Extreme capitalism breeds extreme inequality and whereas America may continually be castigated for it, there is no doubt that it works. This is based on the fact that America has the largest economy in the world (Rank, 2016). This economy has been able to survive some of the greatest economic catastrophes in history yet has continued to thrive. However, inequality has continually been castigated based on the argument that it is immoral and ethically wrong to have so much wealth and suffering exist contemporaneously. The purveyors of this concept consider the best economic format to be based on equality through active or passive governmental control. This would enable an equal distribution of wealth, capital, and opportunity thus resulting in a negligible margin between the wealthiest and the poorest in the economy (Rank, 2016). The concept sounds great in theory but has failed miserably whenever it has been tried. Among the perfect example for this failure was the Democratic Kampuchea of former years and North Korea today. These two nations clearly show that both government control and equality are an anathema to economic growth and development be it to the rich or the poor.
The kind of inequality embodied by the American economic system is quite simple. The government provides a level playing ground for all economic players large and small, local or international. Anyone is free to come up with an economic idea whose legality or otherwise will be adjudged based on well-established rules and regulations. These rules and regulations include laws such as avoidance of contraband, tax evasion, intellectual property infringement and antitrust laws (Rank, 2016). Once the business concept is adjudged to be legal, the person who has developed it is free to market and sell it freely and rake in as much money and practicable. This makes it possible for one good idea to make a billion times more than another good idea within the same period of time. Equality, on the other hand, would mean a system where everyone works equally hard and smart and gets the same level of return in wages.
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This requires active government control where the government owns the economy, commerce, and intellectual property. A more passive level of control would consider approaches such a quota systems and taxation that encourage the equal growth of all players in a particular sector. The argument for equality as against inequality has always excelled in theory. It would be nice to have an America where each and every person has the same level of salary, drives a good car, has equal access to medical services, good food, and good accommodation. However these begs the question on if an attempt was made to make equality happen, there would still be good cars to be driven, good houses to live in and great healthcare institutions. In the same way, that theory has shown equality to be moral and ethical, history has judged equality to be impracticable from an economic perspective (Rank, 2016).
Institutional Control is Manifestly Unfair
History has shown that no matter how well-intentioned control is, the results thereof will always be manifestly unfair. Lack of control may breed a level of chaos but absolute control breed absolute chaos. Yet absolute control is necessary for the creation of economic equality. Pol Pot was a well-meaning graduate of the prestigious Engineering School of Information and Digital Technologies (EFREI) in Paris. He felt that the advent and growth of an elite in his native country Cambodia was the root cause of misery among the majority of the populace. He, therefore, established the Khmer Rouge regime that sought to establish absolute equality in Cambodia, which was then called Democratic Kampuchea (Pancheva, 2013). It was practically impossible to make everyone equally rich so Pol Pot tried to make everyone equally poor then enable them to grow rich together. The instruments of control went out of hand because they were premised on humans who harbor prejudices and personal interests. The positive intention of equality resulted in the negative outcome of genocides, persecution and economic ruin for the entire nation. By the time the experiment was realized to be a failure, 30% of the entire population was dead. The deaths were either caused by starvation as a consequence of economic ruin or the abuse of the absolute power necessary to make equality possible (Pancheva, 2013).
According to Morris, (2016) whenever some absolute power has been allowed to operate within any segment of US governance, the outcome has always been negative. A good example is the form of institutional racism that has been visited upon African-American girls in the school system through false-incrimination. This has resulted in the girls being ‘pushed out’ of school and in many cases into actual criminal activity. However, in a level playfield was put with no limitations for the girls, many of them would excel academically and become taxpayers as workers or entrepreneurs as opposed to tax-spenders through the justice department (Morris, 2016). It is clear from the above that absolute control, such as the one necessary to create equality never works and always backfires.
Economic Growth Relies on Inequality
American inequality is based on equal opportunity. Human beings are generally unequal either in mental capacity, physical capacities and even motivation. Further, some people have more luck than others while others begin with more intellectual and/or financial capital than others. The American economy does not encourage some people to be greater than others but does not stop them either. In this manner, inequality develops by itself. The American dream is based on the fact that the past does not have to inform the future. Therefore, every individual in America is given the opportunity to work hard and smart enough to excel economically (Tamny, 2015). A perfect example is Mark Zuckerberg, CEO, and founder of Facebook who was only born in 1984 and without any stockpiled family money. Through ingenuity, commitment and perhaps some good luck, Zuckerberg has risen to be one of the richest men globally. He has also built an internet-based empire that has literally changed the world and continues to pile billions of dollars into the American Economy actively and passively.
Had Zuckerberg been born in North Korea, chances are that he would still as much of a genius as he is today but perhaps better at working with farming tools than computers and earning less than a dollar a day. This is because, in an attempt to achieve quality, North Korea came up with a system known as Songbun (Baek & Park, 2014). Under this system, the government determines who the elite is and who the common man is. No matter how much an individual’s capacity is, their achievements will be limited by the government so as to maintain social equality among the Songbun groups. Indeed, the North Korean government through absolute control of both the populace and economic instruments has been able to achieve a form of equality among its populace. Except for the few elite, the North Korean people are generally equal (Baek & Park, 2014). But their equality is in poverty not in riches. As it is impossible to create an equally rich community, attempt to establish economic equality only result in equality in poverty. These give America a choice between being unequal but wealthy for being equal but extremely poor to the point of starving.
How Inequality Helps Even the Poor
The issue of having a healthy economy is superior to that of equality in an economy. A good economy is not built by an ordinary effort but rather continuous prodigies of exertions. To get a great economy, there is a need for an army of the likes of Zuckerberg, Bill Gates and Steve Jobs who are willing to create a lot out of almost nothing (Tamny, 2015). These exertions are only possible if the populace is aware that their efforts will be rewarded with success without active barriers from the government. The existence of inequality in America has enabled millions of individuals to perform prodigies of entrepreneurship and innovation in the public and private sector. These individuals may have become billionaires but their efforts have also helped millions. The taxes paid by the billionaires in America have enabled the provision of social welfare, community health, and other social amenities (Tamny, 2015).
Further, corporate America has provided direct jobs to billions and indirect jobs to tens of millions (Tamny, 2015). The salary of the CEO may be unfair when compared to that of the storekeeper but at least the CEO keeps the storekeeper employed. This is better than if the CEO and the storekeeper were equally unemployed and equally absolutely poor. Further, the idea developed by corporate America that is enabled by inequality has improved the lives and economic situations of all. The existence of internet connectivity through the mobile phone has aided even small entrepreneurs in America. The poor need the rich to remain rich, hence the need for inequality. Tamny (2015) quotes former President Obama to have said that the best way to spread the wealth is to let it remain in the control of the wealthy.
North Korea and Cambodia are two great historical examples of exactly how not to run an economy. As shown above, the secret for the astronomical failure of the two economies was the pursuit of equality. This is as compared with the American economy, which in all fairness is among the most unequal in the world. Yet even the poorest in America would be considered as affluent in North Korea. The kind of inequality found in America is based on equality of opportunity and letting the zenith of every individual be determined by their individual capabilities. Through this, some have risen to be very great, hence the inequality but this greatness has had a profound positive impact on all, including the poor. The very rich provide employment, pay taxes and also provide opportunities for the poor thus making them less poor. On the other hand, absolute equality is achieved through absolute dictatorship and leads to absolute poverty.
Tamny, J. (2015). Popular Economics: What the Rolling Stones, Downton Abbey, and LeBron James Can Teach You about Economics . Washington, D.C.: Regnery Publishing
Morris, M. W. (2016). Pushout: the criminalization of Black girls in schools . New York: The New Press.
Rank, M. (2016). Chasing the American dream: understanding what shapes our fortunes . Oxford University Press.
Baek, J., & Park, J. (2014). The power of illicit networks in the world's most isolated country. Kennedy School Review , 14 , 47
Pancheva, D. (2013). How applicable is Bauman’s thesis of modernity in the case of the Khmer Rouge regime in Cambodia? Retrieved from http://www.academia.edu/12296808/Khmer_Rouge_and_Modernity