San Juan Mountains

San Juan Mountains
San Juan Mountains: Grenadier Range

Friday, November 18, 2016

Income Inequality Is Good For The Poor

What am I doing?  Is the title to today's post some sort of cruel joke designed to hurt the tender feelings of people who call themselves poor?  How could I be so harsh and insensitive to the hardships suffered by the self-identified poor people in this country at the hands of the evil rich?  Even worse, how could I make such a blatantly wrong assertion when I allege that income inequality is good for the poor?  I will answer that last rhetorical question.  I guess that means it was not actually a rhetorical question.  I allege that income inequality is good for the poor because it is true.  No, that is not a tautology.  Let me prove it for you here today.
Ludwig von Mises is the world's second greatest economist.  I bet you have never heard of him, have you?  In case you are wondering, the world's greatest economist is Murray Rothbard.  I bet you have never heard of him either.  No matter.  Both men were expositors of the Austrian school of economics.  The Austrian school, in contrast to the much better known Keynesian and Monetarist (Milton Friedman) schools, are generally not permitted on college campuses.  Their ideas are not permitted in civil discourse.  Their members have to meet in dark, aromatically smoke filled rooms where no one else can see or hear them.  Not one in a hundred economics degrees is held by a person who would identify as an Austrian.  There is a good reason for this enormous unpopularity.  In fact, there are several good reasons for it.  First, the truth is always unpopular. Remember the Welsh rule which states, "That which is popular is almost always wrong."  People hate truth because it proves they are wrong about most of what they believe.  If you want to be popular, and every politician knows this principle well, tell lots of lies.  Second, Austrian economics is unique among economic schools of thought in that it sees government intervention in the market place as always being evil.  Given the fact that most of the idolatrous citizens of the Socialist Democracy of Amerika worship the god of civil government, it is not hard to understand how folks who do not bow down to the throne would be blackballed.
Allow me to quote Mises on income inequality.  His insights are brilliant and brilliantly true, although almost universally ignored.  He wrote, "The market economy - capitalism - is based on private ownership of the material means of production and private entrepreneurship.  The consumers, by their buying or abstention from buying, ultimately determine what should be produced and in what quantity and quality.  They render profitable the affairs of those businessmen who best comply with their wishes and unprofitable the affairs of those who do not produce what they are asking for most urgently.  Profits convey control of the factors of production into the hands of those who are employing them for the best possible satisfaction of the most urgent needs of the consumers, and losses withdraw them from the control of the inefficient businessman.  In a market economy not sabotaged by the government the owners of property are mandataries of the consumers as it were.  On the market a daily repeated plebiscite determines who should own what and how much.  It is the consumers who make some people rich and other people penniless." Did you get all that?  I emphasized the last sentence in bold print for a reason.  If you did not get it, I will explain it for you.
Although ignorant people, which is nothing to be ashamed of, and socialists, which is definitely something to be ashamed of, deny this truth, consumers are always in control of everything that happens in the economy.  Try as he might, a businessman will never make a profit if he is producing things consumers do not want to purchase.  I could go into business tomorrow producing toothpicks with my name carved into them but it is quite likely that no one, even my friends, would be willing to part with some of their cash for what I have produced.  Conversely, consumers reward those who produce things they want with profits.  Businessmen who produce lots and lots of things that lots and lots of people want end up making lots and lots of cash.  They do not make the cash because they are evil. They do not become rich because they are evil. They end up in the top 1% of the income population exclusively because they produce things that millions of people want to buy.
Mises goes on, "Inequality of wealth and incomes is an essential feature of the market economy.  It is the implement that makes the consumers supreme in giving them the power to force all those engaged in production to comply with their orders.  It forces all those engaged in production to the utmost exertion in the service of the consumers.  It makes competition work.  He who best serves the consumers profits most and accumulates riches."  I emphasized that last sentence as well.  It is a lesson everyone should learn and a truth everyone should acknowledge.  How sad it is when millions of stupid people petition their civil authorities to empower them to control the behavior of businessmen.  They don't realize that they already hold all the power.  If you do not like what a business produces, then don't buy the product.  If enough of you agree that business will soon be out of business, and all without a government regulatory body coming along and forcing them out of business.  Businesses that do not bend to the will of the consumers will soon be out of business.  Conversely, and equally true, businesses that do not bend to the will of the government are in business because they are serving the consumers but under attack because special interest groups in government want to suppress their activities.  Who loses in that situation?  Although she does not realize it, it is the consumer who always loses when government gets involved in business.
Mises concludes, "Bigness in business does not impair, but improves the conditions of the rest of the people.  The millionaires are acquiring their fortunes in supplying the many with articles that were previously beyond their reach.  If laws had prevented them from getting rich, the average American household would have to forgo many of the gadgets and facilities that are today its normal equipment.  Inequality of wealth and incomes is the cause of the masses' well being, not the cause of anybody's distress."  Do you understand why I emphasized that last sentence?  I certainly hope so.  It explains why income inequality is good for all of us, including the poor. 
Although Misses' statements are so obviously true, why do so many people categorically reject them?  The answer to that is simple.  Men are sinful.  Envy is one of the most vile of sins and it is on display every single day in the economic world.  Even though men are provided with goods and services beyond their imaginations, they turn around and bite the hand that feeds them because they are envious of the wealth that accrues to those who provide goods and services for them.  Career politicians are shrewd enough to know that they can exploit the sinful envy of mankind and they do so with regularity.  Promising to equalize incomes because the rich have immorally stolen the wealth that is rightfully theirs, career politicians get elected by committing themselves to socialist programs designed to hurt everyone but themselves.  Some of them, like Bernie Sanders and Elizabeth Warren, have been repeating their lies about wealth distribution for so long I believe they have actually come to believe them.  God calls that giving them over to their reprobate minds and it is an act of judgment that He brings upon the vilest of sinners.  Enough said.


  1. Welshy,

    Just to let you know, if you manufacture toothpicks with your name on them I will buy them, but only if they are banana flavored. I've been searching for decades for banana flavored toothpicks and have concluded that none exist.

    Lancelot Link
    A.P.E Secret Chimp

    1. Mr. Link:
      Good to hear from you. I looked for you in the jungles of Hawaii but then someone told me that chimps are not indigenous to Hawaii. I don't know what indigenous means but I suspected he was trying to tell me I would not find you there. There was an unusually hairy fellow at the beach one day but he turned out to be just a Welshman.
      I will take your exhortation to start a toothpick company under advisement. Judging by the state of dental health evidenced in most simians I believe there could be quite a market for them.