• Dawson Vosburg

Does Inequality Really Matter?

Christian economists who argue for free enterprise-style capitalism claim that economic inequality is not a big problem. The economy is not a zero-sum game: there is not a single defined amount of wealth in the world that we must then divide like a pie. They argue that rather than dividing this metaphorical pie more evenly but never getting more, the best thing to do for achieving the real goal of reducing poverty and material deprivation is to grow the pie rather than splitting it more evenly.

This argument is rhetorically effective for two reasons: first, because it plays to the historic strength of capitalism which is to increase production; and second, because it’s abstract enough that it seems like a satisfactory answer to how poverty might disappear within capitalism with zero redistribution. The problem is that on inspection, the argument lacks in correspondence to reality. In the real world, as the “pie” of wealth grows, an ever-growing proportion of the pie goes to the very wealthiest and an ever-shrinking proportion gets split among everyone else.

If we look briefly at income, which is how we measure poverty, we can measure the year-over-year change in what people make. Between the years of 2015 and 2016, annual per capita income for the median family rose by around $700—barely above inflation. In contrast, the per capita income of the 99th percentile (in other words, “the 1%”) rose nearly $10,000. People already making the most gained far, far more than people in the middle—let alone people making the least. And this wasn’t just a one-off year: the share of the growing income pie that goes to the top has been getting bigger, while everyone else’s share has been shrinking. According to Pew Research Center, middle-income Americans took in 62% of the total “income pie” and upper-income Americans took in only 29% in 1970. In 2018, however, the order is reversed: upper income Americans took in 48% of the income pie, while middle income Americans got only 43%. And lower income Americans? Their share of overall income declined from 10% to 9% over the same period.

So far the “grow the pie” thesis has not fared well with regard to income, but the news only gets worse when we turn to wealth—which is usually what the “pie” metaphor refers to. Clearly US wealth has grown: the per capita wealth, adjusted for inflation, went from around $35,000 in 1915 to a whopping $222,000 in 2015. That’s a huge increase. What’s the problem? Those in the bottom 50% in 2014 only had an average of $350 in wealth (the top 1% held over $16 million on average). All that pie growth resulted in almost nothing at all for the bottom half of Americans. Just as with income, their share of the wealth pie shrank over time. According to Pew, upper income Americans saw their share of the wealth grow from 60% in 1983 to 79% in 2016, while middle and lower income Americans saw their share decline—from 32% to 17% and from 7% to just 4% respectively.

While it is true that you could, in theory, have an unequal distribution of wealth and income but still make the lives of the poor better off by growing the total overall amount of wealth and income, that is not what actually happens in the United States. Rather than the unequal share of the pie staying the same while the pie gets bigger, we see the share of the pie going to the richest Americans get even larger even as we expand the pie. Why would this be? Is it just a fluke?

Unfortunately, this is not a fluke: it’s pretty predictable, in fact. Let’s leave the pie analogy behind. People who own great deals of wealth don’t just own things like vacation houses and yachts—luxury items for their personal use. Most of their wealth is tied up in productive assets—essentially, capital wealth. Money that makes more money. Since they start with the advantage of owning more, they can use their wealth to make more wealth for themselves. As a result, when the economy becomes more productive, the people who benefit the most are not regular people who work for a living—it’s people who own that wealth already. If you start with a lot, it’s much easier to compound your wealth and pile it on higher and higher. If you start with basically nothing—if you don’t own any productive assets to start with—the increase in the total wealth doesn’t mean much for you.

God, when he instructed Israel on how to build an economy, required that wealth be distributed equitably from the start—and put in place guardrails to make sure that no one could start accumulating runaway wealth for themselves. The Bible is clear in its condemnation of any society that keeps growing its wealth even as the poor get nowhere. God spoke this way through the prophet Isaiah:

“Woe to you who add house to house and join field to field till no space is left and you live alone in the land.” (Isaiah 5:8)

The current economic order is based on “adding house to house and joining field to field.” Christians must know that even if we can’t fix it all right this moment, it’s important to be witnesses to the whole counsel of Scripture: a society that accumulates wealth more and more for the very rich is a society that has forgotten the wisdom and justice of God.