Don Watkins is a fellow at the Ayn Rand Institute, where he writes on inequality, the welfare state, and the moral foundations of capitalism. He is co-author with Yaron Brook of the national bestseller Free Market Revolution: How Ayn Rand’s Ideas Can End Big Government, and teamed up with Brook once more to pen the recently-published Equal is Unfair: America’s Misguided Fight Against Income Inequality. The Undercurrent’s Eric Rosenberg had the opportunity to speak with Watkins on some of the ideas presented in this latest book.
The Undercurrent: To kick things off, could you give readers a sort of broad summary of what your book, Equal is Unfair, is all about?
Don Watkins: Sure. We’re referring in the title specifically to economic equality, and in the book we argue that economic equality is unfair because different people create different amounts of wealth. To make them equal, therefore, is to sever the link between what a person earns and what he gets. To look at it another way, to equalize is to punish people for being successful and to reward people for being unsuccessful, which represents a total inversion of justice. “Justice” means that achievements are met with rewards, and so to sacrifice the people who have achieved them is perverse and unfair.
TU: President Obama has called economic inequality the “defining challenge of our time.” Do you agree with him?
Watkins: In one sense, he’s right. “Inequality” isn’t a narrow issue, like healthcare. It’s really the philosophical lens through which many on the left view every economic issue (including healthcare). And if you are concerned about the future of this country, I think in many ways it will be determined by how we think about economic inequality. If we view it as an evil that government has to combat, then capitalism loses. If we view it as something that is irrelevant—that it refers not to a deprivation, but to a gap, and that such gaps in themselves are unimportant—then that allows us to put the focus where it should be: on freedom and opportunity, not economic inequality.
TU: It sounds like you don’t think economic inequality is hurting the American Dream. So what is?
Watkins: The American Dream was a dream of unlimited opportunity. In this country, no matter where you started, you had the opportunity to rise as far as your ambition and ability would take you. And unfortunately that dream is not fully alive and well today. Why not?
There are really two things, and they’re related. First, there are enormous obstacles that the government is putting in the way of success, particularly for those starting from the bottom, whether it’s the minimum wage or occupational licensing or zoning laws that drive up housing costs or an education system that doesn’t educate.
But underneath that is a disturbing ideological trend. The American Dream requires celebrating success and valuing the freedom that makes success possible. Yet the trend today is really toward viewing success with suspicion, hostility, and envy, and rejecting freedom in favor of government control.
To the extent there is validity to the feeling that the system is becoming rigged, it is rooted in this fact: that we are giving more arbitrary power to the government and, consequently, our ability to rise by our own productive power is diminishing.
TU: Should we care about economic inequality at all, then?
Watkins: I think there’s absolutely no reason to, if you keep in mind what economic inequality refers to. “Inequality” does not mean “poverty,” though it’s usually translated to mean “the rich get richer and the poor get poorer.” It refers simply to the gap between what different people make, and that gap can grow even if everyone is doing better. And that’s really the story of capitalism. The rich get richer and everybody else gets richer too—they just get richer to different extents and at different rates.
Now, can the gap increase as the result of injustices (e.g., special favors given to crony businessmen by the government)? Yeah, but the problem isn’t the gap—it’s the injustice. Injustices are wrong regardless of whether they increase or decrease economic inequality.
Focusing on inequality, then, distorts our thinking because we put into the same category Bill Gates increasing inequality by creating Microsoft and some Washington insider increasing inequality by getting a bailout or a subsidy. Notice, then, that the solutions to economic inequality offered by the inequality critics penalize the Gateses as well as the cronies. That is unfair.
TU: You talk in the book about how on the whole, the poor are much better off than they were years ago. You cite a number of specific examples: that 75% of the poor have at least one car, that 50% have cell phones, that 43% have access to the internet, etc. But what about the poor people who still don’t have access to those things?
Watkins: Well, the point we make by citing those statistics is not that everything is well and that we have nothing more to achieve. It’s rather that we’ve already achieved something incredible. It is vital that we understand what made such an amazing achievement possible so that we can put those lessons to work, and increase progress and opportunity across the board. That’s really one of the key themes of our book.
But the inequality critics don’t learn those lessons. They don’t ask where cellphones and cars and plentiful food come from. Instead, they observe that some people have these things and other people don’t, and they propose to equalize us by taking from some and giving to others.
The critics take production and prosperity for granted and think they can co-exist with plunder. But they can’t—not in the long run. They require respecting the rights of producers, including their right to keep what they produce. That is what virtually eliminated absolute poverty in the West.
The inequality critics have no right to claim that they care about poverty. The most incredible story of the last thirty years is the decline of global poverty from 40% to 14%, which was made possible by increasing economic freedom in China and India. The inequality critics have remained virtually silent about this achievement, and instead seek to eliminate economic freedom here at home.
If you really cared about poor people, your chief concern would be to get rid of all the restrictions on opportunity that are imposed by the government. That includes things like the minimum wage—which makes it illegal to work if you can’t find someone willing to pay you what the government arbitrarily decrees to be the minimum wage; occupational licensing—which basically stops would-be entrepreneurs from getting started if they can’t afford the time and the cost of meeting the government’s arbitrary restrictions; and really the whole regulatory state—which imposes enormous costs that make it much harder for you to pave your own way. The fact that the inequality critics approve of all of these restrictions and many more indicates that their real goal isn’t to lift up those at the bottom—it’s to vilify and shackle those at the top.
TU: You mentioned the minimum wage—a hot topic—as a restriction on poor people. Could you expand on that?
Watkins: What is the minimum wage? It says that an employer has to pay employees, say, at least $15 an hour. And a basic insight from economics is that when there is a price floor, when the government mandates an artificially high price for labor, and you can’t purchase work for anything less than that, what you get is a lot of people who can’t work. They cannot take that first step on the ladder of success.
Now, the debate has revolved around the question of predicting exactly how much unemployment will rise if we raise the minimum wage. And you get a lot of studies saying it has a significant effect, while others say it doesn’t. But this is the wrong way to think about the issue.
You have to think about these things from the perspective of the individual, not from some aggregate perspective where “we as a society” decide how much unemployment we’re willing to tolerate in order to lift some people’s wages. From the perspective of me as an individual, the minimum wage says “Don, if you can’t find somebody willing to offer you $15 an hour, it’s illegal for you to work.” I don’t care if the minimum wage lifted wages for 99% of people and only condemned 1%to perpetual unemployment. Nothing can justify that.
If people really want higher wages, then what they should fight for is economic freedom and the economic progress it unleashes.
TU: What do you think is the biggest misconception people today have about income inequality?
Watkins: The biggest misconception is that “equality” is an ideal. Few of them advocate total economic equality, but they treat anything that moves us in the direction of a more economically equal society as good, and anything that moves us towards a less economically equal society as bad.
But why? Why is that desirable? Shouldn’t those who create more wealth enjoy more wealth? Bill Gates’s fortune didn’t come at my expense—why should I regard his success as a crime he has to atone for? The inequality critics have never answered that question.
Instead what they’ve done is propagate various fallacies about wealth that tacitly assume that Bill Gates’s success makes us all worse off. First, there’s what I call the “fixed pie fallacy”: the idea that wealth is like a pie, and if one person gets a bigger slice the rest of us get a smaller slice. But that ignores the fact that we constantly grow the pie by producing wealth, and when the pie is growing, one person’s gain need not come at anyone else’s expense.
The second fallacy is what I call the “group pie fallacy”: that society as a whole cooks up some pie, and then the government divides it up, arbitrarily giving some people a larger share of “society’s” wealth. But the truth is that wealth is created by individuals and morally belongs to individuals. To the extent a society is free, the way inequality is emerges is through some people creating vastly more pie than others.
If you stop thinking about wealth as this pie that somehow emerges anonymously from society, and start seeing it as the product of values created by individuals, then the idea that we should be anything close to equal becomes bizarre. My wife, for example, is a great teacher, but she’s only providing economic value to a few dozen kids a year—of course she is going to make a lot less money than someone like Amazon’s Jeff Bezos, who provides economic value to millions of employees, shareholders, and customers each day. Good for Bezos! He didn’t get rich at our expense—he got rich by making our lives better.
TU: Given that we’re geared towards a college audience, I’m curious whether you think it’s fair that some college students graduate with debt and others don’t.
Watkins: Where’s the unfairness? It’s not like some students graduate debt-free by taking out loans in other students’ names. “Fairness” has to do with how we treat other people. The fact that some people can’t afford a college education without a loan isn’t unfair. Education is a service and it has to be paid for. (Unfortunately, today it is far more expensive than it should be thanks to government intervention, as we explain in the book.) What would be unfair would be to force me to use the money I earned to pay for your college education so that you can graduate debt free.
TU: Why did you and Yaron feel that now was the time to write a book about inequality?
Watkins: So, I mentioned that inequality is not just an issue, but more of a framework for how people think about many different issues. And if you get your framework wrong, everything else goes wrong. If you see the world through the lens of inequality and you ask yourself, “How do we minimize inequality?,” rather than “How do we maximize opportunity?,” then you’re going to end up creating a culture and a political system that is inhospitable towards success, that actually punishes people for achieving success. The importance of getting that framework right makes this a crucial issue.
Another reason is that there’s been almost no opposition to the inequality critics. When Yaron and I started working on this book in June of 2014, for at least the previous 10 years, the inequality critics had been putting out five, six, seven major books basically every year surrounding this same theme—that our problem is inequality and that we have to fight it through government restrictions on those at the top, and by propping up those at the bottom. How many books had there been opposing that narrative? Zero. Equal Is Unfair is the first book to mount an economic, historic, and philosophic opposition to the campaign against inequality.
That said, our book is not mainly a polemic against the inequality critics. It is really a celebration—a celebration of productive achievement and of the system that makes productive achievement possible: capitalism.
TU: You’ve spent the past month speaking and debating across the country to promote the book. Any final words on how readers can keep track of what’s on the horizon and how they can get involved?
Watkins: Absolutely. The first thing they can do is go to equalisunfair.com, where they can download the first chapter of the book for free and get a bunch of other relevant content, including information on upcoming events. I also encourage everyone to follow me on Twitter (@dwatkins3), where I’m constantly posting stuff and answering questions.
The Undercurrent is happy to offer interviewees a platform for their ideas. Their responses do not necessarily represent the views of the publication at large.
Image courtesy of the Ayn Rand Institute