Defending the Free Market: The Moral Case for a Free Economy by Robert A. Sirico

Author:Robert A. Sirico
Language: eng
Format: mobi, epub
Tags: Political Science / Political Ideologies / Conservatism & Liberalism
ISBN: 1596983256
Publisher: Regnery Publishing
Published: 2012-05-20T22:00:00+00:00

Mind the Floor, Not the Ceiling

Sometimes one hears calls for a “cap” or a ceiling on income. In 1942 President Franklin D. Roosevelt proposed to Congress that incomes for Americans be limited to $25,000 a year—about $350,000 in today’s dollars. Although Roosevelt’s proposal did not become law, Congress did levy a 90 percent income tax on Americans making more than $25,000.

But caps on income are counterproductive, if what we want is more for the poor. Let’s look at an example from the private sector. From its inception in 1978, Ben & Jerry’s Ice Cream has been a “progressive” business, supporting a variety of causes popular on the left. It was founded by two life-long friends, Ben Cohen and Jerry Greenfield, whose policy was never to permit anyone working for the company to earn more than seven times the amount of its entry-level employees—until, that is, Ben and Jerry’s well-intentioned policy met the reality of the open market. When they decided to sell the company and began the search for a new CEO who, they announced, would make only marginally more than the rest of the workers at the company, they discovered that no one with the requisite skills to run what by now had become a large corporation would apply for the position.2

Think about why this is so. It is not because others did not support the social aims of Ben and Jerry. It is not even because no one applied for the position. It is just that people with the requisite skills and experience to keep Ben & Jerry’s in operation were too valuable to the market to work under the ceiling set by the company’s founders.

Eventually, Ben and Jerry simply sold the company to the Unilever conglomerate, which ended the seven-to-one policy.

Differences in remuneration are important signals to the market. More highly paid professions entice more people to enter, despite the formidable challenges of extended education, long working hours, or stressful conditions. Lower pay sends a message that there is a surplus of available workers; thus if you seek a higher wage you should acquire additional training, move to another region, or take on a more strenuous job. In a properly functioning market there is nothing morally wrong with income differences per se.

The real moral problem is not the gap in wages between the lowest-and highest-paid workers, which is what a wage ceiling addresses. The real moral question is about the floor—how the poorest and most marginal people in any given society are doing. America’s Catholic bishops acknowledged as much in their 1986 pastoral letter on the economy, Economic Justice for All, a relatively “center-left”-leaning document: as they put it, “The impact of national economic policies on the poor and the vulnerable is the primary criterion for judging their moral value.”3

When you think about it, the rage for income equality is rather curious in the contemporary social climate. “Diversity” is celebrated (even obsessed over) and individuality praised, yet so many are looking to equality as a prescription for human flourishing.

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