How Markets Have Delivered More Economic Equality
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I recently attended the Soho Forum debate between (democratic socialist) Ben Burgis and (libertarian) Gene Epstein on the question of whether capitalism or socialism would lead to the most prosperity, equality, and liberty.
Ben took it for granted that a socialist economy would be more equal, and Gene did not fight hard on this point; indeed, libertarians were once fond of saying, “While capitalism may yield the unequal distribution of wealth, socialism yields only the equal distribution of poverty.”
Well, let’s look at the facts.
We are told that capitalism creates large disparities in income and wealth, and inequality might seem like a real issue if we only train our attention on dollar values.
More Equal Than Ever
In the material sense, however, we are the most equal society that has ever been.
A billionaire has a Maserati or Rolls Royce, but he can’t drive the streets much faster than you or I can. Yet there was a time when the rich were carted around in horse-drawn carriages while most people walked. The former is a form of equality.
Pineapples and other tropical fruits were once were rare and highly valued exotic items. In fact, Charles II of England is seen being presented a pineapple (surely worth thousands of pounds) in a seventeenth-century painting. Nowadays, the rich frequent swanky restaurants, but most people in Western countries have access to more calories of quality food then they could ever eat.
That’s not all. The richest person in the world can’t get that much better of a broadband connection than you can, or a much comfier pair of shoes, bed, or couch.
In terms of the operations of day-to-day life we are becoming more equal. Increasingly everyone—even those in third world countries—have access to a smart phone which can reach the internet and all the education, art, music, culture, and social media that everyone else has access to.
A rich person has a flush toilet. You have a flush toilet. A rich person has water coming out of his taps. You have water that comes out of your taps. A rich person has electricity. You have electricity. You can afford soap. You can eat fruit that is flown in from all over the world, in every season. The richest lord in the world a couple hundred years ago couldn’t even dream of the luxury that people who are considered impoverished in first world countries live in.
Competing for Resources under a Socialist Regime
Burgis admits to wanting to place institutions like banking and finance, utilities, healthcare, and lord knows how many others under so-called democratic control, in the name of egalitarianism, but we have to wonder how the masses are going to vote on how the public gets access to telecommunications while still serving the user. Ultimately, private business owners are answerable to the consumer. It might look like they get to boss everyone around and make decisions, but if someone does it better, they are out of luck. They will be replaced by a competitor.
Removing the market does not solve the problem of “competition” (if this is indeed a competition). There will still be plenty of competition for government contracts and favored positions even once institutions are under democratic control. Ultimately, someone is going to have to make decisions when it comes to who gets what, and they will wield a disproportionate—dare I say “unequal”—amount of power, and likely will “get” rather a lot more than most people.
Ultimately, it is true that the more dollars you have on a free market, the more votes on what is produced and by whom you get. But, as I’ve explained, the “excessive wealth” of the rich is not stored under a mattress. The only way they can keep it is if they invest it in things that serve the public by creating better products and services. If they invest in lines of production no one wants, they will lose the investment. In this way, the market—to the extent that it is indeed a free market with only mutually agreed upon exchanges—forces an alignment of the interests of those who possess the wealth with those of the consumers. The consumers decide what the rich have to invest in to stay rich with their “votes.” Gene mentioned over and over in the debate that those who make up the ranks of the “working class” control a disproportionate amount of consumer spending and therefore have a more equal say in how our society functions than most people would think.
The Issue of Healthcare
We can pit the market against socialism in the most seemingly inegalitarian case, which is the economics of life and death, namely, healthcare. In a debate with me, Burgis expressed horror that on a free market a rich person could buy their way to the front of a queue for life-saving treatments and said it would be better if the state rationed these things. This seems to make sense if we take a steady-state view of the economy, but economies are not fixed.1 Supposing there was only one surgeon who could perform the operation, allowing the highest bidder to get first access to the surgeon would bring so much money in that it would be possible to calculate how much time the surgeon should be performing operations for the very wealthy and how much time he should spend teaching others to perform the same procedures. It would send out a signal to all other surgeons that this is a desperately needed specialization and that they should stop what they are doing immediately to train up in the new style of operation. In the long term far more people would have access to the procedure at an affordable price than if the state merely rationed out access to places. In the latter case, waiting lists would be huge and people would die for want of qualified surgeons. A strange form of equalization tends to occur over time whenever the market is allowed to function. Is access to healthcare in the USA unequal at the moment? You bet! But that is only because the market is not allowed to function.
The market creates an upward pressure on the quality of products and a downward pressure on their prices, because consumers want the best product at the best price. This means “production for us” is “production for profit.” What is only accessible to the rich today becomes more equally accessible to everyone tomorrow.
That is why at first hardly anyone could afford a computer. But because the “greedy rich” opted for exuberance rather than charity, buying expensive computers rather than giving away their money to the poor, the companies that made those computers could afford to fund the research that led to the relative “supercomputer” that you are reading this article on today, affordable to you.
- 1. With the exception in Mises’s conception of the “evenly rotation economy,” which he uses as a thought experiment to demonstrate how real-world markets actually function.