It is often said, that a Capitalist system will bring about inequality and expand the difference between incomes. From an empirical point of view, this statement is hardly true, in fact, it was the industrial revolution in England, characterised by its liberal market, that created the middle class we know today.
My hypothesis about why this difference in wealth might be expanding, rests on one simple idea. Some people play by different rules than the rest of us. This is contrary to capitalism, and contrary to freedom philosophy.
The market, is becoming increasingly divided into two fields. Those who compete in a “free”, though heavily regulated and obstructed market, and those who hold a privileged position because of their political connections. This is what I mean by market polarization.
As government becomes bigger and more intrusive, the more its influence and power expand. The more regulation, the more opportunities there is for those interested, to occupy those positions as “regulators”. The more spending on public works, the more corrupt construction deals our leaders can make. The more we believe what they tell us, the more in debt they can get, and the more they can bail-out all their friends.
Meanwhile, the rest of the world, the small and medium businesses, the real creators of wealth and occupation, get strangled by unnecessary bureaucracy and are subject to unfair rules. The only way that we can create jobs, is by creating job opportunities. The only way of doing this, is by having succesful businesses. Most states, have an unfair bias against the business and in favour of the worker, which is why so many businesses have a lot more trouble staying open, or hiring people, than they would in a free market. This bias, of course, stems from a general misunderstanding of market interaction.
There has been indeed a growing difference in income. This is because, during the good times, the people at the top made millions. Now, during the bad times, we have to pay the price. Like I’ve said before, it’s a question of privatizing gains, and socializing the losses.
To rid ourselves of this pathology, all we have to do is create a truly free world. With real equal opportunities and where law applies to everyone in the same way. To destroy the kind of structure that is in place now won’t be easy, that I guarantee.
This will never be achieved until people understand the superfluousness of government, how capitalism really works and what freedom really means.
For some reason, people seem tt apply different models of human behaviour for different things. In the world of social science, we use homo economicus, as a reference to human behavior. However, our educational system, in an implicit way, and from a very young age, teaches us that in politics, benevolence and collective well-being rule. This is contradictory.
Either you acknowledge, that we are self-interested homo economicus, and therefore, so are our political rulers, in which case, like me, you might find it harder to believe that politicians always have your best interest in mind, rather than their own.
Or, you could go the other way, and say that everyone is benevolent, in which case, why should such levels of regulation and interference be necessary?
I’m not hear to define human behaviour, just to point out the inconsistency, or perhaps subjectivity, that is present in our understanding of the issue.