Economics 101 & Public Square

Is Springsteen Right On Income Inequality?

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Editor’s note: This post has been edited from its original version appearing on DoggieHeadTilt, a blog run by the Clapham Institute.

All-American rocker Bruce Springsteen took to the pages of Rolling Stone magazine this past spring to lament the existence of income inequality in our country today:

You cannot have a social contract with the enormous income disparity – you’re going to slice the country down the middle. It’s not going to hold.

Is Springsteen’s concern about income inequality shared by most Americans? If you were to gauge your response by viewing media coverage of the Occupy Wall Street campaign, then your answer would have to be yes.

Pollsters find a wide range of viewpoints. Gallup found that only two percent of Americans find the gap between the rich and the poor to be the most worrisome aspect of today’s economy. However, the Public Religion Research Institute found that more than six in ten Americans think that “one of the biggest problems in this country is that more and more wealth is held by just a few people.”

When talking to Christians about the issue, many don’t know what to think or what the Bible says about the issue. Is it a natural part of life? Is it a problem in America? Is it unfair or against Biblical teachings?

Much of this confusion within Christian circles is a result of economic illiteracy and simply being unfamiliar with Biblical teachings on the topic.

Here at the Institute for Faith, Work, & Economics, we recently released a research paper that provided an economic and Biblical explanation of why income inequality exists. My colleague Dr. Anne Bradley, IFWE’s Vice President of Economic Initiatives, made the following key points in her paper.

1. Diversity is a Biblical premise of creation. We are born with different gifts.

Scripture tells us that we are created in God’s image (Genesis 1:26-27). This implies uniqueness. God is unique – there is only one God. Man too is unique both physically and spiritually. Diversity is woven into the fabric of Creation.

We are all created with a unique set of gifts (I Corinthians 12:4-11). We can further the Kingdom of God through our very different gifts, and the different applications of these gifts.

2. By focusing on our gifts, we can unleash our comparative advantage and bring value to the marketplace by serving others.

Economists refer to our uniqueness as our comparative advantage. A good example of this is in Jesus’ parable of the talents, in which a rich man gives his servants different amounts of money according to their ability.

If one individual or company can produce a good or service at a lower cost, then they are better off specializing in the production of that good or service and trading with others. Focusing on our specialties frees up our time to focus on using our gifts productively. That freed time is a resource, an opportunity to further advance the Kingdom of God.

3. In a free society, absent cronyism, disparity of wages is not a sign of injustice.

Because gifts are different and value in the marketplace is subjective, incomes will be different. They are different because we are created differently. Income inequality is inseparable from a fallen world in which scarcity abounds. It’s a fact of economic life and economics pervades all of our life choices.

4. If we care, like Springsteen, about a society that reduces poverty and assists the poor, we should be concerned not about income inequality, but about the relative prosperity of those at the bottom and their income mobility. 

In a market economy, most people start out at a lower bracket and move to higher incomes. But is this really  happening?

The Congressional Budge Office reports that from 1979 to 2007 real (inflation-adjusted) average household income grew by sixty-two percent. The average household experienced economic growth. Most U.S. citizens are quantitatively better off than they were in 1979. Even though the rate of growth across groups is not the same, all groups experienced growth.

5. An opportunity society is the best way to unleash the creativity and dignity with which we are created and serve others with our gifts. 

A system of free-market (voluntary) exchange supported by well-defined private property rights protected under the rule of law is the only empirically-tested way to protect human dignity and unleash creativity with which we are created, all for the purpose of serving the common good. That is also the best way to foster income mobility.

From a Christian viewpoint, we are created uniquely, and than means there is no universal Biblical standard for income equality.

That said, we Christians are called to seek justice and to care for the poor. We must be at the forefront of this discussion on income inequality. Corruption and injustice that cause poverty must be eradicated.

Christians must be leaders in cultivating and protecting an economic environment that creates opportunity for those in poverty to enjoy upward mobility through the dignity of work.

What do you think? Is income inequality unjust? What causes it? Leave your comments here

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