Questions For Libertarians – Isn’t it inevitable that inequality will increase with every generation

The next question from @simonr916

“Will a Libertarian world not become more and more unequal
as each generation further entrenches the privilege of the few?

Those people who have been successful will naturally wish to give their own children advantages and protections in life. They will pay for education, help their children develop networks of useful contacts, give them resources to use as capital and so on.

Those who were not successful will not be able to do things. Their own children – through chance of birth and no fault of their own – will have much less chance of success, even if they are hard working and clever. They will, of course, have no state education or welfare support.

Many of the most successful people in society have ‘pulled themselves up by the bootstraps’. Poverty is a great motivator. These people do this through hard work and ability, but they also require opportunity– whether that be a state education (which may allow them to shine and
achieve a bursary for higher education), or a public library for
research, or a small amount of capital to start their own business, or welfare support so that every moment isn’t dedicated to base survival”

It is certainly true that each of us has different opportunities, resources and abilities. The children of attractive parents are more likely to be born attractive, the children of intelligent parents are more likely to be born intelligent and the children of rich parents are more likely to have capital to start their way in life.

However, the relationships are complex. Regression to the mean dictates that the children of highly intelligent parents will not be quite as intelligent as their parents, children of highly attractive parents will not be quite as attractive. Over the generations the children tend to revert to the mean.

Many millionaires feel that to give large quantities of unearned wealth to their children would do them more harm than good and leave their fortune to charities instead.

Many who receive large amounts of unearned income lose it all in a remarkably short period of time. According to some sources 1/3 of lottery winners declare bankruptcy 

I can see two possible arguments in your comments:

1. Inequality would increase simply because inherited wealth accumulates
2. Inequality would increase because opportunities for those without any inherited wealth would disappear.

If the first argument were true, it would also be true, albeit at a slower rate, in any society that did not have a 100% inheritance tax.

We have had countless generations without such a tax and yet 80% of millionaires are the first generation of their family to become wealthy!

The reality is that inherited wealth is more likely to be dissipated by inept children than grown further for the grand children. The saying cloggs to cloggs in three generations or the Saudi version: “My father rode a camel. I drive a car. My son flies a jet airplane. His son will ride a camel” reflect the fact that 9 out of 10 wealthy families lose their wealth by the third generation.

The second possible argument makes the unjustified assumption that without state support there would be no opportunities for those born without wealth.

To equate no state education with no education, no public libraries with no libraries and no inherited capital to start a business with no capital to start a business is simply an error.

Private schools already offer scholarships to bright pupils who cannot afford the fees.
Free education at university level is available online at places like Khan Academy , Coursera and Itunes U . There are thousands of digital books available free for kindle users. It is highly likely that low cost education would be available using shared computers, kindles and online resources such as these once the state monopoly on education was removed. Parents and local communities would also club together to provide access to these resources and charities promoting education and industry sponsored schools would also likely be supported for the very poorest.

As a society we value the importance of education, it is in the interests of parents, children, employers, etc so the idea that it would not exist without the state is simply wrong. The free market and charity can do anything the state can do, usually better and more cheaply.

The idea that without inherited capital you cannot start a business is also simply wrong. The traditional way to acquire capital is to save. Work as much as possible, spend as little as possible and save the difference.

If you have a good enough idea you can bring in outside investors for a share of the business, or you can borrow money and pay interest on the loan.

I had no inherited capital but formed a business through personal savings an external investor and some money borrowed on a credit card.

It is therefore not inevitable that inequality would increase with every generation in a libertarian society. As long as opportunity is not crushed at the bottom end of the wealth scale it would not matter if it did. Wealth is not a fixed pie to be divided up, but an infinitely expandable pie with plenty for all who contribute.

As a libertarian the fact that others have been much more successful than me is not a cause for concern but a challenge to do better myself having had my eyes opened to what is possible.

 

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  • @simonr916

    Regression to the mean dictates that statistical outliers will revert back to the average. So, yes, those whose achievements make them statistical outliers – because they won the lottery, or started a billion dollar business, are likely to find that their children do not do as well as they themselves did.

    It does not, however, provide a levelling of the playing field. The mean average of achievement for well educated people from wealthy backgrounds is higher than the mean average of achievement for uneducated people who were born into poverty, and those are the mean averages that they (or their offspring) will revert to.

    So if you are a wealthy stockbroker, there is a good chance your child will become a wealthy stockbroker, or doctor, or lawyer. If you are a bricklayer, then your child is likely (not certain, but likely) to be a manual worker.

    I’ve never seen statistical proof of the ‘9 out of 10 families lose their wealth’ truism. In Britain, inherited wealth passed through generations of the same families for centuries until the imposition of inheritance tax, amongst other factors, began to disrupt this process.

    It is not just inheritance tax that limits this entrenchment of privilege. General taxation and state education, healthcare, welfare and services give children from poorer families a chance – just a chance – to escape poverty.

    I accept that some aid would be available to the poor in the absence of state support. However, this would be far from comprehensive. With fewer children having access to schools, libraries, computers and books, there would be reduced social mobility and increased inequality.

    And I did not say that you cannot start a business without inherited capital. I said that you cannot achieve success without opportunity.

    Access to capital is just one type of opportunity. Your achievement in starting your business is your own, but you undoubtedly benefitted from an education paid for (at least jn part) by your family or the state.

    And it is difficult to save up to start a business if your entire income is required for survival.

    I often see libertarians suggesting that socialists are motivated to impose taxes by jealousy or resentment of the success of others. For most, the real motivation is to assist those with least, and the belief is that the resource required to fund this should come from each in accordance with ability to pay.

    • http://twitter.com/LibertarianView Murray Rothbard

      I agree that the playing field is not level. This is true with or without wealth re-distribution.

      Intelligent people tend to pick intelligent mates and produce intelligent children. Likewise physically attractive people.

      Genetic variability in attributes and talents inevitably mean that, through no fault of their own, some people have no chance at all of being popstars, premier league footballers or super models. (Even if they have rich parents)

      I make the point in an earlier blog post here:
      http://www.libertarianview.co.uk/general-principles/the-importance-of-equality-questions-for-socialists

      I see nothing inherently wrong with inequality, it is a fact of nature. Even those who are vocal opponents of inequality are in many cases, I think, simply against absolute poverty.

      Few people complain about the inequality of wealth between say Cheryl Cole with a net worth of $18 Million and Bill Gates with a net worth of $61 Billion. (Poor Cheryl!) Yet this is a far greater inequality than that of the bottom 1% and top 1% of income earners in the UK. It is those who cannot afford to eat or shelter themselves that we are all concerned with.

      What is important is for people to have opportunities and be motivated to take them to the best of their ability. 

      I am sure that all intelligent socialists and all intelligent libertarians want as many people as possible to do as well as possible. It is the method of achieving this that we disagree on. Fundamentally libertarians reject the use of coercion.

      As a libertarian I believe that free markets generate the most opportunities for everyone and that allowing people to keep the rewards of their success encourages effort, and charity. That subsidizing failure and protecting people from the natural consequences of stupid decisions, simply promotes failure and stupidity.

      I am sure that some socialists are simply motivated by envy and some libertarians simply by greed, but for the subset of people in either camp who actually think through the issues, both want the same things, they simply disagree on the best way to achieve them.

      • @simonr916

        I agree with you that inequality is both inevitable and desirable in any society. The problem is when those at the bottom suffer from crushing poverty and this is worse where there is virtually no opportunity for escape.

        You’ve said that the free market creates most opportunities, but it is hard to see how those opportunities will be available to those at the very bottom.