My dad used to make the point that the color TV we had growing up, a pretty basic model as I remember, was a miracle. He explained that 20 years before the technology we had sitting in our den couldn’t be had at any price. 100 years before I was watching Scooby Doo the idea of a color TV was the stuff of wild science fiction. 100 years before that it probably was inconceivable.
And my childhood was before the Internet and iPhones, and social media, and…You get the point. We live in a time of great wealth.
I do not say this to minimize the importance of getting people out of poverty, however it is defined. I would like for everyone to be able to not only survive but enjoy their lives as much as possible. However, in discussions about income and wealth inequality and how they have changed over time, understanding the difference between real and nominal wealth gives some perspective.
Somebody with little more than a small rented apartment with central air and heat, running water, and electricity to power a small TV and various appliances is wealthier than even the kings of old.
Therefore, the important question we should be asking is not “how do we eliminate wealth and income disparities today?”, but “what caused the dramatic increase in standards of living for populations as a whole over the past few centuries?”
The answer is capital accumulation, international trade, industrialization, and unleashed entrepreneurship. Unfortunately these mechanisms of economic growth are often accused of “causing poverty” and creating the nominal income inequality we see today.