The United States, and almost every country in the Americas, has more economic inequality than the rest of the world. A good way to measure this is the Gini Coefficient, which is expressed as a percentage: 0% means total income equality, where everyone has the same income, and 100% means total inequality, where one person makes all the money. The range we see in the real world goes from about 25% for the Nordic countries, to 60%+ for some African countries. The coefficient is hard to calculate, so it’s mostly an estimate and varies from source to source; the numbers used here are the latest ones in the CIA’s World Factbook, which gives the US a Gini Coefficient of 45%. In the same neighborhood: The Philippines, Argentina, Mozambique, Jamaica, Bulgaria, Cameroon, Iran, Cambodia, Uganda and Macedonia. Most of Europe is in the high 20s and low 30s; Sweden is the lowest, at 23%.
Two economists, one of which is the author of Predictably Irrational, asked Americans to choose between two unnamed countries’ economic equality. The two countries were actually the United States and Sweden, and those surveyed overwhelmingly chose Sweden’s demographics: 92% of them liked it more, and there was no appreciable difference between Democrats and Republicans, between genders, age groups or income levels. This, of course, should come as no surprise, since few people in their right mind would say “I wish the rich were richer and the poor, poorer.” The question is, how do we get to a state in which the gap between the richest and poorest people is as small as possible?
The simple, and only proven solution thus far, is the redistribution of wealth: take the rich people’s money and maybe not give it directly to the poor people, but use it to fund government services like free universal healthcare, which in concert with low taxes on poor people, will put them on a more equal footing. This Robin Hood approach is par for the course in Europe, and is why the Gini coefficient in countries like Sweden, Finland and Germany is so low. In the United States, however, it’s not as simple because for many Americans, the end does not justify the means: people are not property of the state, so it’s not morally justifiable to take their possessions for any reason, including improving or even saving someone else’s life. However, giving to the less fortunate is highly encouraged as a moral duty, which is why the United States is the most charitable nation in the world, according to the World Giving Index. Sweden, on the other hand, is 40th, Norway is 32nd and Germany, 26th. Charity, of course, does not factor into the Gini coefficient.
Redistribution of wealth does happen in America — the top 10% of earners paid 71% of the nation’s taxes for 2009, but only earned 43% of its income — but due to conservatives, redistribution on the scale of Western Europe will likely not occur here. So what are other ways of achieving higher economic equality? If taking money from the rich and giving it to the poor isn’t an option, then the poor would have to make more money and generate wealth on a bigger scale. The easiest way to make this happen is education: more educated people tend to earn more, so we should be encouraging people to go to college, and offering the ones that do cheap ways to do it, via grants, scholarships, and cheap student loans.
But, not all higher education translates into higher income. And while educated people make more money than those who aren’t, the vast majority of them make a good, but not great income. The millionaires and billionaires don’t amass their wealth through education, but rather through entrepreneurship. Steve Jobs, Bill Gates and Mark Zuckerberg are all college dropouts. So more than education, what we should be encouraging is that drive which makes for a successful entrepreneur. Our society should foster an environment in which people see opportunities around them, have the willpower and dedication to take them, and the tools to turn them into success stories.
And we do a decent job at this already: the United States really is the land of opportunity, and it’s the reason why, even though the American Gini coefficient is the same as Cameroon’s, the American lifestyle is orders of magnitude better, and in many respects even better than countries like Sweden. However, we should be doing more to close the gap between the rich and the poor. The easy way would be to take from the rich and give to the poor, but the smarter way would be a win/win solution in which the poor become richer through their own merits. A way in which, rather than making everyone’s income average, we make lower incomes obsolete.
- Why The Entitlement State Is Morally Wrong
- The Anglosphere Is Very Charitable
- Warren Buffett Wants Higher Taxes On The Super Rich
- Scientific Proof That It’s Better To Give Than To Receive