Melanie Sturm: Inequality and a tale of 2 Ukrainians
March 3, 2014
Last week, as Ukrainian emigre-turned-tech tycoon Jan Koum prepared to cash a multibillion-dollar check from Facebook — acquirer of his startup "WhatsApp" — Ukrainian President Viktor Yanukovich was checking out of his Gatsby-esque estate where he'd cached his stolen plunder.
That the two Ukrainians derived their riches under diametrically opposed systems — free enterprise versus banana republic — illustrates why all income inequalities are not created equal.
Most don't resent the rich — only the undeservedly rich — as a recent Venezuelan protest sign conveyed: "These Castro-Chavistas speak like Marx, govern like Stalin and live like Rockefeller, while the people suffer!"
Koum's affluence springs from a free society in which everyone has a God-given right to go as far as their work and talent will take them. Yanukovich's hijacked wealth is exploitative, depriving others of dignity, opportunity and economic mobility. One system disperses power as it champions an individual's right to pursue happiness; the other concentrates it while stifling human potential.
There will always be a top 1 percent. The question is: Will they be hardworking and productive people whose value creation benefits society — think Steve Jobs and J.K. Rowling — or cronies living off perks extracted from the labor of the little people?
In America, we have increasing numbers of both, which is why we must think again before allowing policymakers to concentrate more power in the name of social justice. In fact, economic liberalization is the real cure.
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Economically freer countries enjoy greater growth, opportunity, civil rights and health, as evident in the yawning gap between North and South Korea and in Asia, where hundreds of millions have escaped grinding poverty.
To secure their freedoms, Ukrainian protesters resemble Koum's mother. She fled Kiev for California in 1992 with 16-year-old Jan in search of religious liberty, privacy from Ukraine's surveillance state and the opportunity to realize a better life.
Although they struggled upon arrival, relying on public assistance, Koum's climb from food stamps to Facebook fortune was jagged and improbable — a journey he honored by signing the
$19 billion sale agreement outside the building that once housed the food-stamp office.
The Koum tale is a triumph made possible by America's system of free enterprise and limited government, which produced human history's most dynamic and decent society.
Today the American Dream is increasingly out of reach for those stuck in government dependency or struggling to survive amid stagnant wages, declining job mobility and ever-increasing health care, food and energy costs.
Confusing the symptom with the disease, President Barack Obama rails against income inequality, pronouncing it "the defining challenge of our time." But he has it backward — economic stagnation causes income inequality, not vice versa.
Obama also ignores the social-mobility-impairing trend of single motherhood, which exploded from 4 percent in 1960 to 42 percent currently, accounting for 50 percent of chronic poverty.
Instead of targeted policies to eradicate poverty — eliminating welfare's marriage penalty and allowing parents to choose the school that's best for their child — Obama's proposed minimum-wage hike and unemployment-insurance extension are mere Band-Aids on the cancer of opportunity inequality.
Five years of Obama's trickle-down-government policies have buoyed Wall Street, corporate America and Washington, D.C., where seven of America's wealthiest counties reside — like the capital of "Hunger Games," whose powerful aristocracy lives off the tribute paid by impoverished citizens in the territories.
Despite trillions of stimulus and War on Poverty spending — causing debt to swell 63 percent — the nearly five-year economic recovery has one-quarter the GDP growth rate of the Reagan recovery. Although the stock market has doubled, median household income fell 6 percent, labor-force participation hit a 35-year low and a record 47 million Americans now live in poverty.
While not Yanukovich-style graft, our government transfers hundreds of billions of dollars annually to the affluent, thanks to cronyism, corporate welfare and entitlement programs that don't distinguish between ordinary Americans and corporate jet owners.
Last year, America's richest 10 percent captured the greatest share of pre-tax income growth since the Roaring '20s, according to University of California-Berkeley economist Emanuel Saez. He also showed the top 1 percent capturing 95 percent of income gains during the Obama recovery (2009 to present), compared with 65 percent during the Bush expansion (2002 to 2007).
That so many Americans have fallen behind is both appalling and avoidable, and it's a reflection of America's deteriorating freedoms. Formerly second in the Wall Street Journal/Heritage Index of Economic Freedom behind Hong Kong, America now is 12th — below Estonia.
Bequeathing our children an economically stagnant America is a choice, not a destiny. Our real "defining challenge" is to restore the growth that creates jobs, opportunity, social mobility and future Jan Koums.
Think again: Shouldn't our goal be to unleash the dreams and talents of all Americans — especially former food-stamp clients — so they can lead fulfilling and happy lives?
Melanie Sturm lives in Aspen. She reminds readers to Think Again. You might change your mind. She welcomes comments at firstname.lastname@example.org.