The relativity of wealth

There is no consensus on the meaning of freedom and liberty. Many people think that liberty means freedom to follow their own path in life but other people view liberty as freedom to wield power over others. Those who view liberty as a measure of power are inordinately concerned with inequalities of wealth. They regard freedom as meaningless if they are relatively poor compared to others, and relatively powerless to boot. They are not content to get on with their own life, free to do as they please, because they are consumed with envy. 

​Liberty is the effective power to do specific things…the demand for liberty is demand for power.

John Dewey, Liberty and Social Control (1935)
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​Many people have a vague sense that notions of liberty might somehow be relevant when we discuss wage distribution (or rather, wage redistribution). Redistribution means taking from some to give to others, and this has implications for liberty if the people being taken from are not happy about being forced to give to others.

If freedom means being powerful, and thereby being able easily to achieve your goals in life, and if to have such power one must be wealthy, then it seems to follow logically that to be free means to be wealthy. By that reasoning liberty means wealth, and without wealth liberty is pointless. This explains why liberty seems to be irrelevant to those concerned about poverty.

This goes a long way in explaining why we see a rise in concern about inequality, and a fall in concern about liberty: liberty has simply failed to produce the expected return on investment. Freedom? Freedom to scrape together a dollar or two, more like, which is easy to deride unless you have some overriding reason to value liberty. Hence liberty is deemed to be meaningless for 99.99% of the world’s population and it is thought that only the rich have the luxury of being free.

Having abandoned notions of liberty (because that's only for the privileged) many people seek comfort in trying to achieve economic equality. If everyone has the same amount of stuff then obviously nobody will feel as if they are ‘poor’ as compared to their neighbours. Remember, wealth is relative. The test must always be whether your neighbour has more stuff than you, whether the guy in the next office is paid more than you, drives a better car, etc. With economic equality everyone has the same amount of wealth (if any), and the same amount of power – hence nobody is able to lord it over the others with their superior wealth. Economic equality then becomes a second-best substitute for freedom.

Here’s where the law comes in (again). The law is a useful tool in ensuring that wages are equalized, as market forces will never equalize pay. Here’s what happens when markets are left to run rampant:

High rewards to labor market skills or employment in high paying sectors penalize demographic groups that have below average levels of skills or a lower representation in higher-paying sectors, even in the absence of explicit discrimination against them. So, for example, rising returns to skill or sector in the USA in the 1980s reduced the relative wages of black workers and immigrants; and slowed the economic progress of women.

Blau and Kahn, ‘Inequality and Earnings Distribution’ Oxford Handbook of Economic Inequality, p. 178.

​That is unacceptable if wealth equality is viewed as the goal. You can guess what happens next. Calls for a ban on ‘high rewards to labor market skills’ and a ban on ‘high paying sectors’. High pay is deemed to be unfair to those who are not qualified to do high-skilled jobs or work in high-skilled sectors, for no fault of their own. After all nobody asked life to cast them at the bottom of the heap. It just happened that way, and now look: we are in a situation where 99.99% of people are at the bottom of the heap. Meanwhile others selfishly advance their private agenda by growing richer by the second. Remember that wealth is relative, so the privileged status of rich folks will automatically reduce the pay of others and slow down their progress. 

To give an example, if you live in the same society as a billionaire then by comparison your humble pay is pitiful, your modest progress is glacial, and you will literally never catch up with the billionaire. No matter how hard I work, I will never catch up with Mark Zuckerberg and it is only a short step from acknowledging that fact to deciding that it is unacceptable. Possibly he’s got some creative ideas that people find valuable, but so what? That’s irrelevant in discussing wealth inequality. By the logic described above, his income has reduced my income level and slowed down my progress and that’s not ok. The same principles apply to the relative wealth of nations. Rolling out the same logic, it seems unfair for people in rich countries to be working hard, inventing cool stuff, getting richer, while countries like the South Sudan are starving. 

This way of reasoning explains why economic inequality is widely regarded as the most important problem we face today. 
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