The income inequality issue will not go away. It is Team Obama’s main causus belli, and underpins all of their re-election strategy. But the progressive tenets of income inequality are a myth that has again been exposed, most recently using data from a Swedish study that is reported in the 9mar12 WSJ piece by Dr Allan Meltzer.
Citing that data Meltzer points out that the recent increases in the incomes of the developed countries’ top earners are easily explained away by the Great Doubling of the world’s competitive workforce that occurred after the Fall of the Wall. This affected the middle and lower echelons of workers and caused “the top 1% (to) gain relatively because they are less affected by the hordes of newly productive workers.”
This, of course, is denied by all on the Left ranging from their street twits (aka the recent occupiers) to their ‘honorables’ in Congress. As Meltzer points out –
The big error made by those on the left is to believe that redistribution permits the 99% or 90% to gain at the expense of top earners. In much current political discussion, this is taken as an unchallenged truth. It should not be. The lasting opportunity for the poor is better jobs produced by investments, many of which are financed by those who earn high incomes. It makes little sense to applaud the contribution to all of us made by the late Steve Jobs while favoring policies that reduce incentives for innovators and investors.
The mythically characterized income inequality is not a phenomenon peculiar to only America, but as seen in the nearby graphic filched from the WSJ, it is common to all advanced countries. And, as has long been argued in these pages, to ascribe the inequality as some sort of global capitalist plot to beggar the lower classes is simply inane.
Our system is democratic capitalism. In every national election, the public expresses its preference for taxation and redistribution. It is a democratic choice, not a plot controlled by one's most despised interest group. The much-maligned Congress is unable to pass a budget because it is elected by people who have conflicting ideas about taxes and redistribution. President Obama wants higher tax rates to pay for more redistribution now. The Republicans, recalling Ronald Reagan and Margaret Thatcher and much of the history of democratic capitalist countries, want lower tax rates and less regulation to bring higher growth and to help pay for some of the future health care and pensions promised to an aging population.