Inequality, disparity, pie slices and crumbs.

Last Sunday at our small rural church, our vicar spoke of his concern that 41% of the estimated $164 trillion global wealth was in the hands of 1% of the world’s population.(source CNBC quoting Boston Consulting)

The slice of the pie

What share of the pie, slices or crumbs?

He and many others are concerned that a small group of people get a very large share of the “pie” while the overwhelming majority have to survive on small slices and most of those on the crumbs left over after all the bigger shares are taken. The much publicised “income inequality”.

I admire him for his concern for the poor and for the work he does. I can understand his point of view and I would be disappointed if he as a minister of religion did not have that concern.

But I cannot agree with him.

At first sight it is easy to understand why so many commentators throw the word “inequality” about with reckless abandon.

Like being pregnant, equality is an absolute condition. Not a relative one. One either is pregnant or one is not. There are no degrees of pregnancy. The same with equality, two conditions, incomes or bank balances are either equal – exactly the same or they are not.

The correct term to describe differences in levels, amounts or sizes is disparity.

But the correct word does not carry anywhere near the emotional charge as inequality.

Well-intentioned campaigners against racial and gender discrimination spawned the widespread and incorrect use of the word “inequality”. Admirable causes that corrected conditions preventing certain people from having equal opportunities they may have been. Honest and correct users of language they were not. Since then,the media have nurtured and promoted the word because it generates sensational headlines.

However history, ancient and modern, shows that ensuring equal opportunities does not guarantee equal results. Disparity in success rates, incomes and crime levels, academic achievement, seats at boardroom tables continues despite legislation and other artificial attempts to change it.

Adversity, whether from lack of income, lack of education, poor economic conditions, accidents or illness will always affect some individuals and segments of society more than others.

Disparity of incomes, wealth distribution and living standards have been part of life since man first got up on his hind legs.

Equality of wealth or income levels could only exist under a pure communist system. A system that has failed everywhere it has been tried. Under the less than pure systems that have managed to survive in Cuba and North Korea, the slices of very small pies are given to the select few while the majority survive on crumbs. The only differences to the capitalist system being the size of the pie and the poverty of the population.

That the global pie is $164 trillion is thanks largely to the small percentage of the population ready to take risks to produce that wealth. Natural resources do not transform themselves into wealth. They have to be transformed by people with the initiative, skill and resources to do so, not by well-meaning social activists demanding that the pie be divided into equal slices.

The size of the pie is not finite. As long as there are resources to transform and entrepreneurs willing to take risks to do so, global wealth will continue to increase. Disparity in income levels, wealth and living conditions will continue to be with us too.

Business owners who start new ventures, provide new jobs and pay more taxes do not take a larger share of the same pie at the expense of those existing on crumbs.

The opposite occurs, the larger the pie the more for every one, whether large or small slices or just crumbs.

It is easy for middle class Westerners struggling to pay credit card debt and buy new consumer items on $50 000 a year to complain about the wealthy 1%. Easy to call for caps on CEO salaries and bonuses, higher taxes on businesses.

To people in the third world struggling to support families on $100 a month, any one earning basic wages in the West appears wealthy beyond their wildest dreams. How would those same middle class Westerners react to calls for all their mid range incomes to be reduced so that there was more of the pie for those currently surviving on crumbs?

Wealth that is invested or spent on consumables increases economic activity and retail sales. Both of which create jobs and tax revenue.

Illegal acquisition of wealth is an entirely different matter.

Wide disparity in income is a cause for concern. Huge real or perceived disparity in income levels is the fuel for revolutions. Revolutions which merely transfer some of the wealth to new countries, some to new beneficiaries without increasing the size of the crumbs enjoyed by the revolutionaries.

Attempting to improve the lot of the poor majority by redistributing the wealth of the rich by force generally only achieves greater levels of misery for a larger segment of the population.

Let’s stop this mindless condemnation of the 1% just because they are wealthy.

A disclaimer, I do not consider myself wealthy, I have been much better off than I am now. I have experienced the disastrous effects of a government deliberately ruining an economy on the pretext of stealing from the rich.

The solution for reducing the disparity in incomes and wealth is to provide opportunities for those at the bottom of the income range to lift themselves up not to destroy the productive capacity and the incentive of those at the top.

What do you think? Leave a comment.

 

photo courtesy Mister GC / freedigitalphotos.net

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  2 comments for “Inequality, disparity, pie slices and crumbs.

  1. July 2, 2015 at 4:31 pm

    Love your common snese and clarity.
    Equality has NEVER been a criteria for civilizations to thrive and enjoy.
    I like you use of the word Disparity
    “Income disparity is always a subjective observation, with observations often occuring on the local level.”
    Being subjective is always only in the mind of the person discussing the disparity, and NOT necessarily a panacea for bliss.

  2. July 3, 2015 at 7:27 am

    Well said, Peter. Like Chuck’s comment, I like the disparity definition. It says a lot. But sadly, those who foster revolution for personal gain will never understand, let alone live with, that definition.

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