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Chloe Forgie-Williams

The instrumental value of income inequality

The debate over income inequality has become hopelessly muddled. In North America the term “income inequality” has become the weapon of choice for politicians who run out of acts to perform in their media circus. Somehow what should be a rational economic discussion descends into a mud-slinging match, based on emotional appeals of injustice rather than fact. Canadians recently bore witness to this during the general election, when Trudeau pitted the highest income earners against his precious middle class, arguing the former was hurting the latter. This sloganeering is not rooted in evidence. In fact, while income inequality is by no means the perfect system, it is when properly managed the most supportive of entrepreneurship, innovation, and long-term economic growth. In simple terms, the potential to earn income gets people to work.   You don’t get up at 6:00 AM five days a week to sit at a desk for eight hours for nothing in return. Individuals make the decision each day to sacrifice leisure for income; a pay cheque is the reward. Without that reward, what is there to encourage people to productively contribute to society? The leftist response falls flat; reverting to an emotional appeal about altruism or working for the betterment of society, people work because it’s right. In a more frightening response, the left has actually used force.  While the Soviet command economy may produce short-term results, it utterly fails to produce innovation necessary for growth. A system of scaled individual rewards is a necessary condition for innovation because innovation requires individuals to take risks.  The payoff for a successful risk needs to be higher than the payoff of not taking the risk and accepting a regular wage. Sam Walton, the founder of Wal-Mart came from a modest background, what separated him from the rest was his… Read More