--><div>
<font color="#002864" size="1" face="Verdana">http://www.mises.org/fullstory.asp?control=1230</font>
</div>
<div>
</div>
<div>
<font face="Verdana" size="2"><font color="#002864" size="5"><strong>Is Inequality Necessarily Bad?</strong></font>
</div>
<font size="4">By Art Carden</font>
<font size="2">[Posted May 27, 2003]</font>
<font size="2">[img][/img] In
my last piece, I argued that we may not be measuring inequality correctly and
that, if we examine our ability to substitute the goods available to the poor
for the goods available to the rich, we may find that the gap between rich and
poor is shrinking.</font>
<font size="2">But let's go ahead and grant that we are measuring
inequality correctly and that it is growing, as most of the commonly-cited
inequality indicators suggest. Many argue that the U.S., with its relatively
skewed distribution of income, lags behind a number of countries with more
equitable income distributions on a number of quality-of-life-indicators. It
is usually at this point in the discussion that someone mentions Sweden—the
welfare state par excellance.</font>
<font size="2">Sweden ranks second in the U.N.'s Index of Human
Development (compared to the United States' sixth place ranking). As Paul
Krugman writes in the essay cited yesterday,</font><a title href="http://www.mises.org/fullstory.asp?control=1230#_ftn1" name="_ftnref1"><font size="2">[1]</font></a><font size="2">
"life expectancy in Sweden is about three years higher than that of the
US... (f)unctional illiteracy is much less common than in the U.S." Furthermore,
he accounts for Sweden's relatively low per-capita GDP by pointing out that</font>
<blockquote dir="ltr" style="MARGIN-RIGHT: 0px">
<font size="2">Swedes take longer vacations than Americans, so they work
fewer hours per year... Real GDP per hour worked is 16 percent lower than
in the United States, which makes Swedish productivity about the same as
Canada's…very few people in Sweden experience the deep poverty that is all
too common in the United States. One measure: in 1994 only 6 percent of
Swedes lived on less than $11 per day, compared with 14 percent in the U.S.</font>
[/i]
<font size="2">Great points, all, and they certainly suggest that a
redistributive welfare state need not be a poverty-stricken backwater. As one
of my classmates noted recently, these figures"make us question (the
U.S.'s) status as a first-world country." While it is true
that the Swedes enjoy higher life expectancy, longer vacations, and comparable
productivity, Americans enjoy more material amenities, better manufacturing
jobs, higher earnings, less hectic schedules, and more Big Macs with less
effort.</font>
<font size="2">Moreover, the wages of women relative to men are higher in
the U.S. than in Sweden. As the table below shows, there are a number of other
margins on which Sweden fails to compare favorably with the United States.</font>
<div>
<table cellSpacing="0" cellPadding="0" width="355" align="center" border="0">
<tbody>
<tr>
<td width="355" bgColor="transparent" colSpan="3">
<p align="center"><font size="2">The United States and Sweden in
the 1990's</font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<p align="center">
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">U.S.</font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">Sweden</font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<p align="center"><font size="2">Consumer Goods</font>
</td>
<td width="64" bgColor="transparent">
<p align="center">
</td>
<td width="72" bgColor="transparent">
<p align="center">
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<font size="2">Percentage of Households owning:</font>
</td>
<td width="64" bgColor="transparent">
<p align="center">
</td>
<td width="72" bgColor="transparent">
<p align="center">
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<p align="right"><font size="2">Clothes washer</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">90</font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">72</font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<p align="right"><font size="2">Dishwasher</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">53</font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">31</font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<p align="right"><font size="2">Microwave</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">86</font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">37</font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<p align="right"><font size="2">Television</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">98</font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">97</font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<p align="right"><font size="2">Clothes Dryer</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">82</font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">18</font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<p align="right"><font size="2">VCR</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">83</font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">48</font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<p align="right"><font size="2">PC</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">40</font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">29</font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<p align="right">
</td>
<td width="64" bgColor="transparent">
<p align="center">
</td>
<td width="72" bgColor="transparent">
<p align="center">
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<font size="2">Automobiles per 100 people</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">57</font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">41</font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
</td>
<td width="64" bgColor="transparent">
<p align="center">
</td>
<td width="72" bgColor="transparent">
<p align="center">
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<p align="center"><font size="2">Health Indicators</font>
</td>
<td width="64" bgColor="transparent">
<p align="center">
</td>
<td width="72" bgColor="transparent">
<p align="center">
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<font size="2">Crude Death rate (per 1000)</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">8.8</font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">11.3</font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<font size="2">Suicide Rate (per 100,000)</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">11.8</font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">14.7</font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<font size="2">Life Expectancy at Birth (1997)</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">76</font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">78.2</font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<font size="2">Pace of Life (1 is fastest)</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">16</font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">7</font>
</td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent">
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
</td>
<td vAlign="bottom" noWrap width="72" bgColor="transparent">
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<p align="center">
</td>
<td width="64" bgColor="transparent">
<p align="center">
</td>
<td width="72" bgColor="transparent">
<p align="center">
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<p align="center"><font size="2">Education</font>
</td>
<td width="64" bgColor="transparent">
<p align="center">
</td>
<td width="72" bgColor="transparent">
<p align="center">
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<font size="2">Student/Teacher Ratio</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">16</font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">11</font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<font size="2">Nobel Laureates</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">178</font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">10</font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<font size="2">R&D Scientists & Engineers Per 1000 of
labor force</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">7.6</font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">2.6</font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<font size="2">Percentage of Mfg Labor force employed in
high-tech industries</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">21</font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">13.8</font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
</td>
<td width="64" bgColor="transparent">
<p align="center">
</td>
<td width="72" bgColor="transparent">
<p align="center">
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<p align="center"><font size="2">Output and Productivity</font>
</td>
<td width="64" bgColor="transparent">
<p align="center">
</td>
<td width="72" bgColor="transparent">
<p align="center">
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<font size="2">Per Capita GDP</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">$28,338 </font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">$19,615 </font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<font size="2">Financial Wealth Per Capita</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">$64,402 </font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">$9,258 </font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<font size="2">Earnings of Women relative to men (1980=100)</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">113</font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">100</font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<font size="2">Minutes of work required to afford a Big Mac</font>
</td>
<td width="64" bgColor="transparent">
<p align="center"><font size="2">8.1</font>
</td>
<td width="72" bgColor="transparent">
<p align="center"><font size="2">13.3</font>
</td>
</tr>
<tr>
<td width="219" bgColor="transparent">
<font size="1">Source: Cox & Alm, Table 5.2 (pp. 97-98).</font>
</td>
<td width="64" bgColor="transparent">
<p align="center">
</td>
<td width="72" bgColor="transparent">
<p align="center">
</td>
</tr>
</tbody>
</table>
</div>
<font size="2">And America's poor have traditionally enjoyed more creature
comforts than their counterparts around the world—indeed, they enjoy more
creature comforts than citizens of other countries who are presumably"richer." Robert
Rector (1995) reports that, in the early 1980's, almost all poor households in
the United States enjoyed what we think of as implements basic to sanitation;
in fact, the American poor enjoyed these comforts in greater proportion than
the average citizens of industrialized countries with more extensive welfare
states.</font>
<div>
<table cellSpacing="0" cellPadding="0" width="350" align="center" border="0">
<tbody>
<tr>
<td vAlign="bottom" noWrap width="350" bgColor="transparent" colSpan="3">
<font size="2">Poor U.S. Households in the Early 1980's: Modern
Amenities</font>
</td>
<td width="0" bgColor="transparent" height="18"> </td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent">
</td>
<td width="93" bgColor="transparent">
<p align="center"><font size="2">Percentage lacking
indoor a flush toilet</font>
</td>
<td width="100" bgColor="transparent">
<p align="center"><font size="2">Percentage lacking fixed shower or
bath</font>
</td>
<td width="0" bgColor="transparent" height="78"> </td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent">
<font size="2">U.S. Poor households</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">1.80%</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">2.70%</font>
</td>
<td width="0" bgColor="transparent" height="17"> </td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent" colSpan="3">
<p align="center"><font size="2">Other countries: All Households</font>
</td>
<td width="0" bgColor="transparent" height="17"> </td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent">
<font size="2">United Kingdom</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">6%</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">4%</font>
</td>
<td width="0" bgColor="transparent" height="17"> </td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent">
<font size="2">Italy</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">11%</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">11%</font>
</td>
<td width="0" bgColor="transparent" height="17"> </td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent">
<font size="2">France</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">17%</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">17%</font>
</td>
<td width="0" bgColor="transparent" height="17"> </td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent">
<font size="2">Belgium</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">19%</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">24%</font>
</td>
<td width="0" bgColor="transparent" height="17"> </td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent">
<font size="2">Japan</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">54%</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">17%</font>
</td>
<td width="0" bgColor="transparent" height="17"> </td>
</tr>
<tr>
<td vAlign="bottom" width="350" bgColor="transparent" colSpan="3">
<font size="1">Source: Rector, Robert."How 'Poor' Are
America's Poor?" in Julian Simon ed."The State
of Humanity" (Cambridge Mass.: Blackwell Publishers, 1995), p.
240-56. Table 24.1</font>
</td>
<td width="0" bgColor="transparent" height="17"> </td>
</tr>
</tbody>
</table>
</div>
<font size="2">Poor Americans not only enjoyed more creature comforts than
middle-class citizens of other countries, they also enjoyed more food. There
are many who would dispute the claim that higher meat consumption translates
to higher welfare, but the nutrients that we get from meat are necessary to
sustain life. Again, the American poor enjoyed higher levels of meat
consumption than middle-class citizens of countries with extensive welfare
states. The following table should be interpreted as follows: the average
citizen of West Germany enjoyed 75% of the meat consumption enjoyed by the
average poor citizen of the United States.</font>
<div>
<table cellSpacing="0" cellPadding="0" width="240" align="center" border="0">
<tbody>
<tr>
<td vAlign="bottom" width="240" bgColor="transparent" colSpan="2">
<p align="center"><font size="2">Meat Consumption, 1977: US Poor
versus World's Middle Class</font>
</td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">U.S. Poor</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">100%</font>
</td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent" colSpan="2">
<p align="center"><font size="2">Average Person in...</font>
</td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">West Germany</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">75%</font>
</td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">France</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">70%</font>
</td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">Italy</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">62%</font>
</td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">Great Britain</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">57%</font>
</td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">U.S.S.R.</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">56%</font>
</td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">Mexico</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">39%</font>
</td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">Japan</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">39%</font>
</td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">Brazil</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
<p align="center"><font size="2">27%</font>
</td>
</tr>
<tr>
<td vAlign="bottom" noWrap bgColor="transparent">
<font size="1">Rector, table 24.5</font>
</td>
<td vAlign="bottom" noWrap bgColor="transparent">
</td>
</tr>
</tbody>
</table>
</div>
<font size="2">The point that Krugman and others try to make—that an
egalitarian mode of distribution, guided by the benevolent will of the state,
is necessarily superior to more market-determined allocations on account of
the fact that it supposedly leads to more desirable quality-of-life outcomes—is
ambiguous at best, incorrect at worst.</font>
<div>
<font size="2">To summarize, we can charitably conclude that it isn't
altogether clear that increasing inequality has brought with it pronounced
deleterious consequences. In spite of claims to the contrary, the United
States (which still enjoys more freedom than almost every other country on
Earth in spite of its own massive regulatory/welfare state) outperforms
mixed-economy welfare states on a number of margins. As we will see tomorrow,
even if we grant that inequality is unambiguously bad, it isn't clear that
the state possesses the wherewithal to fix it.</font>
</div>
<div>
<br clear="all">
</div>
<div>
<hr align="left" width="33%" SIZE="1">
</div>
<div>
<font size="2">Art Carden is a graduate student at Washington University
in Saint Louis, and a visiting summer fellow at the Mises Institute.
See his archive
and send him MAIL. This is
part two in a series of the subject of inequality.</font>
</div>
<div id="ftn1">
<a title href="http://www.mises.org/fullstory.asp?control=1230#_ftnref1" name="_ftn1"><font size="2">[1]</font></a><font size="2">
Krugman, Paul."For Richer." The New York Times
Magazine, October 20, 2002.
</font>
</div>
</font>
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