Text 18. Critique of Inequality in Capitalism
(Критика неравенства при капитализме)

It is reasonable to expect that some disparity in wealth and income among individuals would exist in a capitalist system as this is determined through market forces rather than by centralized governmental authorities. Some view a significant disparity and concentration of wealth to be problem and that such is endemic to capitalism, while others do not have such egalitarian concerns. Some opponents of capitalism assert that there should be no inequality in wealth and earnings among individuals commensurate to their inheritance, skills, abilities or efforts. Defenders of capitalism respond that since free market capitalism distributes wealth and earnings among individuals commensurate to their inheritance, skills, abilities and efforts, it provides inherent incentives for human beings to hone their skills, improve their abilities, and make strong efforts to meet the needs of each other, incentives that are missing or significantly less present in any other type of economic/political system.

Other critics argue that inequality may be necessary but that the distribution of wealth and earnings is unfair or immoral in capitalism. In the capitalist economies, the distributions of earnings and, especially, of wealth are concentrated and skewed to the right. In the US, the shares of earnings and wealth of the households in the top 1 percent of the corresponding distributions are 15 percent and 30 percent, respectively.

Some critics note that there are very few people who are twice as tall as average, or who can run twice as fast, or have twice as high an IQ. Some critics argue that the fact capitalism doesn't distribute wealth in a similar fashion means that something is fundamentally wrong with the system. Supporters argue that human contributions vary much more than humans vary in height or IQ.

Critics also note that there are many people who have no wealth. If wealth followed a bell shaped curve (standard normal distribution), as many other human characteristics and it might be surmised people's ability to be productive, then there should be very few people with no wealth. Supporters might argue that human productivity and especially the tendency to save wealth is not bell-shaped.

An untamed capitalist system may have inherent biases favoring those who already possess greater resources. For example, rich people can give their children a better education and inherited wealth. This can create or even increase large differences in wealth between people who do not differ in ability or effort. There are some data supporting this, like that in the US 43.35% of the Forbes 400 richest individuals were already rich enough at birth to qualify, or a study that indicates that in the US wealth, race, and schooling are important to the inheritance of economic status, but IQ is not a major contributor and the genetic transmission of IQ is even less important. On the other hand, at least some of the difference in wealth between people of equal ability may be explained by that some people voluntarily, maybe because they see other things as more valuable, make life choices that make them earn or save less than other people with the same ability. Defenders respond that since 30.1% of the individuals on the Forbes list of the 400 richest did not inherit great wealth (meaning they did not inherit at least $1 million in assets) this shows that even such people can gain the very highest level of wealth in capitalist economies. There are also some data indicating that income inequality for the world as a whole is diminishing.

Supporters argue that a problem with using "distribution of wealth" as a standard to measure economic systems is that such a standard can produce seemingly irrational judgments. Under the "distribution of wealth" standard, a system where everyone has nothing is judged as equal to a system where everyone has enormous wealth since the distribution of wealth in the two systems is equal. The claim is made that capitalist economics are not zero-sum games and that more wealth for most people is actually "created" through innovation, entrepreneurship and risk-taking. Rewards for this may cause a necessary inequality. Regarding the inheritance of wealth, this may be necessary so that the most productive people continue to do productive work and save money when they get older. Thus, people who see uneven wealth distribution as a lesser or unavoidable problem tend to argue that if inequality leads to higher average wealth and higher wealth and income for most people, then wealth inequality may be acceptable. Several peer-reviewed studies show that the relative income share of the poorest do not decrease with higher economic freedom, but their absolute income increases.

Some advocates of capitalism may partly agree with the critics but think that the problem can be resolved with solutions like progressive taxation, wealth tax, and/or inheritance tax. They note that such taxes are already implemented in most capitalist states. The best extent of such taxes and how much inequality there should be is much discussed and researched, but these variables can be changed without abandoning capitalism.