Kurt Bouwhuis, Mackinac Center Intern
Looking around the world today, it is not hard to spot inequality. There are some individuals who own multiple homes and eat large meals, while other individuals are just trying to survive. An easy solution to this problem would be to make everyone equal; take wealth from some to give to others. This way, everyone could eat and we would all be equal.
This system of equality raises a few alarming questions. Should people be given wealth according to their need, or according to their work? Is a system of equality obtainable?
Creating a system where people are given wealth according to their need changes the system of incentives. This is often overlooked, but is crucial to fully understanding how people would respond. If an individual were given all that they need, then why would they work? Why would anyone become a doctor when a janitor’s needs are fulfilled to the same degree as a doctors?
Although people despise profit, it is the incentive that drives corporations to succeed. GM would not be in existence if they knew that their earnings could be snatched away from them. People who work on GM’s assembly line are not there because they are providing you with a car, they are there primarily for their wage. If you don’t agree, then let’s say I take away the worker’s wage. Would they still work on the assembly line? A worker’s wage and a corporation’s profit are the reason for their existence.
Aside from incentives, it is impossible to achieve a system of total equality. Let’s look at something as simple as the equality of food distribution. If food were distributed equally to everyone in a society, you would see inequality within the first couple of minutes. The inequalities would be generated from trade. People would begin to trade food they value less for food they value more until everyone is content. The basic laws of supply and demand would be guide people through a day of trading.
Voluntary trading is a positive sum game. This means that multiple parties benefit in a transaction. Think about it this way: When I go to the grocery store to buy a gallon of milk, I value the milk more than I value my $3. The grocery store values my $3 more than they value the milk. The mutual trade takes place, and both parties are better off because of it.
Trade is one of the many reasons inequality is in existence. Some individuals are better at trading then others. Individuals trade their time for wages and their money for goods and investments. At the end of the day, some individuals are better off than others.