More on Income Differences

I recently proclaimed that

there is no such thing as income “inequality”. There are income differences, but no income “inequalities”. The very term “inequality” has been constructed to imply a moral content in differences between people’s incomes (or wealth). Every time we use the term we imply – deliberately or inadvertently – that income differences are problematic and need to go away. But if the premise of any discussion of income differences is that the differences are somehow immoral, then there really is not going to be a dispassionate conversation about those differences. There is a crucial distinction distinction between “income inequality” and “income difference”. The former term, again with its moral content, implies that there is a role for economic policy – in other words government – to play in how people earn their money. This involvement, in turn, would come in the form of measures correcting differences between people’s incomes.

A more principled approach would say that those who talk about income inequalities do so because they believe people have the right to satisfy their needs regardless of what effort they put up to do so themselves. Logically, this principle says that if Adam works more than Eve, and thus obtains more resources, then Adam will be responsible for satisfying some of Eve’s needs.

Socialism, in a nutshell. As a simple principle for how to organize society, it is easily dismissed. After all, if Eve chooses to work on her sun tan instead of being gainfully employed, while Adam chooses to be gainfully employed instead of working on his sun tan, then why should he be forced to surrender some of what he earns to keep her alive and well? If he chooses to do so voluntarily through a contractual arrangement such as marriage, then the resource redistribution from him to her is entirely voluntary. But if government makes the redistribution, it violates the very natural right that every person is born with, namely to the full possession of the proceeds of his work.

So long as we keep the discussion about income differences at the principled level it tends to stay simple and focused. Socialism quickly loses ground. However, once we put the issue to work in a real-life setting the redistributionist argument gains ground. One reason is that proponents of income “inequality” tend to make the issue far more complicated and convoluted than it really needs to be. Let us look at a good example from a country that has one of the largest income differences in the world, namely South Africa. About two weeks ago, Mr. Itumeleng Mahabane, a prominent journalist and public policy commentator, offered his take on the issue in a column at the quality news site Business Day:

I read an interesting opinion piece in the New York Times about a new book, Capitalism in the Twenty-First Century, by French economist Thomas Piketty, in which he argues that economic inequality may be veering back, if not quite towards Marxist prediction, at least to significant social disruption. Indeed, inequality the world over has become an issue of major angst. Not so in South Africa, one of the world’s most unequal societies. “Mainstream” South Africa is at best ambivalent about, if not dismissive of, inequality.

And this is of course a problem for Mr. Mahabane:

Commentators and journalists continue to dismiss its significance — about four years after iconic right-of-centre economist Kenneth Rogoff conceded that inequality matters. Its social disruption consequence is more evident in South Africa than in just about any other country. South Africa, despite its continuing evolution from an exclusionary society and state-dominated economy to an open democracy with strong tenets of market economics, is not becoming more inclusive as a society.

Notice now how Mr. Mahabane has changed the subject. He started out talking about income “inequality”, a subject that straightforwardly is about income differences and possibly their causes. Now he is talking about how a society needs to be “inclusive”.

What does social inclusion have to do with income differences? Nothing, of course. Social inclusion is about whether or not people are allowed to participate on their own terms in economic activities and the businesses of democratic government. In this sense Mr. Mahabane is right to point out that South Africa used to be an exclusionary society under Apartheid, but despite his attempt at linking “exclusionary” and income “inequality”, no such link exists.

If black South Africans were very poor under Apartheid, it was because government violated their natural rights, being as they are God’s children just like every other man and woman on this planet. But if black South Africans are as poor in the post-Aparteid era as they were before, then it is no longer the fault of an oppressive, exclusionary government.

I have explained in previous articles about South Africa that the ANC regime is responsible for the poverty among blacks in the country. I maintain that they are, but it is not because of exclusion. It is because of clumsy, prosperity-stifling economic policies and a high dose of corruption. These ailments are often the sign of socialism at work in one form or another; the solution lies in dismantling the socialist character traits of the South African government and to maximize economic freedom for everyone in the country.

Somehow I have a feeling that Mr. Mahabane is opposed to this solution. Back to his Business Day column:

Yet despite boasting one of the strongest and most vibrant constitutional democracies in the world, we are an exclusionary society — and it is not, as the world feared, white South Africa that is excluded, but poor blacks, who are on the margins of our society. The theory behind constitutional democracies is that they protect and therefore provide for the inclusion of (structural) minorities.

Well, what part of the South African constitution excludes poor blacks from taking advantage of the free-market economy, even as it exists under the heavy hand of the ANC government? Mr. Mahabane does not explain this, but he apparently feels the need to define “exclusion”:

A commonly accepted definition of social exclusion is that it is a complex and multidimensional condition or process that involves or results in the lack or denial of resources, rights, goods and services. Further, it is an inability to participate in the normal relationships and activities of a functional democracy. It incorporates economic, social, cultural or political arenas. It affects the quality of life of individuals and the equity and cohesion of society as a whole. While it is open to contestation, there is sufficient cause to argue that a significant portion of South Africa’s population is excluded from the political economy in practical and conceptual terms.

Here is where socialism pries its way into Mr. Mahabane’s column. The right thing to do is of course to demand of the poor blacks in South Africa that they do exactly what my very poor ancestors did as they moved away from home in that crummy little village north of the Arctic Circle: they got a haircut, rolled up their sleeves and went and took whatever job they could find. They logged timber, they worked the shallow layer of farmable soil in the short summer season. Some left and moved to find work in the unforgiving conditions in the iron ore mines. Others migrated all the way to North America.

A few chose to stay on their backs. They were offered a hand to self-support. Some took it, others refused it. Those who refused help were left behind.

Harsh? Maybe. But adult men who demand the right to be treated as adults must be able to make adult decisions about their lives.

Under these hard conditions, my ancestors raised families and sent their children into the future as best equipped as they could. Did they ever feel excluded from society? No. They were their own society, their own social and economic context. Did they ever lament their poverty? Some did, but they also knew that if you wanted to better your life, you could always work harder, get a better job, pursue new opportunities.

Mr. Mahabane does not take this approach at all. Instead he loops back from “social exclusion” to “income inequality” and then moves on to add race into the mix:

When our economy is not in terminal decline, journalists and analysts regularly talk about economic stability and good relative performance, despite the fact that nearly 70% of young people between the ages of 16 and 29 are unemployed. Sadly, there is a race dimension to this. If seven out every 10 white children had never worked and were never likely to find employment, I wager that it would be a consistent aspect of economic coverage. As matters stand, the only common reference to youth unemployment is from the perspective of the cost to companies of employing entry-level workers. It is as if the deprivation of black people is a normative condition and of marginal moral significance. The factors that drive this are too complex to unpack and are the subject of a separate piece. The real question is how it is that we have, on the one hand, a vibrant and healthy democracy, but on the other are perpetuating and consolidating social exclusion.

There is a simple answer to Mr. Mahabane’s last question: if the South African democracy is as strong as he suggests – and I will take his word for it as he apparently does not want to discredit the ANC for its way of running the country – then South Africa also enjoys quite a bit of economic freedom. If there is enough economic freedom to allow some blacks to prosper – as there evidently is, given the growing black middle class in South Africa – why is it wrong to expect everyone to take advantage of that economic freedom, or suffer the consequences?

The problem is that Mr. Mahabane is not an advocate of economic freedom. He is a dyed-in-the-wool Marxist. As such he is of course right in using Marxist rhetoric, but government incursions into the private sector never solve the problems they are intended to solve. Income redistribution does not make the recipient of government entitlements better off. It turns him into an entitlement consumer while making someone else responsible for feeding both his own family and that the one with a less-paid breadwinner.

Again: there is no income “inequality”. By claiming that there is, and by implying that government needs to redistribute more income among citizens, the advocates of government intervention call for policies that perpetuate the very problem they claim to want to solve. Furthermore, they are sure to reduce the standard of living for everyone, as taxes on high-earning citizens are taxes on high-producing citizens who often have the opportunity to create more jobs. It would be nice if Mr. Mahabane could ask himself what South Africa needs the most right now: more burdens on job creators or more opportunities for people to support themselves.