PJTV’s Bill Whittle uses a great illustration that I’m about to shamelessly rip off. Imagine that you work in an office, occupying one of many cubicles. One afternoon, the boss calls you into his office and tells you that you’ve done such an incredible job that the company has decided to provide you with a $5,000 bonus. In that moment, how would you feel? Pretty darn good, right? Your day just got $5000 brighter! Your mind might go straight to what you could do with the money, the vacation you could take, the bills you could pay, the possible boost to your savings or investment accounts. You’d probably swell with pride at the recognition you’ve earned and head out to tell a friend and co-worker the great news. He would listen intently, then smile and tell you that he and everyone else earned a bonus too — only theirs is $10,000.
Now how do you feel? What only a moment prior was overflowing joy and celebration instantly metastasizes into something wholly different. You actually feel worse than you did before getting an extra $5000. Instead of thinking about what you can do with the money you got, you think of what you could have done with the money everyone else got. From a dark place, you acknowledge that you’d rather see no one receive a bonus — including yourself — than see others get more than you.
There’s something about the human heart which fosters such envy, an emotion so powerful that it can drive us to work against our own interests in pursuit of equity. It’s better that everyone get the same, even if the same is nothing, than for some people to get more than others. So that dark corner of our heart proclaims.
Speaking to such envy within our souls, the above video concisely makes the Left’s case against wealth inequality. Even the term “wealth inequality” provokes the green-eyed monster. Inequality connotes a lack of fairness, an injustice, something wrong which properly ought to be set right. The video seizes upon that sense of unfairness to advocate for some unspoken solution — not “all the way to socialism,” but certainly in that direction.
The lynchpin of the piece is a subjective “ideal” established by an unnamed Harvard business professor and economist who asked 5,000 Americans how they felt wealth in the country ought to be distributed. Before considering any further analysis, that methodology ought to signal a fatal flaw. Rather than establishing objective criteria by which to judge how wealth ought to be distributed, we’re looking to whim to set a wholly arbitrary “ideal.”
From there, the video’s creator seeks to shock us by comparing real wealth distribution to the public’s imagination. The 80% of Americans who earn the least earn only 7% of the total income in the country, while the 1% of Occupy bane bring home 24% of the national income. That’s obscene, right?
Of course, missing from the video’s analysis is any consideration of how people come to earn their wealth. The narrator briefly acknowledges the role of productivity in the economy and how incentives must be maintained to foster it. Even so, he adopts a condescending tone which suggests all that free market stuff might be nonsense. Meanwhile, the fundamental concept of value goes largely ignored.
To the extent the narrator does evoke value, he expresses the labor theory which perceives value as a measure of effort. According to the labor theory of value, people should be compensated for working hard, regardless of whether their work produces anything of use to anyone willing to pay for it. The narrator expresses this when addressing the difference in income between a CEO and an average corporate employee.
I’m sure all of these people have worked very hard for their money. But do you really believe that the CEO is working 380 times harder than his average employee – not his lowest paid employee, not the janitor, but the average earner in his company?
That question proceeds from the assumption that earning more can be justified only if someone works harder. Surely, any given CEO probably doesn’t work 380 times harder than his average employee. But it shouldn’t surprise anyone to learn a CEO produces 380 times more value than his average employee. What the CEO does, regardless of how much effort he expends to do it, commands a higher price in the market than what his average employee does. Let’s be clear what we mean by that. Someone — a board of directors — is willing to pay the CEO a certain amount for what he does, because they judge the transaction to be worthwhile. Virtually anyone can sweep a floor. A whole lot of people can pilot a cubicle. A slim few have what it takes to head a major corporation. We’re talking about simple supply and demand, the same forces which result in multi-million dollar contracts to professionally throw a ball.
The labor theory of value, a lynchpin of leftist ideology widely accepted throughout academia, much of the media, and our popular culture, fails the most cursory of tests. If a CEO were not worth 380 times more than his average employee, why would his board of directors pay him that much? No one is holding a gun to anyone’s head in this scenario. No one is forced to work or forced to pay. Market transactions rest upon consent and mutual benefit. So why would a board consent to pay a CEO one penny more than they are worth?
What many folks seem to find obscene is the notion that one human being could be worth 380 times more than another. Yet, we’re talking about economic value here, not the value of one life compared to another. We who defend the market are not saying a CEO’s life has greater intrinsic value than his employees’, or that one should be granted legal privileges at the expense of the other. In fact, that’s the Left’s argument! They’re the one’s saying some people — the 99% — ought to be granted privileges at the expense of others. We’re saying every individual gets to keep what they earn, whether they earn $10,000 per year or $3,800,000.
In the final analysis, that’s the concept folks concerned with wealth inequality wish to avoid — earning. Let’s say three different prospectors set out to find gold, but only one actually finds it. Applying the labor theory of value, each prospector would be entitled to compensation on account of their effort, regardless of the fact that only one of them was successful. Would that truly be fair? Would the unproductive prospectors have actually earned pay?
True value isn’t defined by effort. True value is defined by the mind. Stephen King and I can put the same effort into writing a novel. That doesn’t mean we will each create something which holds the same value. One work will likely be better than the other. In the admittedly unlikely scenario where King authors a hit and my manuscript languishes in obscurity, has King taken something from me? Have I been somehow cheated? Applying the labor theory of value, the answer would tend toward yes.
Wealth inequality should not concern us unless it results from an inequality of rights. Does the top 1% pull in 24% of the nation’s income because they earn it, or because government violates individual rights in such a way that those with favored status operate from an unjust advantage? That’s a question worth investigating, and a point of potential alliance between grassroots activists across the political spectrum. Perhaps wealth distribution in this country would look more like the “ideal” imagined by Americans if individual rights were protected and individual judgment dominated the market.