1 00:00:02,060 --> 00:00:06,780 There has been a lot said and a lot written about income inequality – about how unfair 2 00:00:06,790 --> 00:00:11,299 it is that a few people are very rich and the rest of us aren’t; that the income gap 3 00:00:11,299 --> 00:00:16,259 between the wealthy and even the middle-class, let alone the poor, is so large. 4 00:00:16,260 --> 00:00:19,060 There’s only one problem with this complaint. 5 00:00:19,060 --> 00:00:20,980 It’s wrong. 6 00:00:20,980 --> 00:00:26,300 Income inequality is actually a good thing -- when it is the product of a free market economy. 7 00:00:26,300 --> 00:00:28,620 And your own life proves it! 8 00:00:28,620 --> 00:00:34,020 An economy is made up of millions of individuals making decisions about their own lives 9 00:00:34,020 --> 00:00:38,940 – where and how much they want to work, what they want to buy, and so on. 10 00:00:38,940 --> 00:00:41,120 You are one of those individuals. 11 00:00:41,120 --> 00:00:45,440 In a country like the United States, you are free to pursue a path in life that you believe 12 00:00:45,440 --> 00:00:47,260 best suits your talents. 13 00:00:47,260 --> 00:00:52,880 That talent might be teaching, or making music, or banking, or starting a small business, 14 00:00:52,890 --> 00:00:55,010 or raising a family. 15 00:00:55,010 --> 00:01:00,990 Whatever it is, this freedom helps to make life enjoyable, exciting and meaningful. 16 00:01:00,990 --> 00:01:03,750 But it’s also an expression of inequality. 17 00:01:03,750 --> 00:01:05,580 This is simply because we’re all different. 18 00:01:05,580 --> 00:01:09,700 We have different talents, different temperaments, different ambitions. 19 00:01:09,700 --> 00:01:14,960 That’s okay because – again in a free society – we can seek out opportunities 20 00:01:14,970 --> 00:01:19,290 that play to our personal strengths; that distinguish us from others. 21 00:01:19,290 --> 00:01:22,450 If you find what you’re really good at and work hard, you might have 22 00:01:22,450 --> 00:01:24,920 great success and make a lot of money. 23 00:01:24,920 --> 00:01:28,200 If you’re an outstanding athlete, I’ll buy a ticket to see you play. 24 00:01:28,200 --> 00:01:32,360 If you’re a savvy investor, I’ll give you some of my money to invest. 25 00:01:32,360 --> 00:01:36,880 As long as you have the freedom to guide your own destiny, you have a chance to reach your 26 00:01:36,890 --> 00:01:41,140 full potential – achieving success, however you define it. 27 00:01:41,140 --> 00:01:46,280 But if someone, say, a government bureaucrat, told you that your ambition had limits, 28 00:01:46,280 --> 00:01:51,700 that there was a ceiling above which you could not rise, I doubt you’d be happy about it. 29 00:01:51,700 --> 00:01:54,960 You’d feel like you were in a straightjacket. 30 00:01:54,960 --> 00:02:01,280 Forced equality means less opportunity to pursue what makes you individually great.. 31 00:02:01,280 --> 00:02:05,880 But what about the growing gap between the rich, the 1%, and the rest of us, 32 00:02:05,880 --> 00:02:08,980 the 99%, that one hears so much about? 33 00:02:08,980 --> 00:02:11,380 Isn’t that a bad thing? 34 00:02:11,380 --> 00:02:13,600 Again, the answer is no. 35 00:02:13,600 --> 00:02:17,640 Here’s why: In a free market economy people become wealthy 36 00:02:17,650 --> 00:02:23,050 making what the rich enjoy today into something almost everybody can enjoy tomorrow. 37 00:02:23,050 --> 00:02:25,859 The rich are the test buyers. 38 00:02:25,860 --> 00:02:27,360 Consider the cell phone. 39 00:02:27,360 --> 00:02:33,160 Now we all have them, but when Motorola manufactured the first one in 1983 it was the size of a brick, 40 00:02:33,160 --> 00:02:38,740 had a half-hour of battery life, reception was terrible, and calls were very expensive. 41 00:02:38,740 --> 00:02:41,540 It cost $4000. 42 00:02:41,540 --> 00:02:47,620 But if no one had bought that $4000 brick, there wouldn’t be a $40 cell phone today. 43 00:02:47,620 --> 00:02:51,219 In the 1960’s a computer cost over a million dollars. 44 00:02:51,219 --> 00:02:55,900 Nowadays, thanks to billionaires like Michael Dell, we have incredibly advanced computers 45 00:02:55,900 --> 00:02:58,620 that cost us a few hundred dollars. 46 00:02:58,620 --> 00:03:02,500 Remember what an out-of-reach luxury flat screen TV’s once were? 47 00:03:02,500 --> 00:03:04,500 Only the rich could afford them. 48 00:03:04,500 --> 00:03:08,280 Today your living room is essentially your own private cinema. 49 00:03:08,280 --> 00:03:11,720 The free market is about turning scarcity into abundance. 50 00:03:11,720 --> 00:03:15,320 What was once available to the few is now available to the many. 51 00:03:15,320 --> 00:03:19,100 Wealth inequality is an important corollary to that truth. 52 00:03:19,100 --> 00:03:23,740 So, should I resent the people who became wealthy because they have more money than I do, 53 00:03:23,740 --> 00:03:28,139 or should I be grateful for the economic system that allows them to enrich my life 54 00:03:28,139 --> 00:03:31,019 and the lives of millions of other people? 55 00:03:31,020 --> 00:03:37,140 This feature of the free market – income inequality – can appear terribly unfair. 56 00:03:37,140 --> 00:03:41,860 But with a little further investigation, the real picture becomes clear. 57 00:03:41,860 --> 00:03:47,180 Income inequality makes what once seemed like impossible luxuries available to almost everyone; 58 00:03:47,180 --> 00:03:53,260 it provides the incentive for creative people to gamble on new ideas; it promotes personal freedom, 59 00:03:53,260 --> 00:03:56,680 and rewards hard work, talent, and achievement. 60 00:03:56,690 --> 00:04:02,050 In sum, income inequality signals that individual liberty, opportunity, and innovation 61 00:04:02,050 --> 00:04:04,870 are all present in a free economy. 62 00:04:04,870 --> 00:04:08,470 Pretty good for something that’s supposed to be so bad. 63 00:04:08,470 --> 00:04:10,110 Two final points: 64 00:04:10,110 --> 00:04:14,160 The 1% Club is always open to new members. 65 00:04:14,160 --> 00:04:18,480 And you don’t have to be in the top one percent to have a very good life. 66 00:04:18,480 --> 00:04:23,200 And that, not the existence of the very wealthy, is what matters most. 67 00:04:23,200 --> 00:04:28,160 I’m John Tamny, editor of Real Clear Markets, for Prager University.