Inequality is a hot topic, yet those of us who support free markets are often dismissive of the issue.
We (rightly) point out that the most important thing is economic growth – the key driving force behind increasing prosperity for everyone.
However, free-marketeers are wrong to see concerns over inequality as the preserve of those on the left. Socialism is a failed idea, and Karl Marx’s theories for how to run an economy have been proven to be disastrously wrong, with over 100 million dead. And yet, support for his ideology persists.
Given that concerns over inequality drive people to socialism, the right needs to take it seriously too.
What is more, ignoring the issue suggests that free-market capitalism does not have solutions to inequality. As a result, the narrative is shaped by those on the left who call for higher taxes and more government intervention.
But in reality, the free market offers a host of solutions.
For example, a person’s life chances in the UK are still largely determined by where they grew up and the type of school they went to. A low quality education increases the likelihood of poor children remaining trapped in poverty and not realising their full potential.
The left-wing solution is to close down private schools, thereby dragging everyone down to the same education level. The free market has a more effective answer: education vouchers, as suggested by Milton Friedman himself.
Giving parents more choice over their children’s education has successfully increased standards across the board and helped to reduce inequality in countries that have tried it, such as one of the socialists’ favourite nations, Sweden.
Then there is housing. The restrictive planning system in the UK has led to sky-high prices in and around urban areas. As a result, the vast majority of young people cannot afford to own their own home, with millions struggling to pay their rent.
Meanwhile, wealthy people have got even richer as the value of their property has increased. This has fomented feelings of anger and resentment, not just from the less well-off towards the wealthy, but also from the young towards older people who are more likely to own.
The left sees wealth taxes and forced sales of property as the answer. In fact, we should be looking to the market for solutions: scrap many of the unnecessary planning regulations, and abolish stamp duty.
This will lead to more houses being built and sold, lowering prices and bringing down inequality.
These are just two examples of many. We could slash regressive taxes which hit the poorest the hardest; or reduce occupational licencing which creates hefty time and financial barriers for many jobs; or focus on reforming childcare regulations, which are so onerous (especially regarding staff-to-child ratios that are stricter than most other developed countries) that they make it too expensive for many parents to afford, preventing them from returning to work.
All these ideas make sound economic sense in their own right, but they would also address poverty and inequality far more effectively than just raising taxes.
The stakes are too high to leave the inequality debate to the left. Free-market capitalism has the answers. Now we just need to share them.
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