The term ‘income/wealth redistribution’ has returned to civil discourse with renewed vigor. Criticism of successful corporations and entrepreneurs has become a daily occurrence. Democratic socialists have sprung up all over the world calling for income redistribution. However, as we shall see below, the entire endeavor is misrepresented by willfully ignorant politicians, economists and civil society leaders.
To begin with, the term ‘income redistribution’ itself is ‘tendentious,’ as described by Thomas Sowell. Income is an end result of labor and production, earned by the individual worker or entrepreneur. Individuals do not pluck income from a money tree, they labor for it, either physically or intellectually. Prior to beginning labor, a worker willfully enters into an agreement with his employer as to the work to be done and the income to be earned. By entering into this agreement voluntarily, the worker acknowledges sufficient or acceptable levels of compensation for the labor to be provided.
An individual flipping burgers at McDonalds may be unhappy with the meager hourly wage but nevertheless took the job. If said individual is dissatisfied with his earnings, he is free to improve his skills and provide more value in order to merit higher wages. Income, whether earned as wages, profits or rent, is directly proportional to the value of product, service or property provided. A doctor ought to earn more than the burger flipper at McDonalds because of the time and resources he invested in developing the skills necessary to provide a scarce and valuable service. The same holds true for entrepreneurs and renters. Selling a scare and much needed product, say pharmaceuticals, justly earns more income than say, selling hot dogs. Likewise, renting out a prime property downtown justly earns more income than say, renting out a flat in the suburbs.
So, individuals voluntarily enter into agreements to earn a predetermined amount of income after rendering agreed services. Therefore, under such circumstances of free and voluntary exchange of labor or goods, these individuals cannot rightly envy others who earn more if their goods or services are valued more. In other words, the McDonalds burger flipper cannot justly envy the doctor for earning more because they both entered a voluntary agreement fully knowing the level of income they would receive. The pursuit of income redistribution is essentially going after the rightfully earned wealth and income of others who earned more by providing more valuable products and services to society.
Calls for income redistribution are hidden behind a veil of moral superiority and collectivism. The moral half of the argument goes: all individuals are entitled to the satisfaction of their needs and wants. If they do not have the resources to satisfy those needs, then it is incumbent upon society to take from the haves and give to the have nots. The argument is based on the false premise that all individuals are owed luxury and satisfaction by society. The moral argument is complimented by totalitarian collectivism: that society (or the select commissars) have the solemn responsibility to confiscate the rightfully earned income and wealth of others in order to fulfill the moral duty of providing luxury and satisfaction to those that want it – i.e. it is incumbent upon society to take from the productive individuals in order to provide for those individuals who fail to provide a valuable product or service to society.
As Thomas Sowell argues in Intellectuals and Society, “if there really were some pre-existing body of income or wealth, produced somehow—manna from heaven, as it were—then there would of course be a moral question as to how large a share each member of society should receive.”
But since there is no ready and waiting ‘pool of wealth or income’ to be taken from and shared, the only other solution is to increase production and therefore wealth and income – enlarging the pie, so to speak. However, increasing production or productivity has no place in the plans of the democratic socialists as that would entail ‘them’ having to work or contribute meaningfully. As moral superiors who preach, their sole job is ‘redistribution’ – deciding how much to take from A to give to B – of course pocketing a nice service fee (tax) for themselves in the process.
The entire income redistribution movement begins in the middle of the economic process, skipping the investment and production parts and going right to the end, where the fruits of investments and production (income and wealth) are. Of course, those who lack valuable skills blame other abstract factors for their failure to invest and participate in the production parts of the economic process. For there to be ‘income’ or ‘wealth’ to distribute, proportional investment and production must take place prior. Individuals who participate in the investment and production phase earn the resulting income and wealth. This income and wealth is first ‘distributed’ according to each participant’s level of contribution to investment and production. But then willful non-participants – who voluntarily chose not to participate in either investment or production – seek to take the income and redistribute to other non-participants.
Income redistribution is akin to a few comrades waiting at the finish line in order to redistribute the winnings of the productive individuals. Income redistribution is a farce masquerading as moral endeavor.
Yazid Suleiman is an economist and consultant. His areas of expertise in economics are banking, finance, macroeconomics, and international economics.