FREE-MARKET ECONOMY

An explanation of Why in Practice There May Be Great Inequality and Adverse Environmental Consequences in Free Market Economies

An explanation of Why in Practice There May Be Great Inequality and Adverse Environmental Consequences in Free Market Economies

Introduction

In a free market, capitalist society, all individuals are considered equal before the law, and no one is legally bound to any particular caste or economic class. Individuals are thus free to compete and advance to an elevated economic status. It is this mobility and fluidity that make the American economy dynamic and innovative. Any attempts to achieve an egalitarian society by redistributing income destroy the individuality and freedom that are crucial to the development of society. If people are not allowed to keep the fruits of their labor, they lose the motivation to innovate and specialize and create the goods that benefit the economy and society. It is therefore dangerous and counterproductive to try to guarantee the same income to everyone.

Discussion

In a recent article, Paul Krugman [a New York Times columnist] pines for the lost America of the 1950s and 1960s, which he characterizes as a "middle class society". While inequality existed, Krugman tells us, it was not nearly as bad as the [nineteenth-century] Gilded Age where robber barons ran roughshod over the less fortunate. It is Krugman's contention that the United States has returned to a Gilded Age as extravagant as the original, characterized by the widening gap between the haves and have nots (Economist, 2005).

While pointing out the many social and economic "problems" in the U.S., Krugman fails to offer any recommendations regarding how to fix them. Here, I would like to focus on two issues that are the foundation of Krugman's analysis. They are (1) the idea of class distinction, or class struggle, which leads to (2) the notion of ...