Hornberger's Blog

Hornberger's Blog is a daily libertarian blog written by Jacob G. Hornberger, founder and president of FFF.
Here's the RSS feed or subscribe to our FFF Email Update to receive Hornberger’s Blog daily.

Marx and American Leftists Are Wrong About Inequality


Not surprisingly, the American left are among those in the world who are honoring the 200th birthday of Karl Marx, the author of the Communist Manifesto, given that Marx’s socialist philosophy forms the bulwark of leftist economic thought.

Among the points that Marx made that American leftists celebrate is about economic inequality. Marx said that capitalism results in large disparities of wealth, which then causes conflict to occur between the classes. Therefore, he argued, a free market contains the seeds of its own demise.

Socialism, Marx argued, was needed to eliminate this economic inequality. Marx’s ideal was that the state would own and operate everything and then dole out the same amount of money and wealth to everyone on an equal basis. Thus, socialism entailed what became known as “public ownership of the means of production.” Under socialism, everyone would work for the state, and everyone would be equal economically.

That’s mostly the way things work in North Korea and Cuba. The state owns most everything, and most everyone works for the state.

There are two important points to note about those two countries: One, most everyone really is equal in terms of income and wealth. And two, most everyone is on the verge of starvation.

That’s what happens under socialism. Over time, it brings economic equality through equalized poverty.

Consider one of the most important founding principles of the United States: no taxation on income and no IRS to collect income taxes. From the founding of the country in the late 1700s through virtually all the 19th century and into the early part of the 20th century, the American people were free to keep everything they earned and decide for themselves what to do with it.

One result of this unusual economic system was great inequalities of wealth. Marx was right about that. There were people who were extremely poor, such as the penniless immigrants from Europe who were flooding American shores to come here to live. And there were many multi-millionaires, like Andrew Carnegie and John D. Rockefeller.

But here is the kicker: This unusual economic system lifted the standard of living of everyone, especially those at the bottom of the economic ladder. It also provided the means by which people could break the chains of poverty and become wealthy (which was why those penniless immigrants were coming here to live). In fact, there were many stories of poor people becoming rich people simply by providing goods and services that other people were willing to buy in this free-market way of life.

Suppose one is faced with the following choice: A society in which everyone earns $100 a month and has a net worth of $1,000 versus a society in which the poorest people earn $1,000 a month and have a net worth of $50,000 but in which there are also multi-millionaires.

Which society would be preferable?

I think it’s safe to say that most American leftists would say the first society is preferable. To them, the thought that some have more while others have less is anathema. Notwithstanding the commandment “Thou shalt not covet thy neighbor’s goods,” American leftists are so consumed with envy and covetousness that they would rather see everyone on the verge of starvation than to see some people have more than other people even if the poor are significantly better off.

Forced economic equality was what the adoption of the welfare state was all about. American leftists knew that they could never get Americans to fully embrace the Marxian concept of total public ownership of everything. So, American leftists settled for a halfway measure — the welfare state, which entailed public ownership of the results of production — i.e., the nationalization of people’s income. Since the adoption in 1913 of the progressive income tax (which was one of the planks of the Communist Manifesto) and the adoption of the welfare state way of life in the 1930s (without even the semblance of a constitutional amendment), the goal was to equalize income by using the state’s taxing power to take income from those to whom it belonged and give it to those to whom it did not belong.

The welfare state has now been a permanent and ever-growing part of American life for the past 90 years. Yet, American leftists today decry the extreme economic inequality in American life. In a delicious piece of irony, they fail to recognize that the economic inequality that they lament has become an inherent part of their 90-year-old welfare-state way of life.

Of course, what some leftists would say is: “Well, we just need to confiscate more income and more wealth, and maybe even go all the way, like they have in North Korea and Cuba.” A good example is how they now want to nationalize healthcare, just like in those two socialist countries.

When a society has produced a large amount of wealth, it naturally provides an attractive target for those who envy and covet. Thus, in the early days of socialism or welfare-statism, the people who are confiscating the wealth or income have a heyday.

What ends up happening though is that over time wealth creation starts diminishing, even while demands from those who are receiving the state welfare dole increase. Gradually, the wealth producers are unable to keep up with the demands of the dole recipients. That’s when the system starts caving in on itself. Ultimately, everyone ends up equally poor.

Contrary to what Marx suggested, a free-market economy does not produce conflict between the classes. On the contrary, it produces economic harmonies among everyone because everyone’s boat is rising, even if some boats are rising more than others. What both Marx and American leftists have failed to realize is that the key to ending poverty is economic liberty and free markets, a way of life in which people are free to keep everything they earn and in which the sins of envy and covetousness are not enshrined into a nation’s political and economic system.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.