Objection: free markets result in inequality

Another objection sometimes raised against free markets is that they result in unfair economic inequality, that a few people become very rich while many others remain poor.

In response, we must distinguish various kinds of equality. One great benefit of a free-market system is that it best protects two crucial kinds of equality: (1) equality before the law and (2) equal opportunity to attempt to succeed and improve one’s situation in life. These understandings of equality are implications of the biblical teaching that every human being is created in the image of God (Gen. 1:26-27; 9:6; James 3:9).

But (3) economic equality is a different question. Individuals have differing skill sets, levels of willingness to work hard, intelligence, desires, preferences, and even luck (or rather, from a Christian point of view, divine providence). Because of this, complete economic equality is impossible to create, and efforts to do so are destructive and cause havoc.

In fact, no society or economic system has ever produced strict economic equality among its population, and those that have tried the hardest (the Soviet Union, Cuba, and China under Mao Tse-tung) produced nothing but bloodshed and the tyranny of oppressive governments. Among the masses of the population, there was equality in misery, but among the elite leaders there was still vast privilege, with better vacations, homes, and cars. No system can guarantee equal outcomes.

People generally recognize that not all economic inequality is wrong. Can you sing like Luciano Pavarotti, play football like the Manning brothers, play tennis like the Williams sisters, or create a software company like Bill Gates or a computer company like Steve Jobs? It is a fact of life that people are unequal in their abilities, interests, and motivations. Is Bill Gates really worth billions of dollars? Or is that the wrong question? Could it be there is nothing inherently wrong with some inequality?

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We should be thankful there are some who make larger amounts, save larger amounts, and invest larger amounts than we do. Otherwise, economic productivity and growth would be dismal, and we all would be much poorer than we are now. Inequality of talent, beauty, and luck may be unfortunate, but isn’t it envy that tells us they are always wrong or unfair?

Unfortunately, legislating economic equality does not work because it shifts capital from investment and jobs to unearned transfers and entitlements in developed economies, and to zero-sum, unproductive relationships in developing economies. Attempting to legislate economic equality usually gives more power to the political ruling class, who retain access to all the privileges the society affords.

But we must add that some economic inequality is very wrong. We have already mentioned a common pattern in poor countries, where small, powerful elites manipulate laws, property ownership, and business licenses to keep the vast majority trapped in poverty (75-77). Such cases are not representative of a free-market system, for they nullify the crucial elements of equality before the law and equal opportunity to attempt to succeed and improve one’s situation in life.

 
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