Friday, March 25, 2011

Why Liberals Go On About Inequality

Here's a cute little item in The Atlantic. It's a map about inequality, The 12 States of America, showing the change in per-capita income in the United States between 1980 and 2010. It takes the US county by county and shows which have experienced increasing real per-capita income and which have been experiencing declining real per-capita income. The counties are divided into twelve categories, such as "Immigration Nation," primarily Hispanic, where real per-capita income has gone down, and "Monied Burbs" where income has gone up.

The subtext is obvious. The rise in income inequality is unjust and requires a political response.

This is, of course, the classic view of the "unconstrained vision" discussed by Thomas Sowell in A Conflict of Visions. If there is inequality, say our liberal friends, then the presumption is that it is unjust and that political means must be deployed to correct the imbalance. Thus it is unjust that the counties in "Immigrant Nation" show a declining real per-capita income from $42,800 in 1980 to $38,900 in 2010.

Conservatives, who generally believe in a "constrained vision," and worry more about the fairness of the process than the results, would take a different line. We would say: well, of course the new immigrant counties are going to show reduced per-capita income. Immigrants from Latin America typically show low skills and thus cannot command high-paying jobs. The question is whether the process allows the immigrants to better themselves and create a better life for their children.

Since per-capita income has increased across the board from about $2-3 per capita per day in 1800 to $100 per capita per day in 2010 it would seem that inequality is not a bar to opportunity. Nearly everyone has running water, TV, and indoor heat today, and the poor are fatter than the rich.

The question for the future is whether it is the political system that creates inequality. Let us make a "constrained" vision argument on inequality. Chances are, says the conservative, that if there is persisting inequality then it is a product of the political system, that some people are denied fair access to the economic system. For instance, people on welfare are encouraged by the political system to divest themselves of jobs and spouses because you need to do that to qualify for benefits. But studies show that unmarried, jobless people are typically more likely to be poor than married people with jobs. To what extent, then, does the welfare state create inequality rather than fight it?

In simple terms, let us look at the situation of Hispanic immigrants who by all measures are less wealthy than native-born Americans. All people, presumably, would agree that we want to help them become part of America. The question is, shall we help them by working on the process, observing how the economic and political system helps them or hurts them? For instance, many Hispanics work off the books, because of illegal immigration status, or because of high payroll taxes. Or should we provide Hispanics with government benefits: welfare and health benefits to boost up their incomes directly?

Conservatives need to be very clear about these issues, because the crisis in government finances will permit a nation conversation on the efficiency and the justice of the pervasive welfare state programs. We've spent a century trying to solve inequality by direct subsidy and providing benefits to the low income community. Now we have an opportunity to change the conversation and work on the economic process and remove the unjust taxes and regulations that make working in the formal sector difficult for the low paid. It helps, of course, that there is no more money for more government programs.

On the level of rhetoric, of course, it's OK to accuse the liberals of using inequality to increase their political power. Bigger government benefits to low-income families increases liberal political power whereas process improvements don't benefit anyone except ordinary unorganized Americans.

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