Envy Inspires Poor Policy

Whether in the religious “seven deadly” sense or the vernacular one, envy is widely considered a sin. Why? Enlightenment philosopher Immanuel Kant defined envy as “a propensity to view the well-being of others with distress, even though it does not detract from one’s own.” Envious thoughts and their accompanying actions are therefore sinful because, regardless of one’s own material conditions or those of the less fortunate, the envious individual desires to bring down another—solely for the sake of damaging that person’s well-being. He seeks to take away what he deems to be excess, in order to create a comforting sense of schadenfreude. So why do we frequently allow envy to dictate public policy?

Far too often, individuals conflate income inequality with poverty. Many a demagogue has understood that equating the two will be well received by those who, consciously or subconsciously, harbor feelings of envy toward those with more. However, income inequality and poverty are materially distinct from one another. Poverty is an assessment of one individual’s living conditions in relation to an objective standard, while income inequality is a comparison between an individual’s material prosperity and the material prosperity of someone else within the same environment. For example, Denmark and India have strikingly similar Gini coefficients (a number ranging from 0 to 1, which indicates how much income inequality exists in a given region, with a higher number indicating greater inequality). As of 2020, according to World Population Review, Denmark’s Gini coefficient is 0.838, while India’s is 0.832一about a 0.7% difference in income inequality, or roughly equal. However, 2019 data from World Bank on gross national income (GNI) per capita highlight a stark disparity between these two countries. In U.S. dollars, Denmark’s GNI per capita is $63,420, while India’s is a meager $2,130, a difference by a factor of about 29.8. In other words, “income inequality” is a construct that derives its meaning only when applied in relation to others, whereas “poverty” is a term that can be applied in relation to an absolute, concrete standard of living. Based on the American standard of poverty, a poor person may own an iPhone, while a poverty-stricken person in Sierra Leone may die of starvation. 

Once we recognize that poverty differs entirely from income inequality, we arrive at a crossroads, one that decides the path down which our civilization will venture. Our choices are, roughly speaking, binary: capitalism or socialism. The former does an excellent job of mitigating poverty; the latter, at least in theory, does an equally stellar job at eradicating economic inequality.

If one’s goal is the end of economic inequality at all costs, a socialist system is desirable (though practically speaking, bureaucratic greed and corruption in such societies tend toward much of the wealth being concentrated in the hands of a few, resulting in income inequality actually being exacerbated under most applied examples of socialism). Absent corruption of the government apparatus, the redistribution of wealth through government coercion will inevitably do exactly what it sets out to do, which is to reduce disparities in income that naturally arise under a more laissez-faire capitalist system. It does not, however, accomplish this by raising the well-being of the working class, but rather, by pulling down the producers of wealth. Were socialism to accomplish what it set out to achieve, at what cost would this happen? Ludwig von Mises, famed economist of the Austrian School, put to rest the idea that a centrally planned “economy” could ever allocate resources according to consumer need in his 1920 Economic Calculation in the Socialist Commonwealth. In a socialist system, private property is not honored, which grossly distorts trade at best or renders it illegal at worst (depending on the level of socialism). Prices serve as indicators of the purely subjective valuations of the consumer populace, but because property cannot be exchanged, the pricing system is massively inaccurate (or nonexistent). And this system cannot be supplanted by a bureaucratic decision-maker or board. Without market prices, a central planner cannot properly allocate resources, so the socialist system falls apart as market prices further disintegrate. Freer markets also lower barriers of entry for competition, meaning that those with innovative ideas and solutions to consumer demands can compete on a reasonably level playing field. Socialism, which Winston Churchill called a “philosophy of failure,” begets poverty.

In contrast, capitalism does not claim to equalize everyone’s income. It does not come with a promise of income no matter the level or amount of energy, work ethic, or product creation, and does not purport to be a panacea. Instead, its free-market foundation naturally creates income disparities as a direct consequence of permitting different individuals in different locations with different talents to use their skills and resources differently. 

Where socialism has been an abject failure in terms of alleviating poverty, capitalism has a record of alleviating poverty in the absolute sense. Economic historians frequently mention the “hockey stick” of economic growth that arose from the Industrial Revolution, despite the economic trend of the prior millennia, which comprised hundreds of years of utter stagnation. Such rapid increases in purchasing power and living standards have everything to do with specialization, the division of labor, and trade一all outgrowths of the free market. The rise of liberalism in the classical sense (equality under law, respect for private property, and the use of the scientific method) caused an astronomical increase in quality of life.

In assessing the psychology or values-driven rationale of the poorest in a given region, it seems probable that their desire for improvement is relative to their own condition rather than (or at least significantly less than) a desire to have as much as those in economic tiers above them. For instance, many economists have cited the fact that income inequality between the top seven percent and bottom 93 percent of the nonfarm population of the United States widened during the “Roaring Twenties,” enabling them to postulate that this was a bad decade for the working class. To make such a claim, though, one would have to neglect the obvious: The income and purchasing power of the masses rose significantly (just not as rapidly as that of the top seven percent). But again, what matters more? In a 2013 New York Times article, historian Amity Shlaes posits that “what matters to people is not how they are doing relative to the rich but how they are doing relative to their own past and their own expectations.” Shlaes goes on to cite numerous examples of such improvements to one’s own expectations, including electricity being present in 35% of households in 1920 versus 68% in 1930, or the presence of indoor flush toilets in homes moving from 20% to more than half over the same time period of 1920 to 1930. Working class people in the 1920s likely would have been more focused on and excited about having electricity and a flush toilet (luxuries many even in today’s developed-world underclass take for granted) than dismayed at someone else owning a gold toilet.

Unfortunately, many of our public figures promote policies rooted in envy rather than compassion and logic, ones that seek to reduce economic inequality at the expense of actually lifting the dispossessed out of poverty. Whether it’s Michelle Obama telling us that the COVID-19 crisis is a great opportunity to reflect on our society “in terms of how wealth is distributed,” myriad Instagram activists exclaiming “Eat the Rich,” or the Chicago Teachers Union (whose members are entrusted to teach our children) saying it was “completely in support” of demonstrators building a guillotine outside the home of Jeff Bezos, it appears that much of contemporary political discourse is overwhelmed by a blind loathing of the rich, having replaced a genuine desire to help the poor. 

In order to fulfill our desire to boost those living at the margins or beneath them entirely, it is imperative that we turn away from the envy-based allure of socialism, and instead, embrace the property rights, free markets, and sound money of a capitalist system.