Governments should value economic equality before prosperity
Political motions are always divisive, but this one lies right at the top of the scale. It's two years after the recession and now, in the American election, a lot of what the international media is showing is a great argument among the presidential hopefuls as to how America can be made to be as prosperous as possible. The question is - is that even desirable? Or should the governments of America and other countries aim primarily for a more equal distribution of wealth, given how some Americans are in greater poverty than ever before, while others seem only to get wealthier and wealthier?
Since the motion is incredibly vague, let me define my idea of "economic equality". Economics is all about standard of living. Having an equal standard of living means that we get fair compensation for our work, and that we get work to do. This involves three processes. First, work must be fair, so employers can't discriminate or treat their employees badly. Second, work must provide adequate compensation to all employees to allow them to have a standard of living, but not so much that a few elites can control access to certain commodities. This is where stuff like minimum wage laws and progressive taxation comes into play, which in many ways are the most important things governments can do. Third, it means governments must do all they can to fight unemployment (I suspect we'll find some common ground here) insofar as people are able to work. In a nutshell, economic equality means we all have equal access to a standard of living, regardless of things like our backgrounds or what suburb we live in. I intend to justify all of this when the debate starts - I merely put it here so that there is no confusion over what I am actually arguing for in this debate.
My opponent is free to define how exactly he measures prosperity. Tautological definitions should be ignored.
The question in this debate is not whether a prosperous society or an equal society is to be preferred. They're not necessarily mutually exclusive. The question is which option governments should generally encourage (notwithstanding exceptional circumstances), in cases where a policy decision can only work in favor of one or the other. As per usual in debating, all other words have their standard dictionary definitions.
Please only accept this debate if you're RoyLatham. If you're not Roy, then do not accept this debate. He and I have been wanting to do this debate for some time.
The burden of proof is mine. This is an acceptance/definitions/setup round. Round four is a summary round, and should be used primarily to summarise the debate, as opposed to doing things like bring up new arguments. The debate is generally structured exactly like any other DDO debate.
This topic underlies many important issues in society. Thanks to Pro for instigating the challenge.
Prosperity. Prosperity is measured by the average annual income of the members of a society. For societies that rely mainly by subsistence agriculture and barter, Calculations of Gross Domestic Product (GDP) [1. http://en.wikipedia.org...], measured by monetary transactions, divided by population will not accurately reflect the relative wealth of the community. In any society, not all of GDP is reflected in individual income. I doubt that either issue will be important in the debate, but they might arise. For our purposes GDP per capita will be a suitable measure of prosperity.
Distributions of wealth. Perfect equality would be everyone in society having exactly the same income. As a graph of numbers of people versus income distribution, in a perfectly equal society all the people would appear on the graph at a single spike at one income level.
While there is only one way for everyone to be equal, there are many ways that wealth may be unequally distributed. If the factors leading to some quantity occur randomly multiply, the result will be a log-normal distribution. [2. http://en.wikipedia.org...] The distribution of the sizes of trees in a forest, IQ scores, the sex drive of humans, he sizes of cities, and a host of other natural phenomena are well described by the log normal distribution. So if a forest grows undisturbed, the trees will nave a log normal distribution of sizes. A farmer growing oranges will trim the trees to uniform size, artificially producing equality.
I know this statistical talk is inherently very nasty, but I doubt there is any way to avoid it.
Poverty level. We will need a definition of "poverty level." This is somewhat controversial of late, because the U.S. government has introduced a new definition of poverty in terms of equality. For this debate, I want to use the definition: The level of income in a society at which the basic needs for food, clothing, and shelter are met. The income level at which basic needs are met varies with the society. In the U.S., it is a family income of about $30,000 a year. $30,000 per year in underdeveloped countries would correspond to substantial wealth. It varies substantially within the US. In rural areas, $30,000 allows a better lifestyle than in expensive urban areas.
I have no objection to using other definitions of poverty level in the debate, but I ask alternatives be distinguished by some additional word added to the phrase poverty level. Again I don't think we need an extremely precise definition. I will be arguing that the economic goal of society should be to raise as many people as possible above the poverty level, meaning that we should want as many people as possible to have their basic needs met. I think we can argue that without getting into a discussion as to whether for a particular society "basic needs" includes a cell phone or not.
Happiness. I will need a definition of happiness. Fortunately, the idea of happiness is universal. There are actually measures of levels of happiness in societies. The important think is that the measures all depend upon self-assessment. The principle is that if you think you are happy or unhappy, there is no better authority for the opinion. The Wikipedia article on happiness economics gives an overview of the subject. [3. http://en.wikipedia.org...] The Satisfaction with Life Index is, I think, a pretty good measure. [4. http://en.wikipedia.org...]. United Nations Human Development Index is empirical, but it seems reasonable. [5. http://www.cnngo.com...] the two generally follow each other in broad outline.
Pro is right when he says that economic equality is about standard of living, but he's wrong in asserting that employers being fair has anything to do with that. People may be economically equal or unequal largely independent of employment. For example, The Prince of Monaco provides free housing to all citizens, and that has nothing to do with employer fairness. Subsistence agriculture has a high degree of equality with everyone self employed. "Fairness" is completely subjective. What Pro or the government thinks is fair may be completely at odds with other concepts of fairness. I have heard the argument that it is unfair to discriminate on grounds of competence.
Pro also claims government must do all it can to fight unemployment. That's not a measure of equality. Again, rich princes may provide a large amount equalization without concern for employment. I agree that unemployment is a concern in economic policy, but that concern arises in my case and Pro's case. It's not part of the definition. A significant minimum wage always increases unemployment, but whether that is good or bad overall is a matter to be argued.
If equality is the primary goal of economic policy, it can always be achieved through universal poverty. The question is about the priorities of policy. What's more important?
On to Pro's case.
I thank my opponent for his definitions. Here's my case.
The Great Prosperity Experiment
Back when Henry Ford was still around, and the ideas of industrialists like Fredrick Taylor were still cool, the aim of managers - both at a national level and at a business level - was to optimise productivity, and by extension, prosperity. They called it "scientific management" because they applied scientific learning and axioms to find new ways to increase their prosperity as much as possible. The great thing was that it worked wherever it was implemented. After Tsar Nicholas II demolished the Russian economy, Vladimir Lenin turned to scientific management to provide a solution, and Russia rebuilt itself. After German hyperinflation, Adolf Hitler also used scientific management, and the German economy started working again. And just like Hitler and Stalin, Henry Ford used scientific management (even if he didn't call it that), inventing one of the most productive systems known to man. Russia went from poverty to prosperity. Germany went from poverty to prosperity. People in US cities where there were major production lines, such as Michigan, saw their production soar as well. As a result, the average income increased dramatically in all of these cases.
The crucial thing about all of these experiments was that they failed. Neither governments nor businesses could successfully manage to create an economy based on trying to maximise average incomes, and it was always for the same reason. Lenin did increase average income dramatically, but it came with the cost of equality, in effect creating the very opposite of the socialist ideal (http://www.wsws.org...). Hitler also increased average income, but again at the cost of equality (http://en.wikipedia.org...). And Henry Ford faced the wrath of the unions - Ford even hired boxers to physically assault employees who were suspected union members, but eventually had to succumb to the inevitable reality that without worker support his business would fail. What were the unions so upset about? You guessed it - inequality. They didn't want Ford to have too much dominance over the labour market, creating lots of unemployed while paying his workers so well as to create a class system wherever he operated.
The Radical Alternative
My claim is that government exists to preserve the interests of all the people, not just an elite. According to the IMF (http://en.wikipedia.org...(PPP)_per_capita) the countries that do best at that are countries like Qatar, Luxembourg, Singapore and Norway. It's no surprise that on the UN's Human Development Index, which my opponent cited, all of these countries are listed as having "very high" human development. On the Satisfaction of Life Index he cited, Luxembourg and Norway are among the best in the world, and Singapore and Qatar are each in the top 10 for their world-region. Why? Perhaps the answer lies in the Gini coefficients. Gini coefficients measure statistical dispersion of wealth, with zero meaning wealth is perfectly equal. If you arrange the world's countries by Gini coefficient (http://en.wikipedia.org...), you get (with only a few outliers because the data is somewhat older) something that looks suspiciously like the Satisfaction of Life Index. The answer is clear - equality leads to happiness. But as Hitler, Stalin and Ford have shown us, prosperity does not lead to happiness.
There is another force at work here. Equality leads not only to happiness, but also to prosperity. The idea that equality is means everyone is poor is completely unfounded, for two reasons. First, companies are likely to invest in places with high equality, because if people are happy there, then company employees want to be in on that happiness. This investment brings money into the economy, increasing the average wage. Secondly, when people are being paid a fair wage relative to their output, there is an incentive for everybody to increase their output. In an unequal society, there is no incentive on those who are suffering poor working conditions and low wages to work harder, because they'll still be in poverty. This increase in work translates to an increase in prosperity and an increase in the value of money - and assuming we see GDP per capita in terms of purchasing power parity (which is a wise idea, since otherwise my opponent is arguing hyperinflation is the best macroeconomic policy), that means more prosperity.
The choice for governments is simple - choose to promote equality and bring your people prosperity, or choose to promote prosperity and some of your people will fall to ruin. Which should government choose? My belief is that the latter is hands-down better, both for the people of the government and the government itself. For the people of the government, happiness is the ultimate goal, and it is equality that brings happiness, not prosperity. For the government itself, when their people are unequal, that reflects back on them, especially since they'd be creating the inequality by pushing for prosperity.
How does this translate into reality?
Well, first it means employers need to be fair. If one person has to do more of the same work to earn the same wage, then clearly that's inequality, a point that feminism has been raising for a few decades now. Con argues that this is independent of standard of living - to some extent he is right, but it does help determine one's standard of living. Would you rather work for Ford and get beat up by a boxer in order to earn your wages, or work at some other factory and earn the same wages under good working conditions? Everyone would at least agree that the two scenarios do not have an equal standard of living attached to them, so clearly it's not completely independent. Governments must ensure there are fair conditions in factories, both in terms of wages and conditions.
Con also makes the assertion that fairness is completely subjective. This is true only when one considers future policy - in hindsight it is easy to see what policies led to a fair outcome and what policies didn't. I will admit that politicians, like all people, sometimes get it wrong, and in the interests of fairness push policy that's incredibly unfair. That doesn't mean, however, that governments should not push for economic equality. That's a great argument for telling governments to learn from their mistakes, something which I wholeheartedly support.
I also agree that unemployment is a concern to both of our cases, but I think my opponent's criticism is directed at my too general use of words. Let me qualify it therefore by saying that where I said unemployment, I meant the involuntary part of it. Involuntary unemployment is not equal as it polarises society, with some stuck on some government safety net while others get ahead. This is particularly pernicious because it's always the poor who end up getting laid off first. Again, I don't think this will be a point of clash since we both agree on the policy, so I'll move right along.
Finally con argues that a significant minimum wage always increases unemployment. In the long term, I argue that societies that maintain a high minimum wage maintain equality, and thereby create prosperity. This can be seen in many of the European nations, such as Luxembourg and the Netherlands, which have the highest minimum wages in the world and yet very low unemployment (The Netherlands has the lowest in the EU right now). In the short term, there is a small jump, but this can be almost entirely attributed to employers not feeling so bad about firing their employees, as they have less dependence on their jobs. After a while they realise how stupid this philosophy is, because without skilled employees their businesses will not get far.
The basic idea is that equality works.
Freedom is a better value than economic equality
Governments enact policies to bring values to fruition. We know the policies that lead to prosperity. Prosperity comes from accumulation of wealth, a willingness to take risk to achieve rewards, and free market by which investment can be expressed. Government acts to value prosperity when it's policies support savings, investment, and free markets. Prosperity can also derive from good fortune, like happening to have significant oil reserves, but our debate is about governments expressing values as policies, not about being lucky.
We also know how to achieve economic equality with certainty. It is to take money away from investment and redistribute it. Governments can and do achieve equality through poverty, but prohibiting accumulation of wealth and investment. However, suppressing free markets and redistributing wealth is not as easy as it seems. Redistribution of wealth always involves a ruling class that controls the redistribution. So in North Korea there are perhaps 40,000 people who live well and about 24 million who share the equality of poverty.
At root, this debate is about whether a ruling elite should be established to redistribute wealth according to what the elite values. We should not.
The redistribution premise is wrong
What is the motivation for wanting to redistribute wealth? The starting point is that people have a right to do as they wish: to save and invest in risky ventures or not, to spend their time managing risks or not, and to use their earnings as they see fit. So what is the grounds for interfering with the economic lives of individuals. Saying it's for fairness begs the question. In Monty Python skit, a Robin Hood character redistributes lupines, robbing lupines from the rich and giving them to the poor. The joke is that the robin Hood character believes that equal distribution of lupines is important. The people receiving lupines are perplexed.
The premise of redistributing wealth is that happiness is proportional to wealth. Every liberal and most non-liberals believe that, but studies do not confirm the premise. The part that is true is that if people lack basic necessities like food, clothing, and shelter then they are very unhappy. They get happier up to the point where their basic needs are met. Impoverished Zimbabwe under dictatorial rule is the saddest place on earth. But beyond the basics, added wealth produces very little increase in happiness.
Many studies support this conclusion, Wikipedia summarizes "Historically, economists have said that well-being is a simple function of income. However, it has been found that once wealth reaches a subsistence level, its effectiveness as a generator of well-being is greatly diminished." [6. http://en.wikipedia.org... supported y their ref 8]. Science Daily reports "While most people believe that having more income would make them happier, Princeton University researchers have found that the link is greatly exaggerated and mostly an illusion." [7. http://tinyurl.com...]
What is the most important in determining happiness? "Of perhaps utmost importance, nearly all the nations in the top 10 are adept at fostering entrepreneurship and opportunity. Legatum’s researchers concluded that a country’s ranking in this area is the clearest proxy of its overall ranking in the index." [8. http://tinyurl.com...]
Economic policy should therefore not be aimed at redistributing wealth to achieve economic equality. It should be aimed to raise as many people as possible above the level of satisfying basic needs. that is done through permitting free markets to operate and in fostering entrepreneurship.
Forcing economic equality diminishes wealth
The Gini index is one measure of economic equality. It's applied to both incomes and to wealth. Let's look at income first. Con claims that equality of wealth correlates with prosperity. That's wrong because correlation does not prove causation. Dictatorial regimes concentrate wealth and control markets resulting in poverty. Free markets produce wealth by investing accumulated capital and produce prosperity. The proof lies in examining the economies of America, China, and India.
According to Wikipedia [8. http://en.wikipedia.org...] the United States Gini Index for incomes was 45 in 1929. During the Depression, equality increased along with poverty, reaching 37.6 immediately after WWII. From 1947 to 1990, inequality increased slightly, rising to 42.6 in 1990. Poverty decreased. The booming 90s brought inequality to 46.2. Since 2000, inequality has been about the same, ending the decade at 46.8.
In the U.S., unemployment and poverty declined during the 90s as inequality increased, and stayed about the same until the the onset of the current recession. [9. http://www.infoplease.com...] Overall, poverty rates have declined since the 1960s, while inequality increased. Unemployment mostly responds to short term recessions and booms.
In other countries, the most interesting cases are China and India. They are the most interesting because the economies are large, and the policies with respect to inequality have changed significantly. India operated as a democratic socialist state until the past few decades, and while China remains authoritarian, they have abandoned communist economic ideals and permitted much more free market activity in the past. In both countries, inequality has risen significantly in the past few decades, and prosperity has risen dramatically. After WWII, famines plagued both India and China. Freeing markets produced a significant increase in living standards. People are much happier not facing famine than being equal in poverty.
Small countries in Europe are generally not good examples because they are often dominated by special circumstances. Norway received major income from North Sea oil, producing increased prosperity. Sweden became prosperous with near-libertarian economic policies, and is now coasting in slow decline. Respected Swedish parliamentarian Johnny Munkhammar writes:
"…Sweden is not socialist. According to the World Values Survey and other similar studies, Sweden combines one of the highest degrees of individualism in the world, solid trust in well-functioning institutions, and a high degree of social cohesion. Among the 160 countries studied in the Index of Economic Freedom, Sweden ranks 21st, and is one of the few countries that increased its economic freedoms during the financial crisis." [10. http://tinyurl.com...]
Tiny Luxembourg has an unusual economic situation from specialization in international banking and exotic steel making. I see nothing about any efforts to redistribute wealth. [11. http://tinyurl.com...]
The Gini Index for wealth is more interesting that the Index for income. What's interesting is the seemingly random relationship between concentration of wealth. [12. http://tinyurl.com...] Rich countries like Denmark (.808) and the USA (.801)have high concentrations of wealth, but so do some of the poorest countries like Namibia (.847) and Zimbabwe (.845). Some countries with low concentrations of wealth are well off. like Japan (.547) and others are relatively poor, like China (.550).
What counts is how much wealth is invested. The Japanese have extraordinarily high personal savings rates, from which they derive investment. Third world dictators are accumulating wealth but not investing it.
Policies should be directed at prosperity
Redistribution of wealth does not raise people out of poverty, prosperity achieved through free markets does. Free markets can stand fairly heavy taxation, but they clearly succeed in spite of that, not because of it. Economic policy should aim to raise people out of poverty, through free markets. People are happier not being in poverty, and everyone is happier enjoying economic freedom.
I thank my opponent for his rebuttals. In this round I shall answer his contentions and defend my own.
Assuming that the government does not print money (which makes everybody poor and is thus not very conductive to prosperity), one person having more money means that another person has less. That's the problem with my opponent on one hand saying that the accumulation of wealth is important, and that on the other hand poverty eradication is also important - one person accumulating wealth is the source of another person's poverty. If you want to eradicate poverty, you have to deal with one person or group controlling too many scarce resources, which is the inevitable result if money is concentrated into the hands of only a few "haves" instead of a majority of "have nots". The prosperous society he describes is one governed by a ruling elite - both because control of money means control of resources, allowing certain individuals to regulate who gets what, and because with wealth comes the power to lobby governments to certain ends.
The excuse my opponent gave you for why poverty is OK is essentially that poor people don't invest. Companies get their money primarily through two channels: investment and consumer spending. Poor people are bad at the former, but brilliant at the latter. What you'd find if there was more equality in the world is that companies who provide food, clothing and other necessities would have a lot more wealth to help more poor people, while companies who provide luxuries like private jets are likely to have a lot less to help rich people. The point is that companies are still getting income for things like large capital projects - only from a different source, and by different means - if governments choose equality over prosperity.
My opponent claims that the redistribution of wealth must be by a ruling class, using North Korea as an example. He then goes on to defeat his own example by showing that North Korea is actually a very unequal society. The existance of a ruling class is proof that a government cares for prosperity over equality, despite what that government's rhetoric may be. It is perfectly possible to institute a fair and objective system for redistributing wealth, and yet these governments refuse. An example would be progressive income tax, where earning more means you pay a higher tax rate. That's not redistributing according to elitist values, that's redistributing according to an objective measure. If the government "redistributers" started to become wealthy, then they would be taxed at the higher rate too. In this way they don't control the resources either.
Why aim for equality?
I will agree that income has diminishing returns on happiness. What this means is that my opponent's evidence shows that prosperity beyond some basic level becomes increasingly futile. By comparison, the impact that the same marginal amount of income has on a poor family is much greater. My opponent's evidence is entirely consistant with my observation that equality leads to happiness - indeed, it supports it, because it shows that happiness would not have been increased as much through more prosperity than with more equality.
But happiness is only half of the picture. My other contention was that equality leads to prosperity. I gave two paragraphs of analysis on "The Great Prosperity Experiment", and my opponent didn't see fit to answer any of it. All he tells us is that investment and entrepreneurship (which relies on investment) leads to prosperity because the Legatum Institute said so. That's no surprise, because the "Legatum Institute" is actually a division of The Legatum Group (http://www.legatum.com...), a capital investment group. So basically a capital investment group is saying that their services will bring prosperity. This is spin that just shouldn't be believed.
Equality does not diminish wealth
I agree correlation does not prove causation. What proves causation is my paragraph of unresponded-to economic analysis on why the figures show such a strong correlation between equality and prosperity, which stated that equality provides incentives for investment and for achievement. Free markets provide no incentives for either. Con asserts rich people have reason to invest in a free market, and yet his own data shows they have relatively little happiness to gain as a result, and a lot of happiness to lose, meaning that in a free market the incentive is not to invest. In an equal market, there is consumer expenditure substituting investment (as the poor spend relatively more of their income) and incentive for international expansion, as I showed last round.
To distract from this analysis, my opponent provides three counter-examples. On the United States, he explains more inequality was often correlated with less poverty. This is because he has defined poverty in terms of outputs, such as food and housing. The Stanford Center for the Study of Poverty and Inequality shows that while output in GDP per worker has increased massively in the US, the median income hasn't increased a bit since 1970 (http://www.stanford.edu...). That's bad because there has been significant inflation since that time, so in terms of purchasing power, US poverty has increased massively. Poverty has not decreased, or remained the same. It has increased at more or less the rate of inflation, while inequality has certainly increased.
On China and India, my opponent says that they have recently become more prosperous and open. To some extent, the size of a market determines the potential for returns in relatively equal societies (like China and India used to be), meaning that when these countries opened up to foreign investment (NOT free markets or deregulation like my opponent always asserts - in fact China has particularly non-free markets, such as their currency market), there was a lot of investment. It will take some time before issues of poverty in China mean investment slows, and we're already seeing the first signs of that. For instance, Apple's scandel when workers at the Foxconn factory at Zhengzhou suicided will inevitably mean investors will be more cautious about moving into China, and even the US government has expressed some concern (http://www.bbc.com...). In addition, what incentive do these workers have for entrepreneurship, or to increase their productivity? None. Their lack of equality has diminished their real wealth, just as it did when communists caused the famines there under a five-year plan to improve prosperity.
Now let's turn to my awesome examples, which didn't include anyone in Scandinavia so I'll ignore that bit. I gave the example of the Netherlands, my opponent did not respond. I gave the example of Luxembourg, and my opponent blamed that on the attractiveness of their industries. Their efforts to redistribute wealth are in their highest-in-the-world minimum wage, which I cited and my opponent ignored. Their industries are attractive because of the significant foreign investment there. Why? Well, as your source says, it's mostly because of the positive labour relations. And why's that? One word - equality. Of course people will be happy workers if they're equal, that's what I've been proving time and time again.
The great prosperity experiment is a failure. Equality should be the future.
If a country is prosperous it can contemplate more redistribution of wealth than if it is not prosperous. Oil rich sheikdoms can distribute money to residents. If a country is not wealthy, it is more important to become wealthy than to ensure that poverty is equally distributed. A sure way for government to bring about economic equality is to make sure that everyone is poor. If it were true that equality should be valued more than prosperity, then governments should seek universal poverty. That's obviously not true, so the resolution fails.
The Zero-Sum-Game Fallacy
Pro begins with grievous mistake, that an economy is a zero sum game. The notion is well-debunked, including a book-length exposition. [13. http://www.amazon.com...]
A simple example shows the error. Assume a small island nation with a constant money supply and only two farmers, A and B. A and B produce equal amounts of food. Suppose farmer B decides to stop producing. There would be food shortages and the price of food would increase significantly. The people on the island would spend more and have less food, so poverty would increase. Suppose instead, that the two farmers obtain, for the first time, some tractors that increase productivity. The islanders would then have more food at less cost, and prosperity would increase. Poverty and prosperity are functions of efficiency, and may rise and fall even if the money supply is held constant. If everyone decided to stop working in favor of receiving government checks, the result would be inevitable poverty.
Pro originally argued that the Satisfaction with Life index correlated with equal distribution of income as measured by the Gini index. In the last round, I showed that was false. It's good to be rich, for sure. Norway derives wealth from North Sea oil which it has wisely invested, Qatar from vast oil supplies, Luxembourg from a unique position in international banking. Singapore derives it's wealth through free markets. None derived wealth from redistribution. Pro uses small countries as examples, because the overall economies can be dominated by a few special conditions.
I explained why small economies are not good examples, but Pro insist that The Netherlands proves redistribution brings prosperity. Policies of redistribution brought the Netherlands to near bankruptcy in the early 1980s. they restored prosperity by changing to free market policies, and were prosperous again by the mid 1990s.
"During 1970-1982, the fiscal situation deteriorated dramatically … Public expenditures rose sharply, mainly as a result of an increase in transfers to households. … Important in these rising transfers was the rapid increase in the number of social security recipients: the number of unemployment, disability, sick leave, and welfare recipients more than doubled … Problems in the labor market were exacerbated by increases in the minimum wage, the introduction of minimum wages for young people, … and the elimination of the difference between the minimum benefit and the minimum wage." [14. The Netherlands: transforming a market economy http://tinyurl.com... p. 4]
"The striking turnaround in the Netherlands economic performance over the past decade [to the mid 90s] … the policy reforms that included a firm monetary anchor, tight control over public expenditure, and reduced intervention in the economy. … major cuts in minimum wages for adults and even deeper cuts for youths … reducing the duration of unemployment benefits, … privatizing other benefits, and cutting the personal tax burden." [14, p. 1]
Having regained prosperity they returned to redistribution, an their economy is now sinking again.
"... the most pressing challenge for the near future is to prevent the cyclical increase in unemployment from becoming structural. ... the upturn is still supported by exceptional fiscal and monetary stimulus. ... as a result the deficit widened significantly and fiscal sustainability deteriorated. As economic growth strengthens, the government coming in after the June 2010 elections will be confronted with the task of consolidating public finances without putting the recovery at risk. The most crucial longer-term challenges are to secure fiscal sustainability and raise potential growth." [15. Economic survey of the Netherlands 2010. [15. http://www.oecd.org...]
The pattern in the Netherlands is similar to the U.S. and Sweden: prosperity brings redistribution, and that ultimately ends prosperity.
Pro claims that prosperity came to China because of increasing foreign investment. So, does investment increase or decrease the concentration of wealth? One possibility is to promise investors that their investment will be seized and equitable redistributed to the workers. That's not likely to work. Another possibility is to impose a very high minimum wage, so that profits will be low. Or perhaps taxes could be made high so the profits could be taken by government for distribution. No, investment is only attracted by the understanding that capital will be preserved, profits will be made, and profits will not be seized and redistributed. Investment is concentration of wealth, not redistribution.
Prosperity is increasing in China, and it is not just foreign investors. A middle class is rapidly developing, with an accompanying demand for automobiles and higher end goods. china is expected to soon be the world's largest market for luxury goods. There is no way to explain the prosperity in terms of valuing economic equality. It was abandoning the communist ideal that made the country prosperous. Why doesn't China impose a $100 minimum wage to solve the concerns over Apple's cheap labor? it's obvious.
Abandoning democratic socialism in India has similarly increased their prosperity.
The minimum wage
Pro's minimum wage theory is refuted by the by the data. A high minimum wage causes unemployment as unprofitable operations are shut down, jobs are automated, or low-skilled workers are replaced by fewer high skilled workers.
The Congressional Research Office found 99 academic studies of the effects of the minimum wage. Studies spanned fifty years worldwide. In all but three cases, unemployment increased when the minimum wage was raised. [16. http://web.archive.org... ] In the few cases where unemployment did not increase, the free market wages were already above the minimum wage, so there was no effect.
The Ruling Elite
My argument is:
1. Government values are expressed as policies.
2. valuing economic equality implies policies of redistribution.
3. Redistribution requires many decisions of who to take wealth from and who to give it to, and how much is to be transferred by what means.
4. Redistribution decisions are made by those who have ruling authority.
5. Therefore a ruling elite is required.
A ruling elite might choose not to reward itself, but that rarely happens. One might imagine a theocracy of rulers who do not accumulate wealth, but I know of no examples. In the United States, government workers receive 45% more compensation than private sector counterparts. [17. http://online.wsj.com...] Progressive states like California have a more privileged elite than conservative states.
My point is that valuing economic equality does not mean that economic equality results. The ruling elites in the Soviet Union and Mao's China no doubt valued economic equality, and there is every reason to believe the North Korean leaders also value economic equality. They correctly recognize that redistribution cannot be accomplished without a ruling elite empowered to redistribute. It's a part of the package.
Prosperity derives from free markets
Pro cannot explain why Hong Kong or Singapore are more successful than North Korea or China. It's their free economies.
I thank my opponent for having this debate with me. It's been lots of fun. In this round I will summarize the key issues in the debate.
As should be fairly obvious, a society with an "elite" is the very opposite of an "equal" society by definition, but as I've already pointed out, entirely conductive to prosperity. My opponent didn't respond to that part.
My opponent's fallacy is in the point he labels four - the requirement of a ruling elite to carry out those policies. You don't need an elite to monitor giving everybody equal access to the courts. You don't need an elite to implement progressive taxes. You don't need an elite for minimising unemployment. These policies are being enacted in states all around the globe without the establishment of ruling elites or distribution councils. Why? Because these are all objective rules - there is no subjective element that an elite would be required for. Furthermore, the fact that members of Soviet Russia's (or Mao's China's, or North Korea's) inner party do not have a standard of living equal to everybody else shows that they are far from being committed to equality.
I agree that valuing economic equality doesn't always mean it results, but the same is true of prosperity - to err is human.
My opponent claims I can't explain Hong Kong or Singapore. Singapore is a country that has historically had high equality, with a Gini coefficient about 0.2 below the world average, but it used to be about 0.4 below the world average (which would make it among the most equal societies in the world had it not changed) (http://tinyurl.com...). About 40 years ago the government began to aim for prosperity, and unsurprisingly poverty has increased massively since then. A recent government report said "Evidence from economic research indicates that income inequality can have profound ill effects... It creates price distortion which can push low income families into poverty... Thus inequity can rob Singapore of the very factors – law and order and efficiency, which placed Singapore at the helm of the globalized world." (http://tinyurl.com...).
But there's something I want to say about Hong Kong also, which is a new example con has brought up. When Russia embarked on their experiment it lasted over 75 years before falling apart. Germany's experiment fell apart early because they were proud of the inequality they were creating, but it never fell apart on its own, and even became more and more productive when all the factories were being blown up (http://tinyurl.com...). Henry Ford is so well-regarded in America today because the experiment worked long enough for thousands of cars to be produced, making the automobile affordable (at the time a very remarkable feat). So creating a caste system of "haves" and "have nots" certainly does work for a while - but eventually it all falls to pieces. Hong Kong has fallen to pieces twice already - after the 1998 Asian financial crisis and after the SARS outbreak. They lasted a mere 25 years. What did Hong Kong then do? They ENDED their prosperity experiment (http://tinyurl.com...)! The Hong Kong we know today has, for the past decade, been moving further and further away from free markets - and their economy has been doing better than ever!
I've proven time and time again, both by empirical example and by economic analysis that unregulated free markets don't work. You need REGULATED free markets. These ensure equality, and that ensures prosperity.
Effects of regulation
I agreed that the minimum wage usually causes a short-term increase in unemployment, but I provided economic analysis in round two that in the long-term, countries with a high minimum wage are better off. This analysis has never been refuted - only the examples I used to support it. I talked about Luxembourg; my opponent constantly reiterates that it's their attractive industries. Many countries have attractive industries - but there's a reason they're not as rich as Luxembourg. I've said it many times before - it's because they believe in equality and have a high minimum wage, as well as a healthy unemployment benefit.
I also talked about the Netherlands, and my opponent talked about their crisis of the early 80s. This is because the government enacted the right policy in the wrong way. For instance, they raised the minimum wage beyond an equitable level for everybody that worked. That's not conductive to economic equality, because it's assuming the whole economy is measured in monetary terms. It's not; it's measured in standard of living. Workers got a comparatively worse standard of living than those on benefits, and the economy collapsed. Since then the Dutch have been working to equalise their economy the proper way, and it's worked really well. The notion that the Netherlands is falling apart comes from a dated OECD study that agreed with me that the Dutch economy was "strengthening", although like all European nations, it faced challenges after the recent recession. Today the Netherlands have low inflation, low unemployment and well-above-average economic growth (http://tinyurl.com...).
He also quickly mentioned the US, which I rebutted fully, and Sweden, which he has already proven didn't aim for equality, to which I agreed.
This is the most important issue in our debate - does investment create or reduce poverty. We both agree it creates economic growth (though I've argued consumer spending can have the same effect). The basic principle is that money doesn't magically appear - one person having more means that another has less. I agree with my opponent that production (as opposed to money) is not a zero-sum game, but for that to support my opponent's contention, that would be supposing that if I invest in a company, then that production will benefit everybody. In a free market there is every incentive on the wealthy to invest only in companies that benefit themselves. Why invest in developing low-cost housing for the poor - that doesn't generate a return, nor does it help the investor in any other way! But investing in private helicopters - now that's a wise investment, because it not only generates a return, but it benefits me because I buy private helicopters.
What my opponent is advocating is called "trickle-down economics" - if you make the rich richer, you'll make the poor richer too, and get them out of poverty. It's no coincidence that in every one of the prosperity-nations we looked at the opposite happened. Making the rich richer makes the poor poorer because they have less control over how resources are allocated, and have less political influence. This holds true even if production increases - it will be the rich who get any marginal production, not the poor, because the rich own the factories and, for the simple reason of greed, have absolutely no incentive to raise wages in a free market. As New Zealand politician Damian O'Conner said, trickle-down economics is when the rich piss on the poor.
What's the alternative? Equality. Con frequently says that's just making everybody poor. The reality is that nations high in equality do not have high rates of poverty, as I've demonstrated in many examples. The reality is that equality creates the incentives for massive long-run improvements in real purchasing power, as I've demonstrated in my analysis. And the reality is that aiming for prosperity has made everyone poor very frequently - except, always, for a small ruling elite. That's why Occupy happened. Wealth doesn't come from redistribution - but wealth isn't sustainable if the economy is controlled by a small, greedy, corrupt minority. Governments should, and must, do everything in their power to protect their people against this horrible, but very real, possibility. It's happened before. It will happen again.
There is one thing my opponent and I have a consensus on - we must learn from the mistakes of the past.
The resolution is affirmed.
This has been an interesting debate, for which I thank my opponent.
My contentions are:
1. Reducing poverty brings happiness, but economic equality can be achieved by poverty. I presented data showing that once basic needs are met, added wealth produced little or no increased happiness. Therefore the goal of government should be to raise people out of poverty, not to try to make them equal. For example, data I cited shows poverty rates lowest when inequality measured by the Gini Coefficient was greatest. The Depression brought equality and poverty. Post-war prosperity bought inequality and much less poverty. The fundamental premise of striving for economic equality is wrong. Prosperity vanquishes poverty, not striving for economic equality.
I gave a full explanation of why economies are not zero-sum games. If they were, standards of living could not improve, and manifestly they do.
2. Free markets create prosperity. We have numerous examples that cannot be explained otherwise. The deciding factor is not overall authoritarianism or democracy, it is free markets. South Korea and Taiwan had authoritarian governments for many years, but produced prosperity that brought many people out of poverty. The lack of free markets in North Korea and China kept people in poverty, even though those regimes valued economic equality. Similarly, democratic socialism kept people in India in poverty despite despite democracy. India valued economic equality, and got poverty. Only by seeking prosperity and not economic equality were people raised out of poverty.
Pro sought examples of valuing economic equality in which prosperity resulted, but could find none. Luxembourg was not made prosperous by redistributing wealth, but rather by economic advantages in banking and industry. The Netherlands brought itself out of near bankruptcy to economic prosperity by strong free market policies that stressed lower minimum wages. Now redistribution policies are running down prosperity. I cited Sweden as another example of redistribution destroying prosperity.
I cited the Congressional Research Office finding nearly a hundred studies internationally over fifty years in which minimum wage increase brought unemployment rather than economic equality. Pro says that he grants that minimum wage laws have negative short term effects, but he takes it as an act of faith that the long term is positive. He provides no evidence. I listed what happens when there are high minimum wages: uneconomic businesses shut down, labor is replaced by automation, and low-skill workers are replaced by higher-skilled ore productive labor. Pro gave no reason why any of those should be temporary.
A prosperous economy can afford to better take care of the poor, and that's a consequence of seeking prosperity and not a consequence of seeking economic equality. In a prosperous economy there are relatively few poor people, in the U.S. around 14%, so it's possible to take care of them. In societies that value economic equality such as Maoist China or socialist India, there are too many poor people to be cared for. There is no reason to believe that Maoist China or socialist India, or for that matter, communist North Korea, did not value economic equality. Doing so brings poverty.
Pro says that the Netherlands is now prospering under it's renewed interest in redistributing wealth, but his source says "... in Q3 and Q4 2011, the Dutch economy contracted 0.4 percent and 0.7 percent, respectively due to European Debt Crisis, while in Q4 the Eurozone economy shrunk by 0.3 percent." Shrinking is not prospering. The corresponding growth rates in China, where they have diminished interest in redistributing wealth, were for the same periods +2.4 percent and +2.3 percent. http://www.tradingeconomics.com...
Pro tries to portray Singapore as place where poverty has increased despite increases in wealth. when Singapore became independent the per capita GDP was $400. In four decades wealth grew to $26,500 per capita GDP, among the highest in the world. Pro claims that poverty increased "massively" as the per capita GDP rose. There are no statistics on how wealth is distributed, but it's not remotely plausible that there were fewer poor people when the per capita GDP was $400 and there was more economic equality. Singapore now has extensive social programs and low cost medical care, things that poor countries cannot afford. The report that Pro cites says that inequality may produce unrest, but if so that's a product of envy, not increased poverty.
Pro's source on Hong Kong does not say that they have prospered by redistributing wealth. It says that free market principles are being eroded, but "Hong Kong remains, by and large, a vibrant, entrepreneurial place, with government spending far below Western standards. The costs of rising intervention will take a while to appear—" Hong Kong seems to be succumbing to the pattern observed in Sweden and The Netherlands. Prosperity leads to less interest in creating wealth and more interest in redistributing it, with the ultimate collapse of the economy the end result.
I do not understand what Pro is trying to get at by citing the fact that it took 5 years for the soviet economy to collapse. The Soviets valued economic equality and never had a particularly good economy. The example of Henry Ford is even harder to parse. Ford's manufacturing techniques are an enduring success. ford attracted workers by paying considerably more than alternative jobs. I don't see the relation to Pro's case. Is the point that prosperity does not endure, but equality achieved through poverty stands the test of time? If so, it's not true. the world is in better shape now than at any time in history.
Pro asserts that free markets are proved not to work, but his arguments are obscure and bizarre. It is impossible to spin any of the numerous worker's paradises as doing as well as their more free counterparts.
3. Valuing economic equality does not lead to economic equality. Valuing economic equality leads to a ruling elite necessary to control the distribution of wealth. In a free economy in which economic equality is not valued, there is a spectrum of wealth including a fraction of very rich people. Having a ruling elite is a necessary consequence of valuing the redistribution on wealth over a free economy. A government that redistributes wealth must be strong enough to take wealth from some people and give it to others, and that implies a powerful elite to accomplish that function.
Pro claims that no ruling elite is required for equal access to courts, a progressive income tax, or a high minimum age. Equal access to courts is as desirable in free markets as in ones that redistribute wealth, but there are substantial costs in maintaining a legal system. A progressive income tax requires a huge bureaucracy. the American Internal revenue Service has 106,000 employees. It costs taxpayers about $500 billion to prepare the tax returns through which they pay about $2200 billion in taxes. A minimum wage law must be policed, and a government apparatus is set up to continually check, some say harass, employers.
Pro overlooks what I have been saying through the debate: the decisions of who to take money from and who to give it to are many and complex. In every real case a ruling elite emerges.
Investment requires accumulation of capital so there is the money to invest, and it requires a willingness to take risks in return for potential rewards. Government valuing economic equality means that government works to prevent accumulation of wealth by redistributing it. And if a risky investment pays off, government promises to redistribute that new wealth as well. But let suppose that forcing economic equality leads to prosperity. If so, that is valuing prosperity above economic equality, because equality in prosperity is preferred over equality in poverty.
The resolution is negated.
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