The Rise of Consumption Equality - The Library of Economics and Liberty

7 May 2019 - The exclusion from markets, rather than markets themselves, exacerbate inequality – often driven by crony capitalism and government overreach, which both drive systematic exclusion.

Garreth Bloor
Income inequality may widen, but consumption equality will become the norm – Andy Kessler

Inequality of wealth is a dominant theme in public discourse. Concern birthed from a sense of justice and doing right is merited. Where to direct the concern is the key area of debate. The exclusion from markets, rather than markets themselves, exacerbate inequality – often driven by crony capitalism and government overreach, which both drive systematic exclusion.

Nevertheless, inequality is recognized as a given, by both those focused on absolute and relative wealth.

Yet one measurement of equality is on the rise: equality of outcomes.

The issue was raised by Andy Kessler back in 2012 in the Wall Street Journal, that appeared (tongue-in-cheek) to make a few obvious, but rarely articulated points: “For the most part the wealthy bust their tail, working 60-80 hour weeks building some game-changing product for the mass market, but at the end of the day they can’t enjoy much the middle class does not also enjoy”.

Consumption equality stems from the role of entrepreneurs serving the mass market. The wealth of those entrepreneurs and business executives is often tied up in illiquid wealth and the work schedules of some of the most successful, which preclude leisure often enjoyed by many of the rest of society.

“America’s successful are chosen for performance alone, for service to the people as consumers,” points out intellectual and venture capitalist George Gilder, adding they “bear no resemblance to the plutocrats of socialist and feudal realms”.

“The American rich, in general, cannot revel in their wealth because most of it is not liquid. It has been given to others in the form of investments. It is embodied in a vast web of enterprise that retains its worth only through hard work and sacrifice,” he adds, alluding to Larry Page and Jeff Bezos as examples.

Kessler stated back in 2012 that “[t]he blue jeans and T-shirts of the global elite are no more comfortable than those worn by the middle class. They drink the same coffee, watch the same films and carry the same smartphones. But a gulf yawns between the rich and the rest when they fly. Ordinary folk squeeze agonizingly and sleeplessly into cheap seats. The elite stretch out flat and slumber”.

Nonetheless, Kessler, while acknowledging the point still celebrates that “you can fly almost anywhere in the world for under USD 1000,” as does Gilder in his book Knowledge and Power.

Innovation, as it does, is now taking over that status quo of ‘travel inequality’ which Kessler conceded in 2012. And in turn, that in innovation is poised toward increased consumption equality among flyers.

While The Economist notes private jets are increasingly subsidized through ‘ludicrous tax breaks’ – a government intervention exacerbating the inequality of travel – disruption is occurring.

Entrepreneurs focused on serving the vast majority of flyers are driving consumption equality. Take “uber-for-private jets” models.

Empty legs on private planes and charters are filling up by selling seats through apps at discounted prices to the mass market, making direct flights between smaller destinations easier and more efficiently using empty space on private jets and avoiding commercial airports. There are hundreds more private airports than commercial, making private flying increasingly accessible in the aviation market.

Recently, one such start-up, JetSmarter, was acquired by established private jet player VistaJet.

“Any jet can be supplied into this marketplace and the buyers get an instant booking”, according to VistaJet’s founder, Thomas Flohr. The app has been downloaded over 2 million times.

Extreme poverty in a world of affluence deserves our ongoing urgent attention and increased. Consumption equality among flyers (a relatively fortunate group by global standards) may not seem particularly important. But it is a demonstration of the power of innovation and narrowing what even free marketeers see as a glaring inequality, without ascribing moral outrage to it.

Assessing consumption quality should lead us to consider how we can address far more pressing humanitarian considerations. Asking how people create wealth and measuring outputs beyond income should be important considerations in getting closer to understanding the lived reality of millions; in contrast to measurements of income alone that preclude considerations of how to build an economy that innovatively delivers more to an ever-larger base of millions, if not billions, of people.

Garreth Bloor is a vice president of the IRR, the oldest classical liberal think tank in South Africa. He served as a former executive politician in the country and is the founder of a venture capital firm. Bloor currently resides in Toronto.

https://www.econlib.org/the-rise-of-consumption-equality/

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