Recently I was doing a pre-interview for a panel discussion on an international radio program. The topic was supposed to center around the importance of economic growth. But it quickly became clear to me that the interviewer didn’t really care all that much about economic growth, its benefits, and how to get more of it. Instead, they mostly wanted to talk about everything they disliked about America, from the healthcare system to homelessness to income inequality. They seemed stunned that I preferred the American free enterprise system to the economic system of any other country. Not even Scandinavia! 

Had I not finally complained that we were in the 22nd minute of what was supposed to be a 10-minute interview, I am sure we would have gotten around to discussing the Iraq War, the role of the CIA in the 1973 Chilean coup d’état, and the slaveholding of Founding Fathers. Enough was enough. 

But let’s focus on one of those many criticisms: income inequality. First of all, no supporter of market capitalism suggests it’s meant to produce equal outcomes—or that we should always prefer the unequal outcomes that result. As I pointed out to the foreign radio producer, the US has a pretty extensive tax-and-transfer system. Beyond that, what is the right level of inequality? Is it a bit less than the current US situation or a lot less? I am guessing that if the US GINI index number were at its lower 1991 level than its current level, the inequality alarmists would sound just as alarming.

Second, the income inequality alarmists have failed to notice that inequality seems to have stabilized for now. As AEI economist Michael Strain notes in his wonderful 2020 book The American Dream Is Not Dead: (But Populism Could Kill It): “Between 2007 and 2019, the ratio of the 90th percentile of weekly earnings to the 10th percentile—a more conceptually straightforward measure of the rich-poor gap—increased by only 1 percent. So even if you believe that income inequality is one of the most serious challenges facing the United States, at least over the past decade or so, there seems to be a lot more heat than light.”

Third, many inequality worries seem to care little about how Americans get rich, even the superrich. “All billionaires are a policy error,” supposedly, even if they got that way by starting and growing businesses that provide highly valued goods and services. I really don’t know what to make of these critics with the iPhones in their pockets and the Amazon boxes on their doorsteps.

Also consider: America’s competitive capitalism may be a factor in the success of Nordic cozy capitalism. As economists Daron Acemoglu, James A. Robinson, and Thierry Verdier explain in their new paper “Can’t We All Be More Like Scandinavians?”:

We cannot all be like the Scandinavians, because Scandinavian capitalism depends in part on the knowledge spillovers created by the more cutthroat American capitalism. . . . Some countries will opt for a type of cutthroat capitalism that generates greater inequality and more innovation and will become the technology leaders, while others will free-ride on the cutthroat incentives of the leaders and choose a more cuddly form of capitalism.

Sounds like a great subject for a radio show!

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