Representative Frank’s Deal (2006 Mar)

by Barry A. Liebling

In February 2006 Barney Frank, a member of Congress from Massachusetts, published “When the Bounty Isn’t Shared” in BusinessWeek and wrote “it’s time to make a deal” with business. The essay is a restatement of conventional leftist complaints regarding economic inequality. Frank asserts that some inequality is necessary, that there is currently too much of it, and that steps should be taken to transfer wealth from corporate executives to average Americans. The likely impact of the column is predictable. Socialistically inclined readers will nod their heads, and free market advocates will frown.

But Frank’s essay deserves more attention. A careful reading reveals much about the philosophical foundation of mainstream leftists. It is worthwhile to examine his three main themes – inequality, morality, and his proposed deal – and consider how to respond properly.

First Frank tackles the topics of “inequality” and “excessive inequality.” He takes pains to point out that “inequality is not a bad thing.” It is a way to incentivize producers so they will create more wealth. If more money can be made, productive people will work more effectively.

Notice what this divulges about how Frank sees producers. They are instruments of the state, or of society. They have no right to live for their own sake. They exist to serve the needs of others. Producers are tools to be used by the guardians of society – Frank and his allies.

If permitting inequality is a good method of inducing productive people to create wealth, what is “excessive inequality”? Frank’s answer is that “the free market will create more inequality than is necessary for efficiency.” Incentivizing people to work is good. But it is wasteful to permit them to keep any more of their wealth than it takes to keep them motivated.

What is the alternative to Frank’s comments on inequality and incentives? The correct response is that each person owns his or her own life. Government is supposed to protect individual rights – not control, direct, or incentivize citizens. When people are free to live their own lives incentives are the natural consequence of voluntary exchange.

Frank’s second theme is about morality. He asserts that if corporate profits are up and executive pay is high it is “morally objectionable” if “people live at a lower standard of living than we think Americans ought to.” Consider the open-ended nature of Frank’s “moral objection.” He and his political allies – that is what is meant by “we” – will censure successful businesses and people for performing well and increasing their own wealth. Notice that he is not claiming that successful people are taking wealth away from anyone – just that it is obnoxious to him that they should have more. The solution for Frank is to redistribute some of the wealth to those who did not produce it.

The correct free market response is that companies and individuals are always obligated to be ethical in business. They should create value, act honestly, and deal by mutual consent. Once these conditions are met an individual is entitled to all of his or her wealth. What is really morally objectionable is the political meddler who attempts to seize or extort wealth from the rightful owner.

Frank ends with his third theme – the deal. He is willing to help persuade his “fellow liberals” to support more free market policies if in return “the business community” works to ensure that “the bulk of Americans get a larger share of our increased wealth.”

Two things are especially noteworthy about Frank’s deal. First, it amounts to a threat of coercive force. He is saying that he will not call for legislation against the business community if that community “voluntarily” hands over some of its earned wealth. This is equivalent to a robber saying at gunpoint that he will not shoot you if you give him your money.

Second, and even more telling, is his reference to “our increased wealth.” This phrase exposes that he regards wealth as a national resource, not the private property of individuals. By this view, all wealth in private hands is subject to confiscation by politicians who can see some use for it.

Frank’s essay reveals a lot about how a mainstream leftist thinks. His proposal may serve his purposes, but it is not a good deal.

*** See other entries at in “Monthly Columns.” ***

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