Tyler Cowen The Inequality That Matters
Capitalism has delivered an increased standard of living to those it exploits, which explains its longevity. Although Bill Gates is far, far wealthier than the average joe this in itself will not create a huge problem for the system, provided average joe feels that his or her lot is improving as well. Tyler Cowen’s article compares living standards today with 1911 and concludes correctly that most people feel that capitalism has delivered more prosperity over time.
At the same time, social inequality has increased. But people may put up with increasing inequality as long as their standard of living is not threatened. Once again the statistical facts are clear on increasing inequality and the social fact is clear that overall people put up with it, they don’t take it as sufficient reason to rebel. In practice the moral outrage argument put forward by free market anarchist Kevin Carson (1) (Damning Corporate Capitalism With Faint Praise) is not sufficient for most people to change their outlook. As long as the system delivers for most it is safe.
However, finally, it is the inability of capitalism to avoid economic crisis that is its real achilles heel. Tyler Cowen concludes on a pessimistic note:
“We probably don’t have any solution to the hazards created by our financial sector, not because plutocrats are preventing our political system from adopting appropriate remedies, but because we don’t know what those remedies are … Is the overall picture a shame? Yes. … Will it again bring our economy to its knees? Probably”
So, after arguing that increasing inequality doesn’t really create a threat to the system, Tyler Cowen concludes that the system is still under threat simply because we don’t understand how it works. Indeed, we don’t yet understand how it works …
(1) See Carson’s Mutualist blog for his own perspectives. In his homebrew manifesto Carson argues that big is bad and advocates resilient neighbourhood, backyard, desktop technologies as a progressive substitute. He has also published a significant study of political economy (Studies in Mutualist Political Economy) Many of Carson’s articles are published at Center for a Stateless Society. I noticed an article there attacking political environmentalism (Green Rising: The Dangers of Political Environmentalism) because extreme Greens value the earth more than humans. Carson and the free market anarchists deserve an extended footnote because these sorts of positions are well worth further discussion.
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