There's a difference in how people behave that makes it difficult for equality and prosperity to co-exist.
A difference that is rarely identified as a cause.
Opinion in the street is that it correlates with culture- some cultures are regarded as being predominantly to one side of this divide or the other.
And this could be true; there does sometimes seem to be a triggering social environment or incident that starts an individual down one track or the other, which once established is hard to break away from.
Perhaps the difference could even be genetic to an extent- but if so, it's from widely shared genes as there's no clear-cut correlation with ethnicity- all appear to include at least some individuals to either side.
Have you worked out what personal characteristic I'm referring to yet?
Here are some more clues:
Each type derides the other - jealousy in one direction, contempt in the other.
And it's a root cause of inequality- though more often identified as a consequence (incorrectly I believe).
It's not just that some people work hard and others are lazy (though this does drive inequality). Nor is it that some get captured by addictions- though this ticks every box above, and also contributes to inequality.
No, it's that there are some people who spend up and accumulate debt, while others live frugally, save, and accumulate wealth. I'll call them Spenders and Savers. There's no hard border between these types of course- it's a spectrum- and there are other personal traits that inform our behaviour, but whether we lean towards the Spender or Saver type makes a lot of difference to the world and our place in it.
We all know Spenders: They seem to be doing OK, dress well, eat out a lot and regularly travel to interesting holiday destinations- but are always maxed out on their credit cards and go for leasing not owning. In extreme cases, their social circle is shocked to learn, that to maintain the façade of success, they've been ripping off a local sports club or charity- or the world in general, like Bernie Madoff (USA) and David Ross (NZ).
Savers are not as common (and getting less so as social welfare takes away an incentive). You'll maybe know one or two, and will certainly recognise the type from the back-stories of many successful individuals. NZ's Mowbray siblings are prime examples;
They moved to China in their youth, lived on $1/day, surviving on rice and vegetables in an upper story flat - while building Zuru- a $500m/year toy company, in just 15 years.
Spenders will often say that they had bad luck, and routinely blame others for their failures. They are convinced (and convincing) that they can't possibly live on an income that Savers survive easily on- while putting aside a surplus. Savers believe their success comes from good decisions, hard work, and willingness to take risks- not from luck.
It's my thesis that there really are these two personality types, that you probably have very little choice as to which you tend towards - and that this basic program difference- not bias, not racism, not inherited wealth, not even education, is the predominant source of inequality. Although Savers are relatively rare, because some of them become extraordinarily wealthy they have a disproportionate effect.
As evidence; there are endless examples of people who rise to the heights on their own initiative- overcoming every conceivable obstacle. This has been true throughout history, in every ethnicity and every culture. Sure, choosing your parents carefully provides a huge head start- Alexander the Great for example- but there are even more examples of individuals who get a great start in life but fail miserably.
The trouble is that Spenders are resentful of Savers- they see their difference in circumstance not as a consequence of different behaviour, but as proof that the 'system' is unfair: "it's not right that someone should have all that money ", and "make the rich pricks pay ".
And Spenders have more votes than Savers.
But Saver types pose special challenges for tax collectors because income and spending are easy to tax while taxing wealth is difficult. There have been numerous attempts, but whenever such taxes are implemented, money departs for somewhere unreachable, inward investment dries up- and wealth creators do something less useful instead- or go to a place where they're taxed less. Of course, we could build a wall to stop them leaving. Sure, that'll work.
There are plenty of ways to collect tax that are fairly efficient- energy taxes, GSTs, income tax, and excises for example- but no matter which ones are used, when the total take exceeds around 30% of a country's gross domestic product, the brakes go on its economy- consider Europe's slow growth relative to the USA for example, or high tax NZ versus low tax Singapore (Singapore had half our income per capita in 1970, now it's more than twice). Savers almost always end up contributing more than their share of taxes anyway, via the income and jobs their accumulating assets generate- and at worst, the extra wealth they create returns to boost the common pot within a generation or two.
Why do governments even try to tax wealth then, why don't they just pluck feathers that don't cause the goose to hiss so much?
Partly it's a reflex response- like dogs chasing sticks, they just can't stop themselves-and they seem to have a delusion that some new form of tax can break the 30% ceiling without dragging down economic activity.
The desire to tax wealth is driven by envy not by rational policy:
It's futile even in the wider sense, because people are differently abled, differently motivated- and there's good luck and bad luck (not least in what genes you get dealt). Attempts to make people equal always fail -while impoverishing everyone in the process. This has been tragically demonstrated by every attempt to establish Socialism/Communism- Venezuela being the latest.
Those who, by luck, talent or hard work, are able to contribute more than the average, will willingly do so up to a reasonable level, especially in homogenous communities- Korea, Japan, Norway and Denmark for example. But just 10% of citizens typically pay the bulk of taxes now in most developed countries, which seems to me to be past the 'reasonable' level, is probably already cutting into total national wealth by the disincentive effect- and likely to be unsustainable long term, except by threats and intimidation.
Non-tax policies can also reduce inequality; offsetting the effects of luck by providing as much equality of opportunity (the American dream) as can reasonably be managed, and by applying the rule of law to prevent individuals using bribery, protection rackets, monopolies and the like to take unfair advantage.
But, that some of us are Spenders and others Savers - ants and grasshoppers in Aesop
's fable with this theme:
ensures, that, in biblical terms, 'the poor will always be with us', or in current parlance; inequality is fundamental to the human condition. Unfortunately.
Peter Lynn, Ashburton, New Zealand, 1 April 2019