Wealth redistribution - on whose terms?

I noted two articles this weekend talking about the redistribution of wealth by government. A Gallup poll found that US residents are divided about the idea.

Americans break into two roughly evenly matched camps on the question of whether the government should enact heavy taxes on the rich to redistribute wealth in the U.S. Forty-seven percent believe the government should redistribute wealth in this way, while 49% disagree, similar to views Gallup found four years ago.

. . .

While a solid majority of Americans, 57%, believe money and wealth in the U.S. should be more evenly distributed among the people, fewer than half favor using the federal tax code to do so. The fault line in these views is distinctly partisan, with most Democrats championing redistribution and most Republicans opposing it.

However, these are philosophical views. In practical terms, as government programs and budgets sink in red ink, unions and Democratic leaders at the federal level and in the states are calling for higher taxes on wealthy Americans specifically to help restore fiscal balance and stabilize entitlement programs.

There's more at the link.

Across the Atlantic, it seems more Britons than Americans favor government intervention to redistribute wealth. The Daily Mail reports:

The majority of Britons would support action to reduce the pay gap between high and low earners, new research suggests.

The report, by the Institute of Public Policy research, found an overwhelming 82 per cent of those surveyed said government should act to restrain pay in both the public and the private sectors.

Amid growing public discontent with perceived inequality, the report concludes that government, businesses and unions should do more to make pay fairer.

. . .

... the IPPR's research shows current pay rates for top earners are well out of kilter with the public's expectations.

When respondents were asked what the salary of a chief executive of a large national company should be, the average answer was £350,579 - just a third of the actual average earnings of £1million.

The pay given to those in top public sector jobs was also seen as too high, with respondents saying that the chief executive of a large local authority should earn, on average, 24 per cent less.

According to the 2,337 people who took part in the poll, the lowest-paid workers should also be earning more.

Office cleaners, who earn an average £14,000, should get a 19 per cent pay rise, they believed.

Meanwhile, Prison officers - on an average £26,800 - should get a 20 per cent pay rise, and painters and decorators - average pay £22,300 - should get 12 per cent more.

. . .

IPPR's Nick Pearce told the Observer: 'These results who that pay in Britain is out of kilter with the public's sense of just rewards.

'People think you should be paid what you deserve and do not see current inequalities as a fair reflection of differences in effort and talent.

'People want to see the benefits of success more fairly shared within organisations, instead of a few top earners getting an ever bigger share.'

Again, more at the link.

The same problem is evident on both sides of the Atlantic, of course. What does 'fair' mean? Who decides what someone 'deserves'? Who decides between competing perspectives, and makes the rules?

It's the age-old problem of individual versus collective responsibility. Supporters of the former position argue that each individual should be free to earn whatever he or she can, by any legitimate means at their disposal. It's not a question of what's 'fair' for them to earn; it's what they're able to earn, in a free market, through their own efforts, that matters. Market imbalances - 'lack of fairness' - will be corrected over time by the forces of supply and demand. On the other side of the fence are the statists; socialists, Communists, and so on. The Left argues that the market isn't free, thanks to the phenomenon of concentration of wealth (also known as 'wealth condensation'). Some measure of government intervention - a 'controlled market' - is necessary to rectify the imbalances thus caused, and redistribute economic goods to those who cannot obtain them for themselves because of those imbalances. Marx summed up this perspective in his (in)famous dictum: "From each according to his ability, to each according to his need".

I find myself on the horns of a dilemma over this question. I believe firmly that large-scale government intervention and redistribution of wealth are doomed to failure. No-one has yet demonstrated that government economists, bureaucrats or decision-makers are any better than those in the private sector. Why should we think that entrusting our economy to their tender mercies will produce any better results than allowing the market to find its own level? (Historically, governments have caused far more economic damage than they've undone.)

On the other hand, I'm forced to admit that unbridled capitalism, without controls, has led to all sorts of abuses (most recently by the major financial institutions). I have no doubt that some controls over such excesses are necessary. Such controls may include the need to redistribute ill-gotten gains, or break up companies and/or holdings whose sheer size and concentration of economic power throws the 'free market' out of kilter. However, the controls should be as narrowly targeted, precisely defined and carefully executed as possible, in order to correct the existing problems without causing or adding new ones. This is very hard to achieve; for example, see the Hawaii Housing Authority v. Midkiff court decision, and its consequences.

The difficulty is, where do you draw the line? Where do you say that this is 'controlling excesses', but that is 'controlling the market'? Where do you say that this is 'restoring competitiveness', but that is 'restricting free competition'? Where do you say that this is normal taxation to support the State, but that is 'redistribution of wealth'?

No-one's ever come up with a satisfactory answer to that conundrum. Instead, what we've experienced is a constant see-saw of conflicting economic perspectives. The Republican Party gets into power, and instantly tries to undo all the market controls and redistributive mechanisms they can get their hands on. A few years later, when the Democrats retake control, they try to undo all the 'reforms' the Republicans introduced, and reintroduce their own market controls and redistributive mechanisms. The cycle repeats itself ad nauseam.

We won't find any answers unless and until we can have an open, frank debate, where all options are laid on the table, and special interests aren't allowed to dominate, control and dictate the terms of the discussion. There's right and wrong on both sides. However, the present farcical situation is healthy for no-one. It's producing far more heat than light, and no-one's happy . . . except, perhaps, the special interests who are getting their own way at this particular time. (Not to worry, though. They'll be unhappy soon enough, when the other side takes over again.)

*Sigh*

Peter