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Opinion: Columnists

Poverty, not inequality, is the source of social ills

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Opinion,Columnists,Shikha Dalmia,Pope Francis,Poverty,Income Inequality,Thomas Piketty,Capital in the 21st Century

Conservatives are upset that Pope Francis' recent tweet “inequality is the root of social evil” was meant as a nod to French economist Thomas Piketty's 500-plus page controversial bestseller, Capital in the Twenty-First Century, which warns that Western capitalist countries are headed for ever-widening inequality.

That the Pope is on Piketty's side is hardly a revelation given that he has previously blamed “unfettered” capitalism for perpetuating oppression, tyranny and every other ill on God's great planet. But he was wrong then, and wrong now.

Setting aside the irony that this sweeping condemnation of inequality is being offered by the head of the most hierarchical organization in the world, there isn’t much empirical evidence for the Pope’s claims.

For example, the rap against rising inequality is that it slows economic growth and leads to bad health and social outcomes for the poor. But Harvard University’s Christopher Jencks found little impact of inequality on the poor’s standard of living, life expectancy, violent crime, political participation or even happiness.

Consumers in America, the most unequal of all Western countries, he found, “do better than their counterparts in other large democracies.”

Indeed, after looking for all the ills that liberals attribute to rising inequality in Western countries for over a decade, he has come up with so little that he has abandoned his book plans, he told New York Times' Eduardo Porter last week. (He feared headlines like, “Professor Doesn't Know What he is Talking About.”)

Jencks’ findings sound counterintuitive, but they aren’t. Why? Because the real issue is not inequality but poverty: If the rising income gap between the rich and the poor stemmed from the poor losing ground, Jencks would have found the dreaded ill effects. But even Piketty doesn’t claim that the poor are getting poorer in America or the West – only that the rich are getting richer faster. He expects this trend to grow because advanced capitalist economies offer bigger returns on capital investments (rich people's main asset) over labor (poor people’s main asset).

But even if inequality due to the rising income of the rich doesn’t affect economic and social outcomes of the poor, it is still possible that it is inherently corrupting for society. That’s because rich people can be arrogant jerks. Being vastly better off makes them feel that they are better: smarter, more talented, more virtuous and therefore more entitled. Such attitudes erode social bonds and trust.

Indeed, research by University of California’s Paul Piff found just that last year. He conducted lab experiments in which rich people consistently demonstrated an “empathy gap.” Even when their wealth resulted from pure chance, they became less generous and ethical.

That might be true. But my experience with rich people in a rich country like America and rich people in a poor country like my native India suggests that India’s rich are bigger jerks than America’s on all those counts. Whereas in America, expensive cars and designer clothes define a rich person’s style, in India they define his status and worth. India’s wealthy classes are far likelier to blame not the system and its lack of opportunities for rampant poverty, but the poor themselves. Conversely, they are more likely to attribute their success to their own superiority, not good fortune.

Why?

Because the scarcity of wealth elevates its social importance, making it a far more important metric for judging people. Since abject poverty has been more or less eliminated in America, wealth itself has become something of a lifestyle choice. Plenty of Americans opt for modest lifestyles not because they are losers; it’s because they cherish some other value -- leisure or family time or intellectual/artistic pursuits -- over extra income.

This undermines the notion that wealth is the sole measure of success, tempering the pathologies of wealth. This is one reason why America’s rich are far more apologetic – and less flamboyant – than their more in-your-face Indian counterparts.

All of this suggests that the Pope needs to bear in mind that not all inequalities are equal: Inequality that stems from prosperity isn't nearly as big a problem as that resulting from poverty. Wealth, paradoxically, is its own cure.

SHIKHA DALMIA, a Washingon Examiner columnist, is a senior policy analyst at Reason Foundation, a nonprofit think tank advancing free minds and free markets.
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Shikha Dalmia

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The Washington Examiner