The Myth of Capitalism and Inequality

The idea that capitalism is necessarily associated with a high degree of inequality seems to have become part of conventional wisdom. Yet it is an argument that is as widely spread as it is wrong. A big deal of confusion seems to come from failing to differentiate between gaps of income that arise due to the process of “equalizing differences” and those that occur because of market inefficiencies (often even governmentally enforced). Capitalism having become synonymous with Gilded Age type policies often summarized under the label “neo-liberalism” does not help either. Countless think tanks supposedly interested in promoting a free market society have further built a reputation by distorting what the meaning of such an arrangement actually is. Freedom House’s measure of “economic freedom”, for instance, increases as “levels of government regulation over the economy” decreases. The Heritage Foundation’s Index of Economic Freedom does essentially the same thing in a slightly more elaborate fashion. Clearly, anyone who believes that less regulation (or government in general) automatically means more economic freedom has not thought the issue through. It is preposterous that these institutions are hailed as defenders of a free society when it is clearly their agenda, either on purpose or through almost criminal negligence, to destroy it.

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