Meet the real engine of equality
We hear a lot these days about capitalism causing inequality – about how CEOs earn so much more than ordinary workers, and about how unfair it is that Bill Gates and bond traders have vastly more wealth than average Americans.
Friends of capitalism typically concede that it promotes greater wealth inequality – even the arch-free-market economist Ludwig von Mises wrote that “inequality of wealth and income is an essential feature of the market economy” – but they point out that inequality is the price paid for the immense and widespread prosperity made possible only by the free market. “Sure, there’s more wealth inequality,” the concession goes, “but even the poorest people are much better off with capitalism than without it.”
Let’s not be so quick to grant that capitalism creates greater wealth inequality.
Do a mental experiment. Imagine resurrecting an ancestor from the year 1700 and showing him a typical day in the life of Bill Gates. The opulence would obviously astonish your ancestor, but a good guess is that the features of Gates’s life that would make the deepest impression are the fact that he and his family never worry about starving to death; that they bathe daily; that they have several changes of clean clothes; that they have clean and healthy teeth; that diseases such as smallpox, polio, diphtheria, tuberculosis, tetanus, and pertusis present no substantial risks; that Melinda Gates’s chances of dying during childbirth are about one-sixtieth what they would have been in 1700; that each child born to the Gateses is about 40 times more likely than a pre-industrial child to survive infancy; that the Gateses have a household refrigerator and freezer (not to mention microwave ovens, dishwashers, and televisions); that the Gateses’s work week is only five days and that the family takes several weeks of vacation each year; that the Gates children will receive well over a decade of formal schooling; that the Gateses routinely travel through the air to distant lands in a matter of hours; that they effortlessly converse with people miles or oceans away; that they can, whenever and wherever they please, listen to a Mozart string quartet, a Verdi opera, or Frank Sinatra singing of romance.
In short, what would likely most impress a visitor from the past about Bill Gates’s life are precisely those modern advantages that are not unique to Bill Gates – advantages now enjoyed by nearly all Americans.
NARROWING THE GAP
And while we modern Americans focus on how much more money Bill Gates has than the rest of us, our time-traveler would likely find the differences separating Gates from average Americans to be much smaller than the gargantuan differences between his own pre-industrial life and that of today’s ordinary Americans.
He would also likely find the wealth differences between ordinary Americans and the richest Americans trivial compared to the differences between most pre-industrial folk and the royalty who ruled them.
Before capitalism, royalty and the nobility had exclusive access to a deep pool of servants and amenities that made their lives vastly more agreeable than those of ordinary people. For example, monarchs spent no time washing clothing; their servants washed it for them. When dusk came and indoor lighting was needed, no problem for the rich: they just snapped their fingers and servants lit the chandeliers and candles of the great houses. Whenever the king fancied listening to a string quartet, his court musicians performed for him. If he or a powerful noble wanted to send a message to someone miles away, a messenger galloped off to deliver it. Needing to bathe, members of the royal household counted on servants to draw and heat the water for their baths. And only the rich could afford books.
In modern America, no such differences separate the rich from the rest of us. We have automatic washing machines and clothes dryers (and inexpensive neighborhood laundries) that rescue us from the time-consuming and backbreaking labor of washing our clothes. When we need light, or fancy listening to music, flicks of ours wrists bring these things to us. When we want to gossip with a friend 3,000 miles away, we do so effortlessly. Each of us bathes or showers whenever we want simply by turning on hot and cold running water from our taps. And our homes are full of books.
The fact is, material benefits enjoyed in the past only by the super rich are, in today’s capitalist societies, enjoyed by nearly everyone. This undeniable fact demolishes accusations that capitalism creates inequality.
The next time you hear an anti-globalization protestor or a politician angling for a headline proclaim that the market creates inequality, don’t believe it. The opposite is true. Capitalism is history’s most powerful engine of equality.
Donald J. Boudreaux is chairman of the Department of Economics at George Mason University in Fairfax, Va.