A couple of my Facebook friends recently posted this video on "wealth inequality in America," which was evidently uploaded in November and has now gone viral with close to three million views. I found it to be cleverly produced, but seriously flawed. Here's the video, followed by five reasons why I find it misleading.
1. Wealth is not distributed. Wealth is acquired. Some wealth is earned, and some wealth is gifted or inherited, but all of it is acquired, not distributed. Distribution assumes a central clearing house from which all wealth is parceled out. But there is no central storehouse of wealth, and it is not distributed. Individuals acquire wealth from other individuals according to how highly they are valued based on certain actions they take or qualities they exhibit.
2. Wealth-acquiring actions and qualities are not distributed. Because wealth is acquired, it would be much more revealing to study the "distribution" of the qualities and actions that lead to the acquisition of wealth. These would include such characteristics as intelligence, beauty, ingenuity, creativity, luck, charisma, stature, athletic ability, likability, wit, cunning, perseverance, bravery, thrift, & etc. But, of course, these qualities are not distributed, either, and neither are the wealth-acquiring actions in which individuals engage. People may receive these qualities at birth or through education, development and practice, but they do not receive them through distribution. And if you placed people on a scale according to these qualities, they would not be "distributed" evenly, equally or equitably, no matter how unfair that may seem.
3. It makes no difference how unfair it seems. I would like to be able to throw a perfect fastball at 99 mph. Or even throw accurate pitches at 75 mph. The owner of a baseball team might reward me financially if I could, but I don't have that ability. No amount of training or practice could get me there, and it makes no difference how fast other people think I should be able to throw, particularly people who've never met me and have no knowledge whatsoever of my physical attributes, what a general manager might be looking for in a pitcher, how much he might be willing to pay a great pitcher, or even that the game of baseball exists in the first place. I can't throw a fastball like Nolan Ryan, and the ignorant assumptions of a random group of people are irrelevant.
4. Wealth acquisition is not determined by a random group of disinterested people. Who cares what 5,000 people assume, even if 92 percent of them agree? They have no specific knowledge of the people and circumstances involved. And the same goes for a smaller group of self-styled experts who would like to centrally plan the economy and control the financial outcomes of people they've never met based on their arbitrary assumption about what might be fair. It doesn't work that way. No amount of "re-distribution" can remedy the perceived wrong. The only reason they try is because wealth can be represented by dollars, and dollars can be manipulated. But talent cannot be redistributed. Effort cannot be redistributed. Luck cannot be redistributed. Wisdom cannot be redistributed. If freckles attracted wealth, too bad, you can't redistribute them either. Attempting to redistribute things that weren't distributed in the first place is folly.
5. The "Dreaded" socialism doesn't result in equally abundant wealth. The general result of the "dreaded" socialism both now and throughout history is a small cadre of politically-favored individuals with a fair amount of wealth ruling over a generally impoverished nation. There is no rush of immigrants streaming into socialist countries from capitalist countries. Yes, already-acquired wealth can be "redistributed" among a broader population, or an attempt to do so can be made, but such a scheme does not generate new wealth, and does not lead to abundant wealth spread equally across a population.
BONUS REASON #1: The video introduces a straw-man argument in complaining a CEO can't possibly be "working 380 times harder" than the average employee. But nobody has made an argument that CEOs work that much harder than the average employee. No intelligent person believes hard work is necessarily equivalent to wealth, or that increased effort necessarily results in increased wealth.
BONUS REASON #2: There is no permanent top 20% or bottom 20% in America. In fact, most Americans migrate between the income quintiles throughout their lives. Young people begin working part time and take entry level jobs, earn more and more throughout their career, reach a peak, and then begin working fewer hours as they reach retirement age, or retire and keep a part-time job. The video presents an America in which there are stable classes of people based on income, when in reality someone could be in the top 20% one year and in the lowest 20% the next, or vice-versa.