Deirdre N. McCloskey’s False and Stupid Argument About Poverty and Inequality

Harming Low Income Families By Refuting a Position No One Takes

Writing in the NYT Deirdre N. McCloskey argues that it is bad policy and just plain wrong to fight poverty by taking money from wealthy people and giving it to poor people.

As a matter of arithmetic, expropriating the rich to give to the poor does not uplift the poor very much. If we took every dime from the top 20 percent of the income distribution and gave it to the bottom 80 percent, the bottom folk would be only 25 percent better off. If we took only from the superrich, the bottom would get less than that. And redistribution works only once. You can’t expect the expropriated rich to show up for a second cutting. In a free society, they can move to Ireland or the Cayman Islands. And the wretched millionaires can hardly re-earn their millions next year if the state has taken most of the money.

Now the only problem with this argument is that nobody and we do mean nobody outside of a few kooks is arguing that the way to fight poverty and inequality is to appropriate money from the wealthy and just give it to the poor.  Nobody. 

McCloskey cites how economic growth over the centuries has reduced poverty, but economists truly interested in reducing poverty point out that over the past 40 years or so almost all of the economic gains have gone to the wealthiest families.  Growing inequality is a symptom of the mal-distribution of the gains of growth.  And so the policy prescriptions by those who would fight poverty and raise low income families into the middle class is to promote policies that would direct the gains of growth towards the lower income groups.

This means progressive taxation on the revenue side, which does not take wealth from the wealthy as this is taxes paid out of income not wealth.  (We presume here that people like McCloskey and others do understand the difference between income and wealth).  On the spending side it means investment in public education, and investment in families and most of all policy to promote equal opportunity (not equal outcomes). 

The argument that McCloskey makes is that it is okay to have and create massive wealth as long as everyone benefits to some degree and that poverty is reduced.  Agreed.  But anyone who looks at data and policy today would know that is just not happening.  Donald Trump has apparently made himself very rich.  The people he pays minimum wages to for cleaning his hotels, not so much.  The wealthy are mostly like Trump, they want to make more, they want to keep it all and they want to use government to take even more away from low income families.  All the rest of us asking is for them to show just a little less greed and a little more humanity.