Praise for inequality

Photo Agustin Etchebarne
Agustín Etchebarne
General director en Libertad y Progreso

Economist specialized in Economic Development, Strategic Marketing and International Markets. Professor at the University of Belgrano. Member of the Liberal Network of Latin America (RELIAL) and Member of the Institute of Ethics and Political Economy of the National Academy of Moral and Political Sciences.

INFOBAE – It is common for organizations or even great personalities to maintain that the capitalist system works in favor of the richest and increases inequality. Muhammad Yunus (2006 Nobel Peace Prize winner), for example, argues that “wealth acts like a magnet; and the larger magnet naturally attracts the smaller ones. Thus, unidirectional forces concentrate wealth, making there less rich and poorer. This leads people to envy rich people, becoming a time bomb that will destroy everything we have created.

In this way they justify violence and criticize the system that has been most successful in lifting people out of poverty. As economist Deidre McCloskey explains, “It is not true that during the age of innovation the poor have gotten poorer. On the contrary, the poor have been the greatest beneficiaries of modern capitalism. This is an irrefutable historical truth, obscured by the logical reality that, in the beginning, the profits from innovation go to the wealthy bourgeoisie ”.

People like Bill Gates undoubtedly benefited from the system. His wealth is valued at about $ 119.3 billion. However, many people do not understand why he is so rich. Basically because he solved a problem that we didn’t even know we had. Being very young, he realized that computers were difficult to use, only engineers or specialists with years of training could do it, and he created an extraordinary operating system that allowed a massive public, without training, to use them without problems. Today billions of people benefit from using Windows and Microsoft Office. Microsoft workers also benefited, earning an average salary of $ 160,956 annually. The lowest earner earns $ 78,021 and many managers are millionaires. It is true that initially the inequality between Bill Gates and the rest increased, but this did not harm anyone and benefited many. There is also another group that was greatly favored: people who, without being creative geniuses, knew how to recognize the value for the society that their company created and bought Microsoft shares (“shares”) to “share” a part of that success. They are not few: 55% of Americans own shares. With that money, companies can invest in improving their products to sell more, which, in turn, drives up share prices, enriching minority shareholders. Extreme poverty Extreme poverty

Innovation and technological advancements flourish in countries where there are freedoms and property rights are respected, thereby increasing productivity and wages, enriching the population. Furthermore, it is there where there is greater social mobility and the poor emerge from poverty the fastest and the few who remain relatively poorer have incomes eleven times higher than the poor in less free countries. This can be verified by comparing the population with the lowest incomes of the countries that are in the first quartile with the greatest freedoms against those in the last quartile, in the Index of Economic Freedoms of the Heritage Foundation.

Those who use the inequality argument also argue that the distance between developed and underdeveloped countries has increased. The truth is that the countries with greater freedoms generated an innovation that, in effect, initially separated them from the rest. In 1800 89.7% of the world’s population lived in extreme poverty. By 1979, more than half had managed to get out of that dire state, while 48.1% remained there. In Gapminder’s world income distribution graph we can see two humps, where free countries had a median income close to $ 10 per day while less free countries kept the majority of their population at less than $ 1 per day . In that year, the income of the average American worker was 33.6 times that of the average Chinese.

In the last four decades, however, it was found that, in a second stage, growth spread to all countries that opened up to international trade and introduced institutions that guarantee respect for private property, reducing inequality. Thus, in the income distribution graph we can see that by 2019, only 10% of the world’s population was still in extreme poverty, and there are no longer two humps, but only one, a “normal” distribution. And the gap between the average worker in the US and China was notably reduced, to 3.3 times (USD 58,700 vs. USD 17,100).

To top it all, it is widely shown that progressive taxes, being excessive, kill growth and innovation, producing the exodus of the most creative and productive people who will seek better horizons. Argentina is a pathetic example of the latter. 7 of the 8 young entrepreneurs who created unicorns left us.

Instead of envying Bill Gates or Marcos Galperin, we have to admire their creative genius and applaud their tenacity and ability to organize productive efforts, thereby creating wealth by favoring opportunities for all and without impoverishing anyone. In fact, this year, like many others, I was very grateful to be able to use a computer to continue my work from home amid the pandemic.