In Praise of Capitalist Inequality

For several weeks now, the Occupy Wall Street protestors in New York City and around the country have been demanding “economic justice,” which includes a mishmash of leftist goals including universal health care, forgiveness of student loan debt, and higher taxes on the wealthy. To the extent the OWS protestors have a unifying theme, it’s that capitalism is bad and that redistributing wealth to reduce “inequality” is good.

The Irish socialist playwright George Bernard Shaw once wrote, “A government that robs Peter to pay Paul can always depend on the support of Paul.” The Occupy Wall Street protestors demanding government redistribution of wealth from the richest Americans (“the 1%”) to themselves (“the 99%”) would certainly agree. But as some of them are starting to learn, if their ideas were actually put into practice they’d end up being the Peters, not the Pauls.

Already, some of the OWS protestors are finding their ideas coming back to bite them. Recently, OWS kitchen staff staged a mini-revolt because they were tired of working 18-hour days to prepare meals for “freeloaders.” Another OWS protestor was upset that someone had stolen her $5500 Macintosh computer. Redistributing wealth suddenly became a lot less appealing when one was the victim of the “redistribution,” rather than the recipient.

The OWS protestors are learning first hand about something that novelist Ayn Rand discussed more than 50 years ago in Atlas Shrugged, in her vignette about the Twentieth Century Motor Company. In the novel, the new owners of the factory decided to run the company according to the supposedly noble precept of “From each according to his ability, to each according to his need.” Workers would be assigned duties based according to their expected ability -- but paid according to how much money they needed, rather than how much they produced.

In theory, this would result in a more equitable distribution of wealth. But in practice, it meant the men of greater ability worked longer hours without hope of reward. Hence, the more competent workers either left or deliberately underperformed. In contrast, the more irresponsible workers received more money because of their “need” -- regardless of how hard they worked. Of course, eventually the company went bankrupt.

But Rand’s lesson was not merely that such a model was economically unsustainable. She also made a deeper moral point about the motivations of the workers who supported this scheme. As one of the characters in the story said:

There wasn’t a man rich and smart enough but that he didn’t think that somebody was richer and smarter, and this plan would give him a share of his better’s wealth and brain. But while he was thinking that he’d get unearned benefits from the men above, he forgot about the men below who’d get unearned benefits, too. He forgot about all his inferiors who’d rush to drain him just as he hoped to drain his superiors. The worker who liked the idea that his need entitled him to a limousine like his boss’s, forgot that every bum and beggar on earth would come howling that their need entitled them to an icebox like his own.