It is not people being poor that causes social ills from school failure, teenage pregnancy, crime and short life expectancy, but the fact that some people are poorer than others. It is not the level of income, but the differences between levels that really matter. It follows that fighting poverty is the wrong battle except if it reduces inequality. The right target is inequality and never mind if reducing it were to leave the poor as poor as before. They, and society as a whole, will still be healthier and happier.
This, stripped of rhetoric, is the latest twist in the convoluted chain of arguments for altering a more or less liberal order out of all recognition until justice proper is decisively subordinated to what some call “social” justice. Explicitly shifting the target from poverty to inequality, to the point where poverty becomes irrelevant as long as it is the same for all, is a radical novelty.
There are more potent ways of fighting poverty than soaking the rich. Inducing people to form and preserve two-parent families, if indeed they can be induced to do so, could be wonderfully effective. Another very potent means is to raise the demand for labour, the main or only thing the poor have to sell. One obvious cause of rising demand for labour is capital formation which, in turn, is fed by public, corporate and personal saving. We can’t predict what would happen to corporate saving, but we know that public saving is generally negative. Personal saving is typically much greater proportion of high than of low incomes. Hence the same national income unequally distributed yields more saving than if it were equally distributed. By saving more, the very affluent are, so to speak, raising the price they will have to pay for labour tomorrow. In any event, unequal affluence holds out more hope for the poor than equal poverty.
Extracts from Equal Poverty, Unequal Affluence published by Econlib.