Definition and Plan of Attack
Inequality is the systematic division of the members of a society into separate groups for the benefit of one group at the harm of the other. I call members of the benefited group the top dogs and members of the harmed group the underdogs. The five systems of inequality I deal with here are racism, sexism, classism, jingoism, and anti-Semitism. The treatment of inequality in conventional economics is wrong and causes much grief. Contrary to conventional economics, inequality is not a social investment in future productivity. Inequality is a vice, not a virtue.
After clearing away the underbrush, I will discuss the following characteristics of inequality: (1) redistribution is not the solution; (2) inequality is pathological; (3) inequality is cumulative; (4) inequality is social; (5) inequality is supported by myth; and (6) laissez faire toward inequality is impossible.
Clearing away the Underbrush
The underbrush: the incorrect belief that income inequality is a form of social investment is held by the privileged rich and by conventional economists. The rich just know that it is true. If not rich, conventional economists are taught it during years of undergraduate and graduate training. Perhaps many enter their training with a strong propensity to believe it. Be that as it may, during years of formal training, conventional economists learn to make the right assumptions and investigate the right relations. They do not investigate whether inequality reduces the abilities of the underdogs. They assume that inequality causes the rich to finance capital accumulation out of their savings. Conventional economists learn not to investigate the Keynesian insight that the saving of the rich does not finance investment. They also learn not to investigate whether the saving of the rich actually comes from the sacrifices of the poor. Walter C. Neale, having not learned these things, takes a trip through the conventional saving thicket and concludes, among other things, that he has learned that
the attribution of saving [who does it] is ideological. It serves to justify the increase in the assets of the winners. That some qualify to be savers . . . and that some do not qualify . . . is a consequence of the way our system distributes property, the power to spend, and the power to acquire assets [Neale 1991, 1166; parenthetical statement added].
Inequality is systematic, not haphazard. Each system of inequality selects people for separation into groups of top dogs and underdogs. These groupings are not products of spontaneous social order (invisible hand) or individual choice, but of collective action. Each system of inequality requires a different set of collective actions. Specific collective actions are required to create and maintain a system of racial inequality. Race laws must be established, adjudicated, and enforced. Separate and unequal institutions must be established and justified. These systematic collective actions to put down one race and raise up another one are costly. A different, but partially overlapping, set of collective actions is required to create and maintain a system of class inequality. These actions focus on establishing, allocating, justifying, and protecting property rights. These collective actions are costly. Another set of different but partially overlapping collective actions is required to create and maintain a system of gender inequality. They establish, enforce, and justify the roles of family members, the reproductive rights of men and reproductive duties of women, and the various privileges of men and exposures of women. These actions are costly. Specific collective actions are required to create and maintain a system of national inequality. Armies, navies, air forces, border patrols, and intelligence agencies must be established and supported. Wars must be waged. These collective actions are costly. Another set of collective actions is required to create and maintain a system of religious inequality. Acceptable and unacceptable beliefs and practices must be established and enforced. Heresy and apostasy must be found out and punished. These actions are costly.
Such costly sets of collective actions are required to push whole sets of people in society down, depriving them of income, status, and power, reducing their social participation, perhaps eventually taking their lives. The deprivations and reductions weaken the underdog group, reducing their abilities. Imposing inequality does not facilitate saving and investing in physical capital. Instead, it deprives the underdogs of the opportunity to participate in social processes of all sorts.
Where the analysis of inequality starts makes a big difference. If you start before the imposition of inequality and then impose it, inequality is a diversion of resources and a taking. However, if you start after the imposition, then abstaining from redistribution looks as if you are abstaining from a taking; and if you started redistributing income to the underdogs, it would look as if you were reducing saving and investing. Here we have an Alice in Wonderland world where things are what they are because they appear to be that way [further discussion in Neale 1991].
Redistribution Is Not the Solution
Clarity can be gained by contrasting the assumed leaky buckets of neoclassical economist Arthur Okun with the actual legal relations of institutional economist Warren Samuels [Okun 1975; Samuels 1981]. Okun puts egalitarians - those who oppose racists, sexists, classists, anti-Semites, and jingoists - on the defensive by incorrectly transforming opposition to systems of inequality into support for strict equality. The two are not the same. Okun sets up egalitarians in the following way:
Any insistence on carving the pie into equal slices would shrink the size of the pie. That fact poses the tradeoff between economic equality and economic efficiency [Okun 1975, 48; emphasis added].
Egalitarians seldom argue in favor of strict equality of income [see Tool 1996]. Clarence Ayres explained that "equality means the absence of artificial and arbitrary barriers" [Ayres 1961, 187].
Not only does Okun disregard what most egalitarians actually say, he elevates the conventional argument that equality and efficiency are tradeoffs into a fact. Next, he waters his assertion-transformed-into-fact with the famous leaky bucket analogy. When government redistributes income from the rich to the poor, some will leak out. Not all the income taken from the rich will get to the poor. What leaks out represents inefficiency. The leaks include such things as administrative costs, reduced and misdirected work effort, and changed motivation [Okun 1975, 91-114; see Dugger 1981, 1984]. It follows that if government would just abstain from responding to the pleas of the underdogs, inefficiency would be reduced, and the economic pie would grow faster for all groups - rich and poor alike.
But what if the government had first carried the water in buckets from a group of people that it had made poor to another group that it had made rich? Would those buckets not leak? If the buckets leak when Robin Hood carries water from the rich to the poor, then the buckets also leak when the Sheriff of Nottingham carries water from the poor to the rich.
Samuels grasps the truth in all this sloshing about with leaky government buckets. The fact is, the government is constantly engaged in allocating and reallocating rights and obligations, powers and exposures, limitations and protections. Such government allocating and reallocating cannot be avoided. Even if the government thinks it does not do so, it does so. According to Samuels, 'the issue is not government or no government but which interests, that is, whose interests the state is used to effectuate" [Samuels 1981, 104]. Samuels further explains:
There is an ineluctable set of choices with which government - the state, law, the legal process - is inextricably bound up: choices as to relative rights (whose rights are to be effectively paramount to whose?), choices as to the visitation of injury (who will be allowed to injure whom, or who will be sacrificed to whom; and when is an injury, that is, to be recognized as such in law), and choices as to who will be exposed to whose coercive power. In all these matters the state must and does choose; there exists scarcity in the sense that conflicting interests and claims cannot each be secured at the same time (under existing technology), giving rise to conflict (for example, court litigation or legislative enactment of a change) and the necessity of choice [Samuels 1981, 100; parenthetical statements in original].
These fundamental choices of government regarding relative rights, injuries, and coercive powers strongly influence who will be a top dog and who an underdog and, therefore, who will be rich and who will be poor. The redistribution in allegedly leaky buckets comes after the determining choices have already been made, after we have already been sorted into top dogs and underdogs. The sloshing about with leaky buckets comes after the real game has already been played. It is then that abstinence from redistribution appears to be saving/investing in future productivity.
If redistribution is not the real game, then what is? The real game is the original creation of the systems of inequality that are based on race, gender, class, nation/ethnicity, and religion. Once collective actions have established them, redistribution schemes can involve little more than mere adjustment at the margins.
Take the system of inequality based on race as our model: Once a system of inequality based on race has been established, significant amounts of income can be carried from the allegedly superior race to the allegedly inferior race without changing the fundamental inequality between them. The fundamental inequality between them yields steeply increasing resistance to...