Friday, January 26, 2007

Is Income Inequality Really a Problem?

Bruce Bartlett poses this question in the NYTimes.

His article and the discussion that follows refer to winners and losers and fairness.

It might be useful to look at this issue from a different viewpoint, namely the competitive position of the United States vs. China and what is best for the future of the United States.

The United States has demonstrated in the past that increasing the educational level of its people is the most effective way of increasing the wealth of the nation, even as some of our natural resources are being used up.

China has adopted the same strategy. It worked well in the U.S. and it’s working well in China.

China has four times as many people as the United States. If both nations pursue current educational practices in the future, China will overtake the United States and eventually surpass us.

What should we do?

It seems obvious that we should accelerate the development our intellectual capital, that is educate our young people to the level of their capacity to absorb knowledge and learn how to create more knowledge.

Then the question becomes, not one of "fairness" but: "What policies will lead to the greatest development of intellectual capital?"

The answer is obvious: the United States has to provide the best possible health care and educational opportunities to all its young people starting at the earliest possible age. The future of the nation depends on this.

Referring to the title of this piece, income disparities divert resources from where they will do the most good for the future of the country to increasing the wealth of the wealthiest. In conclusion, yes the income and net worth disparities matter, a lot.

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