Can economic equality be a reality?

Ritu Bhandari Words of Freedom Leave a Comment

In our last Weekly Your View, we asked whether it was possible to achieve economic equality for all citizens of our country. Of the 21 poll takers 5 % of you thought that it was possible to achieve economic equality while the other 86 % thought that it would be an impossible proposition. One of you felt that economic equality is a myth while another felt that impossibility to achieve it should not be a reason for us to stop striving towards it.

When we talk about equality, it remains open ended unless we specify in what respect we are mentioning it. Economic equality refers to an imaginary situation in which all the inhabitants of a country or region are equally wealthy. Whether the proposition is feasible and sensible has been a major point of contention between free market proponents and socialist thinkers. But the questions involved are really very simple. Is there a need to make everyone equal? Will it make life better for all of us? If yes, then is it possible to achieve economic equality among all?

Beginning in the 19th century, many philosophers have contended that it is wrong for the people of the world to be unequal in terms of power, wealth and resources, and that life prospects are unevenly distributed. They started propagating the idea of making everyone economically equal. These thinkers divided the world into two groups- the “haves” and “have nots”, referring to rich and poor as evil and needy. These divisive terms continue to be used to create the perception that acquiring wealth is an unvirtuous activity. As a result governance systems whose policies are aimed at forcefully creating economic equality have come to be regarded as ideal by most of the general public. Free markets, which reward the innovative, courageous and hardworking more than the less enterprising have come to be regarded as unjust systems that favour just a few that possess creativity, ideas and skills. This then became the justification for the demand that governments interfere in the economic activities of the people to promote economic equality by controlling market forces. In other words, the government would impose trade licenses and regulate business activities to impede the growth of the enterprising so that they do not become wealthier than the others.

Another doltish yet deceptively fair-minded idea to achieve economic equality is redistribution. Governments employ such ‘welfare’ but in fact unfair schemes as subsidy, free service and unemployment allowance to achieve redistribution of wealth. Since there is always something that anybody would like to have free of cost, and since taxpayers who fund these schemes are generally fewer than the beneficiaries, welfare schemes are populist and hence favourite of the politicians. It has become a common practice for governments to revolve all their policies around redistribution. And for the poor to consider themselves a responsibility of the state.

Unfortunately, perhaps because of the good intention to help the poor, many people are yet to realize that the idea that economic equality can be created is against natural order. Many who realize it fail to identify its presence in welfare schemes. Redistribution acts as a discouragement to entrepreneurs and innovators, who are the real engine behind economic progress, while simultaneously encouraging dependency of the people on the government, thus leading to the inevitable outcome of a failed economy. Advocates of redistribution may realize the inherent unfair element in the policy but justify the idea as a necessary short-term problem that will be solved once the poor start earning as much as the rich i.e once everyone starts earning more or less the same amount of money. It is easy to imagine the enormity of this proposition’s disingenuousness by what the corollary suggests: soon there will be no man who is either smarter or stronger or healthier or more skilled or more courageous or more talented or in a different circumstance than any other man.

One need look no further than among one’s social circle to understand that no two people are similar and no further than history to understand that attempts to make everyone equal economically in fact promotes inequality of another kind: of reward and punishment for hard work and indolence. It is only when China replaced its goal for equality with goal for growth did it improve the standard of life for its poor. If we want our country to progress and that progress to benefit the poor, our focus should be on creating more wealth, which in turn leads to more consumption and more employment, not less. An economy that is growing lifts more people out of poverty than a bully who takes from the rich and gives to the poor. After all, the resources of the rich are not infinite. The equalities that we should ensure are equality before law and equality of opportunity, not equality of outcome. In fact, it is economic inequalities that are strong incentives for people to produce more and earn more.

In the words of Nobel laureate Milton Friedman:

‘A society that puts equality—in the sense of equality of outcome—ahead of freedom will end up with neither equality nor freedom.… On the other hand, a society that puts freedom first will, as a happy by-product, end up with both greater freedom and greater equality.’

 -Ritu Bhandari

Research Assistant – Education @ India Institute

The poll referred to in the first paragraph is our Saturday Poll 32 that was posted on our social media on 5th June 2014.