Growth Should Trump Envy

October 3, 2024 by Dan Mitchell @ International Liberty

I frequently cite a column I wrote in 2017 about how 1980-2010 was a reasonably good era for China, thanks to a bit of economic liberalization.

My leftist friends will say that can’t be true because inequality increased during those decades.

I respond by pointing out that average incomes dramatically increased during those 30 years and there was a huge reduction in poverty.

The lesson to be learned (echoing my Eighth Theorem of Government) is that nobody should care if some people get richer faster than others get richer. The goal should be better policy so everyone has the chance to rise as far and as fast as possible, given their talents, abilities, and willingness to work hard.

Today, let’s look at American history to see the same principle at work.

Here’s a chart from Professor Vincent Geloso looking at data from 1870 to 1910. It shows what happened to inequality in various nations on the vertical axis (as measured by income share of the top 1 percent) and average income (as measured by per-capita income for the bottom 90 percent).

The first thing to notice is that inequality increased in every nation and per-capita income increased in every country.

But the data from the United States is particularly instructive. Here’s some of what Geloso shared in a tweet.

America had a very mild increase in inequality between 1870 and 1910… However, its also in America that the living standard of the bottom 90% surged the most. By 1910, their living standard had increased by a factor of 2.37. Only Canada got close to that increase and it was still immensely behind America. …only America went fast and hard at improving the living standards of the bottom 90%. By 1910, America not only had confirmed its historical position as the “Best Poor Man’s Country”, it had widened the lead. No country ever before witnessed such a level of living standards for the poor as witnessed in America.

Given this information (as well as the data about China), the challenge for my left-leaning friends who fixate on inequality is deciding which of these two options they prefer.

1. Do they hate the rich so much that they are willing to reduce living standards for lower-income people so long as upper-income people suffer an even greater reduction?
2. Do they love the poor so much that they are willing to let rich people get richer (even disproportionately richer) so long as poor people get to enjoy higher living standards?

Sadly, many folks on the left pick option #1. They hate the rich more than they care about the poor.

P.S. Readers interested in this issue will appreciate this column and this set of tweets.

P.P.S. This four-part series (here, here, here, and here) also is very relevant.