With income inequality becoming a serious issue in the election cycle, the book Equal Is Unfair: America's Misguided Fight Against Income Inequality by Ayn Rand Institute fellow Don Watkins and CEO Yaron Brook is an important read. The Daily Wire spoke to Watkins about the book.
Q: Your book is titled Equal Is Unfair, so go ahead and make your case: why is economic equality unfair?
A: Because different people produce different amounts of wealth. My wife's a teacher, and she's a great teacher, but she's only reaching a few dozen students each year. Jeff Bezos of Amazon, he's providing economic value to millions of people a day. And so, if people are free to create wealth and they're free to keep what they earn, then we're gonna see immense economic equality, and then trying to equalize them is enormously unfair.
Q: The counter, I think, if you were going to say that to someone like Bernie Sanders or Paul Krugman or whomever, is that they don't want to make things completely equal, it's just to make things a little less unequal. So how would you respond to that?
A: Well, how do you do that? You're right that their view is: let's move more into the direction of economic equality. But the only way to do it is to penalize people for their achievements and reward people for lack of achievement. But if you think about what justice means, it means that people should be rewarded for their achievements, not for their non-achievements.
Q: One of the things you talk about in your book is that these inequality critics, they float around these statistics about inequality showing that the gap between the rich and the poor is increasing, middle-class wages are stagnant and so forth. But there are numerous problems with these statistics, as you say. So what are those problems with them?
A: I want to preface it by saying very quickly, I do think there are real economic problems today. We shouldn't paint too rosy a picture. But we shouldn't paint an unrealistically bleak picture either. The fact is that the vast majority of Americans over the last 40 years have seen significant, if not amazing progress. And, the only argument against that is pointing to statistics, because if we look around us, clearly technology has gotten better, houses have gotten bigger, we've seen life spans increase by five years, so there's really something we should be skeptical of in statistics that show stagnation. And if you actually dig into the statistics, there are many, many ways in which statistical categories can seem to be stagnating even if all of the individuals in real life are getting better off, and let me just name a couple, because there's a ton of them. So, for example, as we see more immigrants come from poor countries, those immigrants come to America because they're going to be better off. But they drag down median incomes because they're poorer than the Americans who are already here. Most statistics that show stagnation look at household incomes, but actually the composition of households have changed given that there was a rise in the divorce rates in the 1970s and so, to take a simple example, if you have two people making $25,000 a year and they divorce, even if they get a significant raise, now you have two households not making $50,000 a year but less. America seems to get poorer even though people overall have gotten better off. And just to name one more factor, and this is complicated, but it's how do you adjust inflation, because the value of a dollar has changed over time. And the CPI, which is what most of the critics point to when they are trying to show stagnation, actually most scholars agree that CPI overstates inflation and so understates how much better people have been doing over time. And there's many, many more, but the fact is when you have common-sense and most reasonable estimates of statistics pointing in the direction of progress, it's dishonest to pretend that we haven't seen progress.
Q: What would then be a more accurate measure of inequality and economic mobility?
A: The problem is I don't think there there are precise answers in either of these cases. I think the situation is too complex. So what you really want to be concerned with is: what are the government policies that give people the maximum ability to make their lives successful? And what do we argue are the government policies that leave us free to pursue success and keep the rewards of our success? Just one simple indication of this that I think is understated in debates is in the last four years, we've seen global poverty from 40 percent to 14 percent. That's an incredible achievement. And what made it possible? It's actually not that controversial. What's made it possible is that, particularly in China and India, they've moved in the direction of freer markets. And when people have more freedom to pursue success, to use their minds and put ideas into action, they create enormous amounts of economic value, enormous amounts of prosperity. And I think the same principle applies in America. If we start moving in a freer direction, we will see people rise be able by productive ability and be able to prosper by productive ability. One aspect of this that's critically important is you need to leave alone the innovators, the most productive people, the ones who drive human progress so that they can create the new goods and services and lower prices for higher quality that economic progress consists of.
Q: Bernie Sanders and Paul Krugman would point to Sweden as an example of how their policies work. But if anything that actually disproves their point, doesn't it?
A: Yes. This was actually to me one of the most surprising things we learned when writing the book, and I actually learned it from my colleague Carl Svanberg, who is from Sweden, which is that if you actually look at the history of Sweden, rather than compare Sweden today to America today, which can be misleading for all sorts of reasons because there are many differences between the two countries, if you look at the history of Sweden, it works out so that they've had the most progress when they were the most free. Indeed, at one time they were arguably the freest economy on Earth and that's when they went from one of the poorest countries in Europe to one of the richest countries in Europe. It was only, I believe, in the 1960s when they started pursuing an agenda of heavy government control and wealth redistribution, then what happened was inequality there shrank but so did their economy. It was only later on when they started to move in a freer direction that they began prospering again and inequality rose. There's a lot to say about Sweden, both very good things and very negative things, but the number one thing to take away from their history is fighting inequality doesn't work and liberating producers does work.
Q: One aspect of your book I found particularly interesting was the fact that people are stuck in the ghettos due to the "crab-pot" theory. Can you explain what that is exactly?
A: Sure. We're told that the inequality critics are concerned with reviving opportunity, yet what one of the major lessons is is that success is a matter of luck. Well, if success is a matter of luck, then why bother trying? Why not just say, if I'm poor, I'm going to stay poor and live as a victim? That's in a sense what they tell people. And what you see is that those ideas have been tested. What's happened to human lives who view themselves as victims? Well, we can look around and if you read stories and talk to people who live in the ghetto, one of the most striking and tragic things you hear is that those who are trying to lift themselves up through their own effort, who don't accept the role of the victim, are often faced with hostility, the same kind of hostility that the inequality critics direct to the richest Americans, and gets directed to the most ambitious people trying to rise out of the ghetto. The analogy that many of these people will give is the phenomenon when crabs are thrown in a bucket, and they're struggling to get out, and one is almost out and the rest of them pull them down. And then they see this phenomenon: when you try to rise up, people around you are pulling you down. That is a very awful, tragic phenomenon but we can understand why it would happen, because if you are trying to tell yourself a story that says, not just that it's going to be hard for me to succeed, but that I'm helpless. Well when you see other people starting to succeed and doing it, actually starting to make something of their lives, well then it's much easier to drag them down so that neither of you succeed and you can keep telling yourself that story that you're not responsible for making something of your life, that it's simply not possible.
Q: Is there anything the government can really do to ameliorate that problem?
A: I think the number one thing the government can do is stop making it worse. There are so many barriers and obstacles the government puts in the way of people struggling to rise from the bottom. Just a few that I think are most notable: first of all, the government schooling system. The government's monopolized the field of education for well over a century, and it has completely failed many students, particularly for those in the worst neighborhoods. The minimum wage: I'm from California, where it looks like they're going to raise the minimum wage to $15 an hour, and what that means is that if I'm poor, if I don't have a great education and if I don't have a long work history and I can't find somebody to pay me $15 an hour, it is illegal for me to work. It's illegal for me to take that first step in the ladder of success. Or, let's say now I can't find anybody to pay me $15, but I'm really good at say, hair braiding...and I found people who want to have me braid their hair or teach them how to braid hair. Well, in many states that, too, is illegal unless I get a government certification, get a license, and that can cost hundreds and even thousands of hours, and hundreds and even more than a thousand dollars. So the government, far from making things easier for people to succeed from the bottom, has made it far worse, and the best thing they could do is get out of the way.
Q: One thing that I found particularly disturbing in your book was how many of these intellectuals care about screwing over the rich than actually helping the poor. Why do they have such a perverse mindset?
A: The short answer is that you can have basically one of two attitudes toward other people's success. You can view it as a positive, as a source of inspiration, or you can view it as a rebuke, as something that is in effect making you look bad, and you want to tear it down. Now, these attitudes often get formed early on in childhood, so one of the things you can see is people, who as adults are by all measures successful, still have this resentment of other people "showing me up" and the most ambitious of these people, so many of them go into politics, but the most intellectually ambitious erect entire systems of thought to rationalize that feeling, and in my view this is what's behind communism, this is what's behind egalitarianism and I don't think you can understand the campaign against inequality unless you understand this phenomenon. And let me just give one example that at least suggests–doesn't prove–suggests that this is what's going on. Thomas Piketty, in his mega-blockbuster Capital in the 21st Century, proposes as his chief means of fighting inequality upwards of 80 percent marginal income taxes on top earners and a wealth tax that each year will take up more than 10 percent of wealth that somebody has earned, and he says explicitly this will not raise a lot of money to help the poor, but it will end those big fortunes. When you advocate something that has no positive, only a negative, I think that is a clear-cut sign that what you're dealing with is envy and hatred of success, not love of the poor.
Q: The envy and hatred of success–where does that stem from?
A: The kind of obvious example that we experience throughout our childhood is going to be the bully who beats up the straight-A student. Not because it's going to make him any smarter, but because it makes him feel superior to somebody. And if you look at this instance, definitely they're rich, but more importantly is that they're self-confident and powerful. Powerful not in the way they're portrayed by the critics–not that they can exploit people–but that they can create things and solve problems and when some people encounter that, just like that schoolyard bully what they want to do is make themselves feel powerful, not by solving problems and creating things, but by cutting down creators, and it's a psychological question as to how that develops, but it's a real phenomenon and it's very disturbing. Now let me add one extra point here that is: the inequality debate can't start with impugning the motives on the other side. But nevertheless, the people on the other side impugn the motives of anybody who believes in freedom and who believes in celebrating the success of innovators and entrepreneurs, and so I think it's only fair as a matter of justice that we point the real villains in this story are those trying to tear down the successful, not those trying to make it possible for everyone to succeed.
Q: So then how do we change the narrative to effectively counter the likes of Bernie Sanders, Paul Krugman, Thomas Piketty and so forth?
A: Well you'd have to realize that there are two things going on that have made Bernie Sanders successful: it is not his charisma and sex appeal. It is the fact that he has a powerful moral ideal–economic equality–and the powerful moral narrative, a narrative that claims to show that when we abide by the ideal of equality, such as in the post-war era, allegedly, we flourished, and that when we abandon the ideal as we allegedly in the 1970's and particularly under Reagan, then we flounder. The key to turning the tables on the inequality alarmists is to challenge both their ideal and their narrative and offer a counter-ideal and a counter-narrative. Now that takes an entire book for us to do, but the short version is this: their ideal, as we've explained, is unjust because it penalizes people for their success. The true ideal that we should aspire to is not economic equality, but opportunity. The opportunity to rise by productive achievement. What you need to protect them is not economic equality, but political equality, a government that protects everybody's equal freedom. No special privileges for some, no special penalties for others. And now we can look back at the history of what's happened in the last 40 years from a different perspective. We're told that the problem with the last 40 years is that we're too free and the rich have become too rich. Well, that is simply not true, but there are real problems, which is why the Bernie Sanders narrative resonates. But those problems are not economic inequality problems, they're political inequality problems. We've seen special privileges for every sort of pressure group, whether it's crony businessmen, or groups vying for welfare state handouts, then we've seen special penalties and barriers, whether it's the minimum wage and occupational licensing, as we've talked about, or whether it's a progressive income tax that punishes people the more that they achieve. And it is a growing amount of political inequality that has given us a sense that the system is rigged, and so the final piece of the puzzle in terms of challenging the inequality critics is to point out is that they don't want to un-rig the system, they just want to rig it in a slightly different way. They want to rig it in a way that penalizes the most successful and it stops all of us from pursuing success by giving the government massive control over our choices and our wealth.
Q: What is the most important thing you want readers to take away from your book?
A: Our book is primarily a celebration of productive achievement. That is what is best about America: America was the place where people came to an open road to making of their lives whatever they wanted. This debate is really about the American Dream, and you basically have two views. One is that the way to revive the American Dream is by penalizing and vilifying those who epitomize the American Dream. Our view is that the way that you protect and revive the American Dream is to liberate productive ability and celebrate productive success.