Inequality isn’t a byproduct of capitalism – we should acknowledge geographic and temporal effects of underlying systemic issues.

In our recent book, I argued that capitalism does not initially create oppressive conditions for race, gender, or caste groups, but that it can be seen as creating inequalities of wealth and income given the longstanding background conditions of oppression for those groups. What I meant by that is that capitalism exploits and then exaggerates existing inequalities. Absent those oppressive conditions, however, capitalism would still create inequality of wealth and income, and whatever moral or social inequality that follows from that. The inequality objection to capitalism is that the inequalities created by capitalism are inevitable and morally unacceptable. To examine this objection, the first point to address is the degree to which capitalism inevitably promotes or creates inequality, while the second is the question of what constitutes morally unacceptable inequality. Inequality is a relation between two subjects and with respect to some good. While a social system may reduce inequality with respect to some goods, or between certain groups or individuals, it may increase it with respect to other goods, and between some groups or individuals. The inequality objection to capitalism is that it increases inequalities of wealth and income between rich and poor countries and between individuals. This is not uncontroversial; the degree of inequality one finds depends on which countries one looks at and what time periods one considers. The matter of how one measures inequality of wealth and income is also the subject of controversy. Bob Sutcliffe and David Dollar are economists who argue on different sides of the inequality objection, but they agree on the following basic characterizations of economic inequality at present in the world. 1. Global inequality (among individuals throughout the world) has risen steadily over the past two centuries, but since 1980 has declined modestly; 2. Inter-country rather than intra-country inequality is the largest contributor to global economic inequality; 3. The growth of the Chinese economy since 1980 is one of the main explanations for 1 and 2. (Sutcliffe 2007; Dollar 2007) However, most of the growth of economic inequality is of the “flying top” form, that is, it is because of the increase in wealth and income of the better off, rather than a lowering of the wealth and income of the worse off. Secondly, those countries that have fared the worst over this timespan are the ones that have failed to develop a global capitalist economy. (Dollar 2007) Thus, capitalism creates economic inequalities, but mainly through its positive, wealth creating effects on countries that engage in global trade, and not by absolutely impoverishing individual citizens of capitalist countries. 6 But what constitutes morally unacceptable inequality? Goods that can be distributed unequally can be either rival or non-rival. A good is rival if it’s being enjoyed by one person precludes its enjoyment by another person. Status, political power and influence, and toothbrushes are all rivals to some degree. It is perhaps arguable that any good that is both essential to well-being and rival ought, morally, to be distributed equally or at least in accordance with the difference principle.3 But wealth and income are not necessarily rival; they are not rival if the total wealth is rising. Therefore, increasing the wealth of some does not necessarily decrease that of others. So if capitalism simply raises some persons’ wealth or income, while not decreasing that of others, then that inequality is not in itself morally problematic. If inequality comes about unfairly, then that too is a reason for it to be morally unacceptable. Capitalism essentially creates economic inequalities because it distributes goods in markets, where trade takes place because of differing levels of demand for goods and services. Those who bring highly demanded or relatively scarce commodities or skills to the market are highly rewarded, while those who do not possess those commodities or skills will not gain equal rewards in a system where people are free to make trades that satisfy their needs and desires.4 This is a morally acceptable reason for inequality to be created, all other things equal. When inequalities are created by force or fraud, these are not justified inequalities. It is up to a society’s government to determine through its laws and enforcement of those laws what constitutes force and fraud. Critics of capitalism often conflate inequality and poverty, objecting to the inequalities that capitalism creates while citing statistics about the poverty of the global poor. Most proponents of capitalism will agree that severe poverty is not morally acceptable, although they disagree about how to address the problem. However, most will argue that capitalism is the best means to address poverty because it is the best means for creating wealth. As we said before, capitalism creates inequalities through the differential demands for goods and services that create the very possibility of trade. Capitalism also promotes innovation as people compete to generate demand for their goods and services, and innovation increases the total wealth in the world. Since inequality is part of the explanation for innovation, inequality is even more morally acceptable.