            honor your father and mother.'”

            [21] “All these I have kept since I was a boy,” he said.

            [22] When Jesus heard this, he said to him, “You still lack one
            thing. Sell everything you have and give to the poor, and you will have
            treasure in heaven. Then come, follow me.”

            [23] When he heard this, he became very sad, because he was a man of great wealth.”

            NO I AM NOT A SOCIALIST, I AM A CATHOLIC WHO BELIEVES THAT WE LIVE IN A GREEDY AND SELFISH SOCIETY, A SOCIETY OF WASTE WHERE WE BLAME THE POOR FOR BEING POOR INSTEAD OF BLAMING THE RICH FOR THEIR GREED.

            i unlike you I DO NOT worship at the altar of Capitalism. I am a Christian who thinks we should all have compassion for our fellow human beings and instead of judging them for being poor we should find ways to help them live with dignity by sharing some of our resources and who better than to help with that than governments who can ask the rich and owners of corporations, and firms, like Safeway or Whole Foods etc. that instead of wasting so much food like the 35 million ton of food that are wasted, maybe they can donate that to the churches so they can feed the homeless or destitude.

            I seriously don’t believe that what we have today is a wages that we have today are freely agreed upon. What we have today is abuse and exploitation.

            Governments ARE NOT machines they are made up of people who in many cases call themselves Christians. Well when you are a Christian you are a Christian always you don’t live your Christianity behind because you work for the Government.

            You are so full of BS. just like when you called me a blasphemer for calling you greedy and selfish. What I tell you is the truth you don’t want to hear so STOP twisting words and STOP accusing me of blasphemer because your twisting everything I am not insulting God I am insulting you because you deserve it.

            I have proven to you with Christ’s words that it is the attachment to the material that make men lose their soul.

            Be careful you are walking the wrong path and like I said your theology and understanding of Christianity is NOT the right one.

            You worship the rich, you blame the poor for being poor.
            You opposed fair wages to people with low income just because according to you they are unskilled.

            SHAME ON YOU.

            You blame the helpless while the wealthy shamelessly steal from the people in your own country and in other countries that is why they go to Third World Countries to have jeans, shirts, shoes that companies like Addidas and Nike sell here for making millions of dollars while paying those poor people pennies for their hard work.

            You have the conscience of a SOCIOPATH.
            Wake up! Your greed and selfishness are blinding you to what you to reality.

            The U.S and other Western countries are stealing oil, gas, diamond and other resources from people in poor countries while they destabilized them with wars and conflicts all invented and made up by them.

            Why do you think we have a egocentric, narcissist sociopath like Trump running for the Presidency?

            Because these society is morally twisted. I don’t know if you are a Christian I doubt it but if you do you call yourself a Christian when it is convenient to you.

            I have news for you that is not going to be enough when you are in front of the Almighty that will not suffice.

            Compassion for our fellow human beings means that we are willing to sacrifice for them and to help those in need in every way we can not only donating when we want.

            We must have our Christian hearts ready all the time to help any one who needs it and we must stand up for the helpless when nobody is will to do it.

            So yes I repeat the words of St. John Chrysostom : “The rich is a thief or the son of a thief. “And he is a father of the Church.

            One more thing I might disagree with Pope Francis on many things BUT I agree with him in the culture of waste and on the need to help the poor and to see Christ in the poor and if you call him a Socialist it will be you is a blasphemer because Christ has always been on the side of the poor and humble because they are the ones who better represent his message of detachment from the material something the rich and people who suck up to the rich like you have always found it hard to accept.

          • Nobody

            Please show where the scriptures quote poverty as a virtue.

        • Nobody

          Prove it.

      • Haze

        Was inequality really worse in Abraham’s time? Abraham may have been rich by the standards of his time, but he still lived in a tent, which is hardly luxury by 21st century standards. Meanwhile, the poorest of the poor were probably not much worse off than the poorest of the poor today.

        • Economic historians estimate that the per capita GDP in Abraham’s day was the same as that of Europe in 1800. And they estimate inequality in 1800 as twice as high as in 1900. I’m assuming that since per capita GDP was the same then inequality was likely the same. Abe lived in a tent because he was a shepherd, but he was extraordinarily wealthy in terms of gold, cattle, servants, etc.

          See Deirdre McCloskey’s series on bourgeois virtues. She is an economic historian. The poorest of the poor on the planet today are vastly wealthier than the poor in 1800 or any time before. It’s really a shame that economic history isn’t more widely known.

          Also, see Robert Fogel’s “Escape from Hunger and Premature Death.”

    • Jason

      Point of fact: US citizens and companies are more generous and giving to charitable causes and organizations than any other nation on Earth. I appreciate your empathy for the lower income earners (I’m one of them), but the facts don’t necessarily support your position. A lower income family in the US has possessions and security that the poor in most countries only dream of. I witnessed this firsthand in my years traveling in the Corps. Granted we were deployed to some of the poorest most tumultuous areas of the world but the fact that this nation was built on rewarding effort, hard work, innovation and perseverance with prosperity. Who am I to demand the fruits of others labor because I have less? My wife and I did without for 20 years to pay off our mortgage. Never missing a due date. Our children sometimes had mac and cheese for dinner while we ate peanut butter and crackers. We didn’t have cell phones till 5 years ago. We never had cable. Internet when we finally got it was still dialup when most had broadband.we finally purchased our First new vehicle in 09.before that we both drove vehicles old enough to buy alcohol. But my neighbor across the street bought a new vehicle every 2-3 years, had the latest and greatest big screen, every channel you could think of on cable, built a pool in the backyard almost as costly as the house itself, had boats,jet skis, ATVs, RVs. They had there mortgage forgiven by the redistributers and filed bankruptcy. No, Americans aren’t poor. Some of us just can’t or won’t manage their finances and then cry unfair to the bleeding hearts who are more than happy to use our taxes to subsidize their carelessness. By the way, said neighbors together earned almost 70% more annually and purchased their home 2 years before us for an equal price. They simply kept refinancing to fund a lifestyle that wasn’t beyond their means but rather beyond their discipline and level of fiscal responsibility.

      • StatVeritas7 Ad_majorem_Dei_gl

        Jason go and take your meds.
        I know we live in a world where most people can’t handle the truth. But you need some serious help!

  • As Schoeck wrote in “Envy: A Theory of Social Behavior,” the obsession with equality is a manifestation of envy. Envy has always been with us. Europeans used to marvel at the lack of envy in the US, but as Americans have abandoned Christianity, envy exploded. Nothing but real Christianity can put the demon envy back into the bottle.

  • StatVeritas7 Ad_majorem_Dei_gl

    I agree with Deo!