Love and envy probably are the most bewitching of all emotions. Love blinds all men alike, both the wise and the foolish. Envy sharpens our eyes although it is a timid and shameful passion to which we dare not confess. Being unequal in ability, industry, and the rewards of our labors, we let the vice of envy creep into our hearts and make us miserable. If envy were a fever, many people would be ill.
Man is a social being who seeks protection and comfort in society. He takes care of his own with the help of others, working together in what economists call “division of labor.” It springs from individual inequality in inborn ability and acquired capability which permit individuals to perform different tasks. Individual inequality does not contradict the “self-evident truth” that “all men are created equal, that they are endowed by their Creator with certain unalienable Rights.” It is self-evident that innate inequality calls for equal individual esteem, regard, and respect, assuring social peace among unequal men. Social harmony and cooperation depend on the equal treatment of all members of society before the law.
Many reformers frown upon this political and legal equality as being inadequate; they would extend the scope of equality to economic life through political distribution of income and wealth. They would forcibly reduce economic inequality through taxation and outright confiscation, seizing income from productive members, giving some to unproductive or less productive individuals, and keeping some for the regulators, tax collectors, and confiscators. They would use force continually and relentlessly because people continue to differ in capacity, skill, strength, industry, training, and experience. They love force which breeds more force. They easily enslave servile natures; freemen seek to escape.
A policy designed to bring about economic equality opens the door for demagogues. It invites politicians to stir up the resentment of the poor against the rich so that they may elect those demagogues to positions of power and largess. Demagogues are agitators who ask why anybody should be permitted to earn millions while honest people linger in want and despair. Always ranting against the greed, lust, and corruption of the rich, they promise much but perform only evil. In the end, they incite the envious mob to plunder the rich.
The quest for economic equality breeds a new race of politicians: hunters after popularity, they are men of ambition who seek the profits of office rather than honor and service, orators who wax eloquent of principle, having none themselves. They do not pursue what is right but rather what brings vulgar applause. While in the possession of political power, they lead a nation straight into despotism. Even if we were to surrender all our freedoms to them, there would be no equality of position and income. The taskmasters would take the place of the rich, and political power would triumph over economic productivity.
In an economic order not guided by resentment and envy, the people are preoccupied with their own problems. Every individual faces the challenge of earning enough income to satisfy his needs and wants. He may contribute to the process of production and thus earn an income or be supported by others who do participate. Infants, the aged, and the handicapped obviously must depend on their supporters, while all others face the challenge of earning an income and providing for themselves and the persons who rely on them. He who refuses to contribute to production does not earn his keep, but is free to remain idle. In a command system, he has no such choice; the government forces him to participate in any way the officials see fit. The police, judges, and jailers exact everyone’s contribution to the joint effort.
An envy-free society is clear of political power and coercion. It imposes restraints only on criminal acts that inflict harm on persons and their property. There are no economic commands, rather merely indirect pressures on individuals to cooperate in the process of production. The market order allocates income in accordance with the services rendered and contributions made to social well-being. It rewards individual effort according to the value of the service rendered, which creates an incentive for everyone to apply his abilities to the utmost. Free societies enjoy great productivity, high individual incomes, and commensurate standards of living.
Welfare states pursue a relentless policy of income equalization. Driven by the envy of voters, they seek equality through confiscatory taxation of incomes and estates. But a policy of confiscation is always short-lived; it may succeed once only when it is not expected. As a continuing policy it is rather ineffective as the owners prefer to consume their capital instead of saving it for the tax collectors and expro-priators or, if such capital is liquid, send it abroad to invest in foreign enterprises. Countries that lose capital suffer economic stagnation and decline; countries that attract capital enjoy rising labor productivity and wage rates. After all, saving and investing determine the productivity of labor and provide the means for the improvement of future conditions.
Confiscatory taxation is not the only method of capital consumption; deficit spending and banking regulation have the same desolating effects. Legislators and regulators like to channel the people’s savings to government, which promptly consumes them. All the funds of Social Security and large funds of private trusts and investment companies consist of government IOUs, which are certificates of capital consumption. While individual savers and investors are providing goods and services for the future, government is committed almost exclusively to the enjoyments and pleasures of the moment. While individual saving and investing make for peaceful cooperation and social division of labor, political spending invariably generates bitter conflict not only between the beneficiaries and victims but also the generations. Deficit spending tends to consume both—capital accumulated by past generations and the seed corn for future generations. It is difficult to imagine a policy more destructive than deficit spending.
Love makes all hearts gentle except those touched by envy. Most of the economic and social misery which welfare states bring upon the world is inflicted by demagogues stirring up the resentment of voters. Unable to attain the income of the rich, they rail at it. All kinds of problems are solvable except those which spring from envy.