Income inequality is increasing. So what’s the big deal?

In a truly free society there would be no way for anyone to amass great wealth or earn high levels of income without offering a product or service commensurately valuable to the individuals in society—the nature of voluntary exchange guarantees that. But do we have a truly free society? People are upset about a CBO report showing an increase in income inequality between the highest earning 1% and lesser paid earners (see chart below).  But why exactly?  I don’t think people are upset because they think it’s unfair for someone like Steve Jobs to get rich selling us what we want, but because they don’t think most of the rich are really adding the value their earnings imply. They know instinctively that the system is rigged and I’m beginning to think their instincts are right.

When I first got out of college I had a friend Steve from South America who said to me, “Don’t you think that anyone who’s really rich has done unethical things to get his money?” I was horrified. I felt it was a poor reflection on Steve’s character that he couldn’t see any possible connection between being good and doing well. Only a few years ago I recalled the statement to my husband who replied, “What is he talking about?  Happens all the time. There are plenty of good, rich guys in this country.” That was the key: “In this country.”
But now I am beginning to see signs in America of what Steve saw in his country. I now believe that if you want to make it BIG, you have to be connected, make a campaign contribution, drop a stock tip—whatever it takes—even if you would rather reach the top on the up and up. This is what has been aptly coined “crapitalism”—crony capitalism—and it’s the rat that everyone is beginning to smell.
The Occupy Wall Streeters smell it but don’t know where it’s hiding, so they believe the people they trust, who happen to be the Unions and the Big Government—nay, World Government—guys who tell them it’s the bankers, although the rich in general are the target. (See my blogpost of October 4 with hidden audio of SEIU’s Steve Lerner planning OWS back in March).
But amassing riches is not de facto immoral—voluntary exchange is a moral exercise that benefits both parties. It’s only when riches are amassed unfairly that it’s a problem. But how can you get rich unfairly? Only by using force or fraud. And who is using force or fraud? Are the Citibank guys taking their security guards to GM and forcing or tricking them into taking loans? Are GM goons coming to your house and forcing or tricking you into buying a car? No, they aren’t doing it that way, which is why they are not in jail. What they ARE doing is using the government to do those things through laws, regulations, bailouts, and of course through the ubiquitous and secretive Federal Reserve. And why do those in government voluntarily engage in these practices and often initiate them? Because they can. Government has the power to force some economic actors, particularly tax payers and small businessmen, to do things for the benefit of themselves and their cronies, so that’s what they do.
Both Occupy Wall Street and the Tea Party know something’s rotten, and probably know it’s crony capitalism—even Michael Moore’s movie “Capitalism” was about government bailouts not truly free markets. But which of the two protest groups really gets it? To me, Occupy Wall Street is further from the truth. They are on Wall Street when they should be on Liberty Street outside the Fed. The Tea Party is getting warmer—they go to Washington—but they don’t totally get it either. From what I could tell when I marched alongside the Tea Party against Obamacare, they continue to support the Drug War and the War on Terror, probably because of fears of social instability and personal insecurity, which in turn keeps them beholden to the government they know is destroying the very society they are clinging to.
Unfortunately, fostering base fears has been a tactic of the state for centuries if not millennia. If the masses on the left continue to let their leaders prey on their fear of financial insecurity, and the masses on the right continue to let their leaders prey on their fear of personal insecurity, we will continue to have tyranny and instability—along with crony capitalism and invidious income inequality.

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