The Increasing Divide Between Rich and Poor: An Indication of Societal Breakdown?

Those of a more liberal persuasion opine that we must take care of the less fortunate in our society through means of government wealth redistribution. Conservative types claim that anyone can get rich if they work hard enough, but that the rich are getting richer exclusively because they provide more value to society than the poor.

Both sentiments, although based on veneers of truth, are largely inaccurate. Nevertheless, a widening divide between the wealth of rich and poor portends societal breakdown, and something must be done about it--on the part of government and private interests.

Many on the American political Left lionize Franklin D. Roosevelt. Although I think he was a very dignified and well-meaning man, his policies have been the impetus for a great deal of the societal malaise that America is experiencing today.

True capitalism must be mixed with charity, but when the rich get richer at the expense of the poor that's as uncharitable as it gets.

Roosevelt's main political thrust was that the government can take care of the people, when a nearly $80 trillion budget shortfall required to take care of the schemes FDR wrought belies this noble-sounding idea. In the wake of New Deal policies, government has failed its subjects in its attempt to supplant the family as the fundamental unit of society.

The even bigger problem, however, is the lie of the American Right that the rich are getting richer simply because of their value to society. In nearly all cases this is not true.
  • Corporate Chief Executives are not being paid hundreds of times more than their employees because they provide hundreds of times more value; rather, they are getting paid exorbitant rates because they can.
  • Enron executives were, and farming and energy conglomerates are, filthy rich mainly because of their incestuous relationship with governments.
  • The longer politicians stay in office, the greater likelihood that they'll be able to make much more money from their friends on the other side of the revolving door that leads to K-Street.
  • Bankers, brokers, and federal reserve chairmen are usually able to insulate themselves from the economic chaos that their policies wreak on the rest of society.
The above examples constitute, in a nutshell, the bulk of the widening economic divide, regardless of what so-called "free-market" thinkers would have you believe. And yes, that is a bad thing.

Such political mice (not men) are faux "capitalists" in the mode that Adam Smith and Karl Marx were both correct to abhor. Although Marx came to the wrong conclusions, his observations of "capitalistic" maladies, many of which we're experiencing today, were very accurate.

True capitalism must be mixed with morality,

In the wake of New Deal policies, government has failed its subjects in its attempt to supplant the family as the fundamental unit of society.

and when the rich get richer at the expense of the poor primarily because of the machinations of government, that's as immoral as it gets.

The Book of Mormon, Another Testament of Jesus Christ, gives us an excellent pattern for recognizing impending societal breakdown. It always involves a breakdown of morality, and it always is presaged by a widening gap between the earning power and opportunities of rich versus poor.

Just prior to the coming of Christ in the Western Hemisphere following his death and resurrection, an ancient American society was in free-fall decline, characterized chiefly by a lack of charity on the part of the increasingly rich toward the increasingly poor:
10 ...some were lifted up unto pride and aboastings because of their exceedingly great riches, yea, even unto great persecutions;
11 For there were many amerchants in the land, and also many blawyers, and many officers.
12 And the people began to be distinguished by ranks, according to their ariches and their chances for learning; yea, some were bignorant because of their poverty, and others did receive great clearning because of their riches.

Book of Mormon, 3rd Nephi, Chapter 6
Cataclysmic social and natural upheavals caused the breakup of their society into tribes and caused the ultimate deaths of thousands of people.

The remaining inhabitants were left to learn from previous social mistakes. It worked rather well for about two centuries, but the next devolution of society, which occurred beginning 200 years after Christ's appearance and warnings to these people, became a death spiral.
24 And now, in this two hundred and first year there began to be among them those who were lifted up in apride, such as the wearing of costly apparel, and all manner of fine pearls, and of the fine things of the world.
25 And from that time forth they did have their goods and their substance no more acommon among them.
26 And they began to be divided into classes; and they began to build up achurches unto themselves to get bgain, and began to deny the true church of Christ.
35 And...in the two hundred and thirty and first year, there was a great division among the people.
43 And also the people...began to be proud in their hearts, because of their exceeding riches, and become avain like unto their brethren...
46 And it came to pass that...robbers...did spread over all the face of the land; and there were none that were righteous save it were the disciples of Jesus. And gold and silver did they lay up in store in abundance, and did btraffic in all manner of traffic.

Book of Mormon, 4th Nephi, Chapter 1
In a few more decades, the social breakdown of that ancient American society culminated in a battle in which millions perished.

It would be way cool if we could learn from their bad example before it's too late.

When it comes to ensuring economic fairness, can government be the solution? Yes, insofar as it remains within its proper sphere--that of creating and enforcing fair economic laws. Government will always create more problems than it solves, however, when it attempts to redistribute wealth. Wealth redistribution, if it is to succeed at all, must be affected by charitable individuals, strong families, and by respectful religion and other charitable social institutions.

Wealth redistribution, if it is to succeed at all, must be affected by charitable individuals, strong families, and by respectful religion and other charitable social institutions.



Many factors signal the impending failure of American society. If we hope to save ourselves, government, along with private organizations and individuals, must work within their proper spheres to once again enshrine honesty and charity. Government must enforce the rules. But individuals, if they hope to be called capitalists in the true sense of the word, must act in all cases with charity.

That is a recipe for fairness. That is a recipe for economic success for all.




Comments

  1. I think one of the largest obstacles we face is that we've shifted the entire burden of charity to the government. So rather than look down on someone who hordes their money and abuses the poor, we look to the government instead.

    The trick is going to be getting that general concern for our fellow man back into our culture, while at the same time getting government out of the whole thing. Not sure how you could possibly pull it off though.

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  2. There is an active opposition by some to private charity because it is assumed that such charity cannot be fairly distributed.

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  3. I appreciate the post, Frank. I'm grateful that you, as a libertarian/conservative accept the fact that the growing gap between rich and poor is itself evidence of a very serious problem. Many, many conservatives and devotees of conventional economic theory disregard any such thoughts--some even suggest that the economic stratification is a good thing. I expressed my own thoughts on social justice in a trilogy of posts last year. I'm also working on posts about the morality of wealth, and on the innate flaws of conventional free-market theory.

    I do believe, based on the inadequacy of voluntary efforts since the industrial revolution, that government does have a legitimate active role in social welfare. I'm leery of complaints about "wealth redistribution," because it presupposes that there isn't a subtle kind of involuntary wealth redistribution going on in the free-market, or that the "original" distribution was somehow fundamentally just and perfect.

    My biggest reservation is that I question your perception of Capitalism. I think you idealize capitalism too much when you claim that "true" capitalism involves charity and morality. The fact is that capitalist theory is devoid of any such morality. It is not immoral, but amoral, buying into the morally bankrupt philosophies of Rand and Friedman which legitimize selfishness and obviate social responsibility.

    What you are talking about is moral capitalism; capitalism in the service of moral causes, a means to a moral end rather than the end itself. We should recognize the difference between moral capitalism and true (or absolute) capitalism. When we conflate the two, we risk becoming free market idolaters, and absolute capitalism will inevitably win out.

    Libertarians like you, possessing this kind of moral integrity, make me much more willing to abandon government involvement and embrace purely voluntary methods. If only there were more of you...

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  4. When I see the grossly obese lady at the store in brand name clothes buying food that my family would consider only on special occasions, and then paying with her Horizon card, I'm pretty much of that opinion with Government welfare.

    The big draw for me to private charities is that I am free to choose where my money goes. If I don't like the charity, I can choose to send my money elsewhere, or I can start my own charity, or I can be a selfish jerk and keep it to myself - but ultimately I want to be able to make the choice myself.

    I think us humans are basically good people that would help each other out if given the chance, the problem is that years of government intervention have removed the need to make that choice, so it almost seems foreign to us now.

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  5. Did you try to find a prominent American politician who advocates "government wealth redistribution"?

    The principle is ability to pay. People who are financially successful can afford to "invest" more in America (politicians like Bill Clinton hardly ever use the word "taxes").

    Patriotic Americans such as Warren Buffet know that it's not good for the country when lower income individuals are taxed at a higher rate.

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  6. Or in other words....

    "From each according to his ability, to each according to his need."

    If the government were an investment option, I would think their stock would likely rank lower than Enron's stock, after the scandal broke.

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  7. Taking money from others because "they can afford it" is somehow made out to sound like the moral high ground. Stealing under any other name ...

    No one ever claimed that liberty creates a perfect system -- only that when implemented, its results are better than the arrogance of politicians that believe they can create just systems for distributing wealth.

    Besides, measuring the gap by income alone is shoddy methodology. When both sides of the equation are considered -- income and consumption -- the gap diminishes substantially and, in fact, turns out to be static. See here for details.

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  8. Richard,

    It's not good when ANYBODY is taxed at too high a rate. What you refer to as "investment" is (as Reach and UK have alluded to) theft.

    American politicians don't advocate "government wealth redistribution", because if they called it by its right name the people would revolt. But since they call it investment, people think its okay.

    Now the direction where you may have been heading with your comment, and where I would totally agree with you, is that it is wrong that the rich overwhelmingly "qualify" for government kickbacks, such as subsidies for sugar, mohair, and ethanol. If we could get rid of just this government wealth redistribution we would be in much better shape. The rich are getting richer at the expense of the poor, and we have largely government back-scratching to thank for it.

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  9. Those kickbacks are simply government "investing" in certain behaviors it desires. Taxes obviously affect behavior, so credits, deductions and the like are used to further affect behavior. When citizens get a deduction, it's a tax cut. When corporations get a deduction, it's corporate welfare.

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  10. Cameron may have a very valid point - although I think it is more in line with how things are, rather than how things should be...

    Kickbacks are Government investing in certain behaviors is desires... In many cases, it would appear that politicians are able to get the government to give kickbacks to industries that have supported them in their campaigns, or that are in line with their personal agendas. I guess from the outside this could appear like simple bribery and corruption, but then again, you'll see from my next comment, why I am I'm likely wrong.

    As a citizen I can get deductions for doing certain things, but in the big picture, the more I earn, the more the government wants to take from me. A certain amount of that money is then used as a hand out to people that lack the motivation to improve their lives and quite happy to live off a government hand out. Apparently the government would rather people were supported by it, than supporting themselves and choosing to invest their earnings back into further business ventures. On the plus side for the government, these leaches on society generally vote for those that get them the handouts, and make government feel a lot more "needed".

    I guess since I would rather not have the government telling me to how to live my life, and would rather spend my time in the pursuit of life, liberty and happiness, I fall outside of the behaviors the government desires me to have.

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  11. While Cameron's carrot-and-stick observation is interesting, it does not fully explain matters.

    When central planners undertake to remake society according to their desired view, it creates a whole new economy where interested parties compete for and appeal to authority (the central planners) for a piece of the pie that they have deigned to distribute.

    As UK notes, the motives involved in this process can hardly be considered to be pure. Players in all markets, including political markets, act out of self interest. Thus, it should come as no surprise that businesses appeal to government for subsidies and other favors that protect them from competition. Part of the reason CEOs make so much money is that they are hired to gain such governmental favors.

    None of this will be resolved as long as we allow the government to continue its policies of wealth redistribution. As such policies increase, so will these kinds of problems. There will be more business subsidies, not less.

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  12. Cameron,

    You are too trusting in government and their friends in the corporate world. I agree with Reach:


    it should come as no surprise that businesses appeal to government for subsidies and other favors that protect them from competition.


    Government often invests in behaviors that are neither healthy nor fair.

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  13. Derek,

    Adam Smith's capitalist theory is full of morality. He wrote an entire book about it.

    It's interesting your take on Rand and Friedman. Contrary to your perspective, I think they do not legitimize selfishness and obviate social responsibility. They do, however, say that government cannot force them to do something they don't want to.

    But when it comes to the long run, the only successful capitalist is one who is socially responsible. THAT's what Friedman and Rand teach.

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  14. Frank, you're the first one to ever say I trust too much in government. Congrats! :-)

    What I pointed out is simply how the tax code is used. Sometimes it's legitimate, sometimes not so much. You deduct the interest on your mortgage because that encourages home ownership. Of course, you're also able to deduct the interest on your second home, a cabin, or even a timeshare - in addition to the first mortgage deduction. I'm not sure what the reasoning behind that one is.

    It's this second, somewhat questionable deduction that is akin to "corporate welfare".

    The fact that government wields so much power by way of taxes means that government attracts people who want to use that power. Or at least shield themselves from that power.

    It's for this reason that smaller central government and lower taxes is likely the best way to keep outside influence out of government.

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  15. Frank, you're right that Adam Smith was very much a moralist. However, Randian/Friedmanian theories, the modern capitalist theories, are quite different from that of Smith's.

    I'm fleshing out posts showing how the conventional theories are amoral. Neither Rand nor Friedman teach that social responsibility is necessarily part of the measure of success for the capitalist. For now, let me just point out that Rand wrote a book entitled The Virtue of Selfishness, and Friedman said a number of different times and a number of different ways that corporations have no responsibility beyond maximizing shareholder return. Such thoughts enthrone greed and rationalize away social responsibility.

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  16. I haven't had a chance to study Friedman's statements about shareholders, but I have read Ayn Rand's Atlas Shrugged, a long but very enriching and worthwhile book. I was taken aback by your claim that Ayn Rand wrote about the Virtue of Selfishness, but I found out that it's true. Nothing in Atlas Shrugged is selfish at all--well, except for how the government tries to expropriate Hank Reardon's contribution to society, and in the process how the government destroys them.

    Rand does NOT mean "selfish" in the way that we think of selfish. She means that we look out for our actual self-interest and not for our whimsical interests. If we look out for those interests, we can't help but increase the interests of others. For more information on what she means, click here. In a nutshell, here's what she means:

    To elaborate on the first point: Rand believes that the elements of human self-interest are objective. All human beings have objective biological and psychological needs, and one's actual interests are identified by reference to these needs. Mere whim-fulfillment is therefore not constitutive of human well-being because one's whims might be at odds with one's actual needs. Moreover, the character traits of the "selfish" brute are not compatible with any human being's actual, rational interests. Humans live in a social world; in order to maximize the value of their interactions with others, they should cultivate a firm commitment to the virtues of rationality, justice, productiveness, and benevolence. A commitment to these virtues naturally precludes such brutish behavior.

    Ayn Rand would be appalled, not only at the clear lack of self-interest that many corporations exhibit today, but also at how they are coddled by their back-scratching friends in government.

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  17. I've yet to read Atlas Shrugged (it is on my list, among two-hundred plus other books ;) ), but what you're saying about Rand and Objectivism doesn't seem consistent with others of her essays and interviews which I've read. The sense I've gotten from all of those is that Rand believes we should all look out for numero uno, and since everyone else is/should be doing the same, things will turn out best for everybody--a clever bit of sophistry to rationalize greed.

    If Rand did indeed mean something different than the official meaning of the word "selfish," she should have chosen and used a more correct term for the concept she was discussing, rather than trying to change the meaning of selfishness to suit her whim.

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  18. To Urban Koda who said, "When I see the grossly obese lady at the store in brand name clothes buying food that my family would consider only on special occasions, and then paying with her Horizon card," I say, be careful of your judging. You don't know where she got her clothes; maybe she has a rich aunt who gave them to her. It's none of your concern.

    I am a single mom on food stamps, and, believe me, they don't give me much. I only get enough to buy two week's worth of food, and I'm not talking steak and shrimp.

    Instead of finding fault with people, think thoughts of love. That's what Jesus did. If everyone had more love and compassion for all their brothers and sisters on this earth, we would have heaven on earth.

    I think Heavenly Father would be most pleased with us if we individually would do more to help the poor, rather than just let the bishop or the government.

    I know what I'm talking about. Sometimes bishops do not help people with much compassion. How does God answer someone's prayer? He sends you and me.

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  19. Actually, it is my concern, since the money used to fund her horizon card is taken from my paycheck involuntarily.

    If the lady in question has a rich aunt who feels she can indulge her niece's greed with brand name clothing, yet is willing to let me, a hard working American pick up the tab for her food, then I think we have a problem.

    From what you have shared, you sound like the person that welfare should be able to help. I would love the opportunity to help someone in your situation with the opportunity to better your situation and help you raising your kids.

    My beef isn't with you or people like you, it's with those who are abusing the system, and using money which is taken from me immorally to do it. There are people who do this knowingly, and I'm ashamed to admit I even have some close relatives who do it. That doesn't make it right though.

    For me it's not about love to help the poor... For me, I feel obligated as a human being to help others. The main thing I'm upset about it that I don't have the choice! Because were I actually free to choose, I would willingly give, and that would leave a far better taste in my mouth at the end of the day.

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