Many of today’s pro-socialist politicians, and their supporters, talk about – actually they complain about – income inequality between what they deem to be the “haves” versus the “have nots,” inherent in the free-market capitalist system, which is why they support socialism, which they believe will help to get rid of that disparity.
But, I would argue that this argument is based, wholly or partially, on a flawed perception of where that inequality comes from. This disparity, in reality, comes from the fact that each individual is unique, and each individual has the freedom to make their own choices in life. And those choices that each individual makes is what ultimately results in those inequalities. Let me help you understand this perspective of income inequality by giving you a story about two fictional coworkers named Bob and Matt.
Bob and Matt – a Story of Two Coworkers
Bob and Matt, like I just said, are coworkers. They work at the same company, and make the same hourly pay – by this standard, there is no disparity between the two fellows. But, this is also where things start to be different between Bob and Matt, given their free will, and the freedom they get in a free society to decide what they want to do with their own lives and their own time.
You see, Bob loves to play video games with his free time. Because of this, he works only the basic 40 hours that he needs to work, and no more – that way he can get home to start playing endless hours of whatever his favorite video game is at the time.
Compare that to his coworker Matt – he is working as much overtime as he can get in order to save up for a better car to replace his 20-year-old car, then a down payment for a home, and then, once he gets his home, to pay off his mortgage as fast as he can. He typically works about 60 hours a week, if not more.
From this perspective, Bob’s and Matt’s well-being start to diverge from each other. Because Matt is choosing to work more hours than Bob, he becomes, over time, better off than his co-worker. Obviously there is a disparity there between those two co-workers at this point. Would you argue that this disparity is proof of injustice? I certainly wouldn’t! Bob could work more hours, and make more money, and be on par with Matt if he wanted to, but because he is given the freedom to make his own choices, he chooses to work less hours, and make less money, so that he has more time to devote to his passion, which is to play video games.
Now, you could argue that the government could get rid of that disparity by banning any overtime for Matt, or by requiring that Bob works just as much overtime as Matt, but in both of these cases, doesn’t that mean that we’re taking away Bob’s and Matt’s freedom to make their own choices? Either we’re taking away Matt’s ability to become more prosperous as a result of his own hard work, or we’re taking away Bob’s freedom to enjoy playing video games as much as he wants to.
I could easily argue that by taking away people’s freedom to make their own choices and decisions in their life, and having a government that makes those decisions for you, that we are delving into the realm of tyranny and despotism. Do you want the freedom to make your own decisions in life, or would prefer the government telling you what you can and cannot do? Wouldn’t that be the definition of tyranny?
But let’s move further on with our story of Bob and Matt.
You see, while Matt is busy working as much overtime as he can get, and handling his finances in a wise, intelligent, and disciplined manner, such as sticking to a budget, Bob is being foolish and stupid with his spending. He regularly spends more money than he makes, with no thought for any future consequences he may bring onto himself, and gets deep into debt.
Matt, over time, as he planned, saves up and buys a car without needing to go into debt to get it. Like I said before, he builds up good credit, and saves up money for a down payment on a house. Once he gets a house, he uses all his extra money from all his overtime to pay down the principal on his mortgage, and pays off his mortgage after seven years. Then, he saves up all his overtime money, and starts to build up a substantial savings and retirement nest egg.
After twelve years, Bob is deep in debt, broke, and even got evicted from his apartment – not a house – for lack of payment. He’s sleeping at nights in his car wondering what went wrong with his life. He looks over and sees how well-off Matt is, and gets really, really angry and envious. “That’s not fair! How come Matt gets it all and I get nothing?“
So, Bob thinks it’s not fair that Matt appears to get “everything” while he, Bob, gets “nothing.” This poses a question: is it actually unfair that Matt is so much better off than now-destitute Bob? I would have to argue that there’s no unfairness in this disparity at all – both Bob and Matt were working at the same hourly wage, but Bob made bad decisions with his finances all while Matt was working harder and longer and practicing good financial decisions. The only difference between the two individuals are the personal choices both of them made out of their own free will, and the consequences that came as a result of those choices. In this case, to get rid of the disparity between these two guys, we would need to take away both of these guys’ freedom to make their own free choices, and then act on their own choices. Do we really want to go that route? That would mean replacing a reality full of freedom with a reality where people are not allowed to make their own choices – you know, the earmark of tyranny.
It’s at this point that Bob becomes so angry, so disillusioned, that he becomes irrationally envious of Matt’s successes and well-being. He makes the false claim, which he actually believes, that “The reason I don’t have anything is because Matt took it all! The reason Matt has so much stuff is because he took it all from me!“
Obviously this logic is a bunch of rubbish. Wealth is not static; wealth is constantly being created as a result of our hard work. If Bob had worked as much as Matt did, and made the same wise and disciplined financial decisions as Matt, he would be just as well-off as Matt, but he doesn’t see it that way. Bob couldn’t see the truth if it was six inches from his face.
His irrationally-motivated envy causes him to support politicians that are socialist, who believe in taking from the “haves,” like Matt, and giving to the “have nots,” like Bob. These politicians claim that they are bringing “economic justice” to society. But where’s the justice in taking away from someone who made good choices, and worked very hard to be in the good place they are in financially, in order to give to someone who’s in a terrible financial place because of their bad financial decisions and because they weren’t willing to work hard? I wouldn’t call that justice at all, but a miscarriage of justice being perpetrated on those who worked hard to get to where they’re at. You’re actually punishing the prosperous for their hard work and due diligence, while rewarding the other people for making bad decisions. That’s justice? Is it good for society? I certainly don’t think so. Here’s why:
I believe that one of the best ways to bring more well-being and prosperity to society, and reduce destitution and want, is through a proper set of incentives. People should be rewarded for their own hard work and financially intelligent decisions, because that is what makes them prosperous. People should be penalized for making bad financial decisions that end up hurting themselves, because only good financial decisions will improve their own well-being, quality of life, and level of prosperity. Such a system of incentives, or disincentives, will do more to bring prosperity and improved well-being to society than practically anything else.
Of course, this is the ingeniousness of what we refer to in today’s lingo as the free-market capitalist system, which we presently have in place. If truth be told, we don’t have to put actual fines or punishments in place in order to penalize people who have made bad financial decisions – all we have to do is let them suffer from their own bad decisions and mistakes, and hope they learn from their own mistakes and turn things around for themselves, all without the government actually getting involved. As for the prosperous people, all we have to do is back off and let them be rewarded by the effects of their own hard work and good financial-decision-making. It’s basically a government hands-off approach that works best – it provides the highest amount of freedom for individuals, while allowing them to be rewarded for their hard work and good financial decisions; or get “naturally” penalized for being lazy or making bad financial decisions.
But Wait, There’s More!
You may think this is the end of the story, but that’s where you’re wrong. The disparity between Bob and Matt gets worse…waaaay worse.
You see, Matt sees an excellent opportunity to go into business for himself. He sees a need in his community that he could provide, and which improves the quality of their lives. He uses the saving he built up from his years of hard work to start a small manufacturing firm that produces a “widget” for those in his local community. But so many people enjoy his “widget” because of how it improves the quality of their lives that word quickly spreads, and Matt’s business grows and grows to keep up with this growing demand for his product. After several years, Matt’s business has exploded, and he sells tens of millions of his “widgets” around the world.
Matt’s success is due mainly to the fact that he was able to empathize with those around him, see a need that he could meet, and then meet that need with an appropriate product. If people didn’t need his “widget,” they wouldn’t buy it and Matt’s business would have come to an end. Matt’s success is due chiefly because his product improves the quality of people’s lives, and they see that value in his product.
Matt’s business, at this point, also provides work for thousands of people, which allows them, if they so decide, to go down the same path to prosperity that Matt went down. These workers, because they have a good job at Matt’s business, now have the ability to make an income which allows them to pay their bills, provide housing for themselves and their families, and put food on their tables, among other things.
Where’s the Moral Repugnancy?
Now Bob is really, really pop-a-blood-vessel furious when he compares how down-and-out he is to how extremely wealthy Matt has now become. There is now an extremely large wealth disparity between himself and Matt. He agrees with, and supports, the socialist politicians who look at this extreme disparity, and claim it to be an injustice. In fact, these socialists look at where Matt is now and see it as something that is morally repugnant.
Of course, this begs the question: Where exactly is the moral repugnancy located in this situation? Matt’s “widget” improves the quality of life for millions of people around the globe. Is that morally repugnant? I don’t think so. How could it possibly be morally repugnant to figure out a way to improve people’s lives?
How about the fact that he provides employment for thousands of people – is that the morally repugnant part? How could it be? Are you saying that it’s morally wrong for Matt to provide meaningful work to people, which allows them to take care of themselves and their families? That’s morally repugnant? You’ve got to be kidding me! I could easily argue that creating a situation where you allow lots of people to have a good life, a quality life, is something you do when you’re trying to be morally good.
The only thing left to complain about is the fact that Matt is now extremely wealthy, which means there is now a very large wealth disparity between him and most people. Could this possibly be the thing that socialists believe is morally repugnant?
If it is, before you come to a conclusion, I want you to think about something. Matt developed a “widget” that improved people’s lives in some way, which could be easily argued to be a good thing. His business provides meaningful work for many people, which allows them to take care of themselves and their families, so that they are not destitute or in want of anything – this can also be easily argued to be a good thing. From this standpoint, it could be argued that Matt’s level of wealth is basically – based on how free market capitalism works – it’s a reward, an incentive, for providing something of quality that improves people’s lives.
Remember, socialists campaign on the claim that it will improve people’s lives, and their well-being, even though a thorough analysis of socialist policies by any reasonable person will prove otherwise. Free-market capitalism is based on the idea that if you think you have an idea for a product or service that improves people’s well-being, go ahead and bring it to the free market, and let people decide for themselves whether it makes their lives better. If it does, you’ll personally be rewarded by becoming better off financially; if it doesn’t, you’ll find out soon enough when your own funds dry out.
From this vantage point, the best way to improve people’s lives is to provide some kind of incentive or reward system that motivates people to find ways that improve the quality of other people’s lives. If they do indeed create products or services that improve the quality of people’s lives, they will be personally rewarded by having the quality of their lives improved substantially. In the process, many other people are able to acquire jobs that allows them to have a good-quality life – assuming they make good financial decisions like Matt, and not bad financial decisions like Bob – of course, you have to let each person have the freedom to decide for themselves.
What socialism does is it takes away that incentive to find avenues to improve the quality of other people’s lives. And if that’s the case, how can socialism claim that it works to improve people’s lives when it takes away the incentives to do just that? If you claim that you have a strategy to improve people’s lives, but take away all the incentives, all the rewards, all the motivations that do just that, won’t you be working against yourself? History answers that question with a very loud and tragic and profound “YES!!!” In fact, nothing in the entirety of human history has caused more misery, more devastation, more poverty, more suffering, and more death than socialism has wrought on humankind throughout the twentieth century. And that’s not morally repugnant? What? But, let’s get back on topic.
Think about this: if socialists have their way, Matt would be taxed out the wazoo, which would mean he wouldn’t have ever had the ability to save up enough funds to eventually start his own business, because the government would have taken away most of that extra money from him – from all that overtime he worked – in the form of high taxes. In that case, society, and the world, would be absent the widget Matt would have brought to market, but didn’t, because under socialism, he would have no incentive to have done so, but only penalized for doing so.
To make matters worse, the high taxation rates probably would have put Matt in a higher tax bracket had he worked overtime, thus rendering any increase in his paychecks null and void, as all that extra money he made from working overtime gets taken away in the form of higher taxes. In other words, Matt would have no motivation to work extra hours to improve his own well-being, since he wouldn’t see any increase in his own well-being. Socialism takes away the incentives to make the kind of personal choices that improve one’s well-being and level of prosperity – you know, the kind of good choices you really want people to make if you want widespread prosperity in a society; instead, it penalizes people for making what should be the right choices, and rewards people for making the wrong choices. How does that kind of setup do anything at all to help cause widespread prosperity? It doesn’t! It works against it.
On the other hand, let’s say that Matt was still able to start and grow his business. The high level of taxes his business now has to pay to support socialist programs and big government, should the socialists take power, would reduce the amount of money his company had, forcing them to hire less people, because they now have less funds to pay for workers than they did before. If society benefits from having a multitude of jobs available, wouldn’t the reduction in available jobs mean that less people are now capable of taking care of themselves and their families? And isn’t a multitude of available jobs the catalyst for driving up wages for working people by making sure the demand for workers is higher than the supply of workers? If so, then higher taxes indirectly helps to lower workers’ wages, and increase unemployment rates.
If all of this are the effects of socialist policies and high-tax schemes, how could any of this be considered good for society? This scheme, not free-market capitalism, seems to me to be the thing that is morally repugnant.
Let me say this again: If we really want widespread prosperity in our country, we first have to reward people for making good decisions that lead to prosperity, and penalize people for making bad decisions that lead to poverty and destitution, because that kind of an incentivization structure really does lead to more widespread prosperity and improved well-being across the face of the country. And the best way to do that? Let people reap the consequences of their own decisions they made with their own free will. Government doesn’t even have to get involved here – just back off and let people reap their own consequences.
On top of that, we need incentives that motivate inventors and investors to bring new products and services onto the market, which improve the quality of people’s lives, while providing a livelihood for many people, which further improves the level of prosperity and well-being of all members of society. Getting rich by providing all that seems like a good incentivization plan, and if that’s the case, we shouldn’t be envious of those people, but happy for their successes, and appreciate the improved quality their product or service brings to our lives.
Enter the Racial Component
All to often, in today’s America, well-off Matt is white, and down-and-out Bob is black. It happens so often, in fact, that some experts, and many black leaders, speculate that racism is alive and well in the country, or it wouldn’t be that way. But there’s a very big problem with that argument. Yes, it’s true that many times Bob is black, and Matt is white, but there are also an increasing number of realities where Matt is black.
All too often black Bob looks around, and thinks that the reason he’s down-and-out is because he’s black. He complains about “rampant racism,” and in fact uses that as his excuse to continue making the same old bad decisions that leave him in that sorry state.
White Matt has a cultural background where he’s taught that he needs to be responsible for his own decisions, and that he shouldn’t be dependent on others, but carry his own weight. He was taught that how he handles his money will either improve or worsen his conditions depending on the personal choices he makes. He has a fierce level of independence and self-sufficiency that black Bob was never taught.
But then again, like I said, there are a growing number of situations where Matt is black – that is, there are a growing number of prosperous and successful black people. In this case, black Matt is not using his race as an excuse to practice bad financial decision-making, but is seizing all the opportunities that are available before him to work hard and make good financial decisions, which allows him to become prosperous. There are some things, of course, that he may not be able to change, but he focuses on the things that are within his abilities to control. And if that’s the case, that really means the racism argument is dead, and the only thing that argument can really do is hinder a black person’s well-being rather than work towards it. Heck, one black man out there, through his own hard work, dedication, and good choices, ended up holding the most powerful and prominent job position in the entire country for eight years! If he can do that, there’s nothing black Matt can’t do these days.
So, if you’re black, consider going down Matt’s route, and avoid Bob’s route like the plague.
Summary
So, I shared with you a little fictional story about two co-workers, Bob and Matt, and how their own freedom to make their own choices caused their paths, and their well-beings to diverge. And all of this was about helping you to understand that wealth and income disparities have to do with our uniqueness from each other, our freedom to make our own choices, and the consequences of making those personal choices. Claiming that disparity as an injustice is based on flawed thinking.
I entered into the story the differences between socialism and free-market capitalism, and incentives and rewards each system brings to the table, and their effects. I wanted to help you understand that socialism really takes away our freedom to make our own choices, and free-market capitalism is really about providing an incentive and reward system that works around our personal choices for the betterment of society in general. Socialism may sound great and wonderful to all the Bob’s out there that make bad choices who become envious of all the Matt’s out there making good choices, but in the end, socialism takes away all the incentives and rewards that lead to a more prosperous society, and replaces those rewards with penalties – now that really can’t be good for society’s well-being, now can it? Seriously, think about it!
Back to Bob
So, what happened to Bob in the end? Well, he finally came around. He said to himself, “I’ve got to stop blaming other people for my own stupid mistakes. It’s no one’s fault but my own. I’ve got to stop expecting others to make my life better. Only I can do that.”
After this revelation, Bob, now in his mid-forties, turned his life around. He started working as much overtime as he could get. He stopped being stupid with his money-spending and started making much better financial decisions – he started being much more frugal with his spending.
He quickly got out of debt, improved his credit, saved up for a down payment on a house, and once he got his house, worked to pay off his mortgage so he could own his home free-and-clear. By his mid-fifties, Bob was really prospering.
When he looks back on his life, he sometimes wonders why he spent so long making bad money decisions and being lazy, and why he couldn’t “see the light” sooner. He can’t even remember the names of half the video games he used to play for hours. He consoles himself by shrugging his shoulders and saying, “Well, better late than never!”
Are you curious about how you can use your freedom to make better financial decisions that lead to more prosperity for yourself? I would suggest you take a course called Financial Peace University. My wife and I took this course, followed most of the advice, and we are now in a better place of prosperity than we’ve ever been. It could do the same for you.
