Hard Work Matters, but Not in a Free Market Economy

September 8, 2012 by Ahmad Fuad Rahmat

In the September 3rd issue of the Edge, Lim Ewe Ghee once again wrote in defence of income inequality, this time in response to his critics.

Since he composed the article “in hope of generating further discussion” I shall take the chance to reply. Before proceeding, however, it would help for me to state the crux of Lim Ewe Ghee’s argument for the benefit of first time readers of the exchange.

Recall that for Lim, income inequality is acceptable because anyone who succeeds in a free market economy becomes wealthy primarily through hard work: “under individual liberty, people choose; and as noted, hard work, initiative and perseverance are choices as critical for success as genetics.”

Given the “benign” nature of the inequality caused by a free market driven by individual choices, Lim Ewe Ghee then concluded that it is “not a zero-sum game; its achievers succeed not at the expense of others.”

People work hard to buy the products they want at the marketplace; entrepreneurs work hard to become rich. Win-win, or so we are told.

In response I make the following points:

1.      Income inequality has nothing to do with hard work or laziness

The problem with income inequality is not just that some people are poor while others are rich. The problem, more properly stated, is that in a free market economy the poor keeps getting poorer while the rich keeps getting richer.

More importantly, that gap in wealth cannot simply be explained by a difference in work ethic.

Let’s pick a statistic from America which Lim upholds as the model of a free market meritocracy. From 1972 – 2008 the average income of the CEO increased to as much as four hundred times the average worker. Since 1980, America’s Gini coefficient rose from 0.388 to 0.45.

Now for Lim’s logic to properly hold, he must account for how the CEO’s hard work translates to that much more than the average worker’s.

We must also keep in mind, the common sense observation that poor people do in fact work hard. For example, the labourers who build our city skyscrapers work hard too, under the heat of the sun day after day for years, endangering their health and well-being welding and hammering away, often for very little pay, to help construct buildings that stand hundreds of feet in the sky.

Like entrepreneurs, workers too persevere, take risks, and help make actual progress in society possible. In fact, we can also argue that workers do so at far greater extents.

2.      A free market economy impedes social mobility

A meritocracy is defined by earned social mobility. It is a system whereby people can improve their quality of life through excelling in the work they do.

This will of course require hard work, but even the libertarian will agree that a meritocracy is not about hard work done for hard work’s sake. Rather, the hard work is to translate to the actual improvement of one’s life.

Now, instead of defining quality and improvement in abstraction by focusing simply on “individual choices”, let’s think about it in more concrete terms.

Quality of life does not simply mean accumulating more stuff or having more malls. It means, among other things, developing ourselves to our fullest potential while having a sense of community, autonomy and safety.

All this will contribute to making us more able workers, with the boost and stability needed to pursue more opportunities up the socio-economic ladder. It also makes the competition therein of higher quality and innovation.

But we must meet certain conditions first should we are to do well in that process: education is crucial so that we can gather the skills and knowledge needed to excel in our profession of choice. Healthcare too is needed so that our pursuit of success can proceed smoothly with as little cost to our well-being as possible. We must live with reasonable access to basic goods and services (electricity, water, public services etc.) so that our time and energy – and indeed life – will not be spent merely to fulfil basic needs.

The problem is that the free market is such that those basic needs can be (or already are) owned by others. Under laissez-faire capitalism, education, the cornerstone of self-development, rather than a right, becomes instead a product to be sold with profits to be made in the process.

There is also nothing according to the free market logic that would prevent healthcare to be a service to be bought, rather than a necessity we are entitled to as human beings. All this is in fact already happening in America, the model of free market meritocracy that Lim lauds.

Lim can reply to this by saying it’s every individual’s choice how he or she would like to spend his or her money: If you want to succeed in a meritocracy you must pay for education and healthcare, plain and simple.

But the fact that the basic conditions we need to convert our hard work to success are owned by other individuals for the sake of profit challenges his contention that the free market is “not a zero-sum game; its achievers succeed not at the expense of others.”

3. Not all markets are the same

Another problem in Lim Ewe Ghee’s argument is the equation he makes between a small businesswoman selling Char Kuey Teow on one hand, with Bill Gates and Steve Jobs on the other. Lim ignores the concrete socio-economic power differentials between them, while presenting both as examples of successful free market enterprises.

Now, not all markets are the same. The social value of the bond market is different than that of the vegetable market, for example.

The participants at different levels of different markets must therefore be evaluated by their relative vulnerabilities and strengths. To obscure this would be like equating a cat with a tiger on the basis that they are both felines, while ignoring the differences in their actual capacities.

4.      We are not just consumers

The above errors, I argue, stem from a more fundamental problem in the free market worldview and that is the understanding of society as primarily consisting of consumers rather than human beings, with needs far more complex than mere consumption.

The difference, to be sure, is not merely semantic. To be regarded as a consumer is to be seen as a subject of monetary transactions, whereby your worth is measured primarily from the perspective of what you can or cannot afford in the market place.  Not all people are consumers.

To regard someone in a more complete way, as a human being, is a different perspective altogether. This is not conditional on how much one makes.  In fact it will be revealed upon reflection that what makes us really content are not available at malls or the stock market.

Rather than the mere accumulation of things, there are in fact other aspirations that may give life more meaning such as dignity, family and community, peace of mind, good health, loving trusting relationships and so forth.

None of these are for sale at stores near you, and a real consideration of what it would take for us to achieve them will reveal the fundamental impulse that lies at the heart of all uneasiness towards income inequality: that we need each other to make this world a better place.

This article was also published by Free Malaysia Today