April 21, 2014 | by Axel Kaiser Print

For many people, the mere fact of asking this question is unacceptable. Obviously, they think, inequality is a big problem. President Obama would probably say: inequality is our "great enemy". A statement of this sort, certainly in tune with the Zeitgeist, is not irrelevant. As John Stuart Mill once warned, the intellectual climate of opinion largely defines the institutional development of a country and can have disastrous consequences.

Hence, it is relevant to examine critically the egalitarian premise so as to establish what it is actually attacking and what it is proposing. First, this exercise requires analysing the origin of inequality. And this is none other as Courcelle-Seneuil noted 150 years ago, than human nature in its truest form.

We all are different. We all are unequal. Our talents, abilities, intelligence, willingness to work hard and other factors that define our income vary from person to person. In a free society, these inequalities allow everyone to make the best use of their talent, luck and skills to serve others. This is the principle of the division of labour that Adam Smith masterfully explained in "The Wealth of Nations".

Under a "system of natural liberty", as Smith called it, there are bakers and engineers. There are also lawyers, blacksmiths, teachers, sportsmen, farmers and workers. Perhaps, many of them will change their profession and other will start poor and get rich, or vice versa.

Under this system, our incomes will vary according to how other members of society value each of our contributions. It is a system that fulfils the needs and desires of others, in which merits do not play and cannot play an important role.

When you go to buy pork meat, you do not care if the butcher hunted the boar himself with a knife in the woods or if it was mass produced with minimal effort. You do not care if the producer is a good person or not. You do not pay according to the merit. You just pay for the product. If it is good and has a reasonable price, you buy it. If not, you will look for another option. In that sense, as Ludwig von Mises explained, the consumer is ruthless and the producer is obliged to satisfy him in order to survive.

This freedom to choose according to our own values is the essence of market democracy. It explains why Alexis Sanchez, a famous Chilean soccer player, earns way more money for kicking a ball than a nurse for saving lives, even though the former is less meritorious than the latter. The fascinating thing about this system, even if it seems to be against certain widespread intuitions about justice, is that it is without a doubt the one that allows for the greatest amount of economic and social progress for all community members.

Imagine that a Japanese engineer discovers tomorrow the way to produce near-zero cost clean energy. Not only would that engineer be a millionaire, but the income of most of the world's population would increase exponentially as well. That is the history of capitalism, which certainly does not produce equality but wealth. When Friedrich Hayek observed that inequality was a fundamental part of the free market economy, to the dismay of the socialists, he was simply noting that it is the result of the principle of division of labour, which in turn is the foundation of our well-being and our civilization.

In this context, stating that inequality is the enemy is the equivalent of saying that freedom and human diversity are the enemies. If it was not like that, and freedom was not considered the enemy, it would not be necessary to replace the voluntary cooperation of individuals by state intervention. This is what egalitarians propose, knowing that only the state can achieve by coercion certain politically desired results such as equality. The best illustration that the search for equality is, despite the considerable efforts of John Rawls, necessarily incompatible with freedom can be found in socialist totalitarian regimes. Their maxim was that inequality, and therefore the free economy, was the great enemy.

The result is well known. Obviously, this is not what most egalitarians are looking for. But the path that they want us to follow, often with the best intentions, certainly leads to the restriction of individual freedom and it affects the well-being of society as a whole. On the contrary, the classical liberal way offers freedom and help only to those who are not capable of succeeding in the market economy. In other words, for true liberals inequality is not the problem. The problem is poverty. What matters is that everyone is better off, not that everyone is equal. If a classical liberal had to choose between doubling the current income of all Chileans or Americans, from the richest to the poorest, thereby maintaining the relative inequality existing today, or cutting the income of the wealthiest 15% in half to become a much more egalitarian country, the libertarian would choose the first option. But on the other hand, an egalitarian like President Obama, convinced that inequality rather than poverty is the great enemy to be defeated, would prefer the second option thus harming some people without improving anyone´s overall standard of living.