Here’s a key lesson of economics: Trade is good, but trade with people very unlike yourself is even better. I’m a teacher who eats beef, drives a car and lives in a house. I don’t need other teachers so much as I need students, ranchers, autoworkers and architects. If your neighbors love gardening as much as you hate it, you’ll find it easy to hire a gardener. If it’s the other way around, you’ll do well in the gardening business.
The lesson spills over beyond the markets for goods and services. We learn new ways of thinking and new ways of living from people who think and live differently than ourselves.
We thrive on diversity — diversity of skills, diversity of interests, diversity of lifestyles, diversity of religious and political outlooks, diversity of culinary and artistic tastes, diversity of lifestyles, and, lest we forget, diversity of income. Capitalists need workers and workers need capitalists. A wealthy factory owner won’t stay wealthy for long if here’s nobody to work the assembly lines. A middle-class assembly line worker won’t be middle-class for long if there’s nobody building factories.
Let us then celebrate diversity, not try to extinguish it. And let’s not forget that diversity of income — or, if you prefer, “income inequality” — is just as much a blessing as diversity of skills, preferences, cultural outlooks, and ways of living.
The economist Thomas Piketty argues in his bestselling book that income inequality is frequently perpetuated by the accumulation of large stocks of capital. That’s all the more reason to celebrate, once you remember that one person’s accumulation of capital is another person’s opportunity to earn a living.
Remember too that “the accumulation of capital” is a fancy phrase for “the conservation of resources”. To accumulate capital,
you’ve got to spend less than your income, which leaves more goods available for the rest of us. How could anyone object to that?
The Piketty-ites have an answer: They believe that the accumulation of capital, even when it’s healthy in its own right, can go hand in hand with the unhealthy accumulation of political power. Therefore they support, for example, a hefty inheritance tax to preclude a de facto right wing coup.
Ironically, it was the solidly right wing columnist Pat Buchanan who once wrote a series of columns supporting a hefty inheritance tax to preclude a de facto left wing coup, based on his belief that second and third generation heirs to great fortunes tend to lean left. (Buchanan seems to have backed off this position around the time he decided to run for president.) The truth is that some heirs lean left and some lean right. And that’s not surprising in view of the lesson we started out with: Our natural allies are not necessarily the people we most resemble. Rich capitalists are not all in league with each other, and there’s no reason why they should be.
If you nevertheless believe that the capitalists have been busily rigging the system in their own interest, you’ve got to admit they’ve done a spectacularly bad job of it. How else to explain the quintuple taxation of capital income, where you can invest a dollar that was taxed the day you earned it, then pay corporate income taxes, dividend taxes, capital gains taxes and inheritance taxes on the income it throws off? Surely any concern that the rich are calling the policy shots should melt away in the face of actual policy.
(Please don’t respond that capital gains are taxed at a lower rate than ordinary income. When you tax the same income multiple times, what matters is not any single rate, but the accumulation of *all* the taxes.)
In fact, there are good reasons in theory to suppose that things work the other way — in a democracy, it’s much easier for the 99% to exploit the 1% than the other way around, and the richer the 1% get, the more vulnerable they become.
So there is little to fear from diversity in income, just as there is little to fear from diversity in culture, religion and sexuality. All forms of diversity can seem a little scary at first, but stamping them out is almost always a tragic mistake. The very rich are different from you and me. Let’s celebrate that.