Capitalism Does Not Create Social Inequality

Capitalism Does Not Create Social Inequality. By Lipton Matthews.

Quite often, the hot-button issue of income inequality is caricatured as an outcome of capitalism rather than as a characteristic of all societies across time. Critics of capitalism have a rather romantic version of precapitalist societies. This error stems from a misunderstanding of human societies in general.

Inequality is a permanent fixture in society due to disparities in the distribution of talent. Usually, talent catapults organized groups into leadership positions, and then such groups reinforce their privileges by instituting hierarchies. The entrenchment of hierarchical relationships often results in commoners’ serving elites by providing labor and tribute. From these arrangements emerged rigid caste and class-based systems, where one’s life chances were fixed at birth. …

Under capitalism, ambitious people can expect to advance, courtesy of their talents and smart work, but in the typical precapitalist environment, status was linked to elite connections and honoring higher classes. Unlike the romantic visions of precapitalist societies conjured by intellectuals, such societies were likely to be closed societies that limited the mobility of nonelites.

In many precapitalist societies, kings could expropriate the wealth of their subjects with ease. Kings were not required to solicit permission or to compensate their subjects for the expropriation of property. …

Tax collectors and other bureaucrats occupied positions of wealth and authority and resided in palatial homes. Inequality in noncapitalist societies is more likely than we assume and more persistent, because individuals are bestowed with privileges that perpetuate the status quo.

Free markets and equality under the law were the great liberators.

Capitalism’s name is sullied, however, because it is linked to the creation of money, which we use to represent real capital. Banks and governments create money out of thin air, which tends to rip off the rest of us. Notice how bankers and governments tend to be wealthy, and that they jealously guard their privileges — including dissuading the media from discussing even the existence of said privileges, and where money really comes from.