Capitalism Does Not Create Social Inequality – OpEd


By Lipton Matthews*

Quite often, the hot-button issue of income inequality is caricatured as an outcome of capitalism rather than as a characteristic of all societies across time. Critics of capitalism have a rather romantic version of precapitalist societies. This error stems from a misunderstanding of human societies in general.

Inequality is a permanent fixture in society due to disparities in the distribution of talent. Usually, talent catapults organized groups into leadership positions, and then such groups reinforce their privileges by instituting hierarchies. The entrenchment of hierarchical relationships often results in commoners’ serving elites by providing labor and tribute. From these arrangements emerged rigid caste and class-based systems, where one’s life chances were fixed at birth.

In precapitalist societies, one’s status was woven into a complex web of social obligations. Under capitalism, ambitious people can expect to advance, courtesy of their talents and smart work, but in the typical precapitalist environment, status was linked to elite connections and honoring higher classes. Unlike the romantic visions of precapitalist societies conjured by intellectuals, such societies were likely to be closed societies that limited the mobility of nonelites. Among the Asante of West Africa, royalty and people from chiefly families were given privileged positions. Social divisions were so ingrained in this society that even slave communities had hierarchies.

In a classic article on social distinctions among the Yoruba, anthropologist William Bascom argued that rank is salient in shaping social intercourse. According to Bascom, Yoruba norms permitted an upper-class boy of fifteen to flog a lower-class man of forty at the market if the latter obstructed the former. Bascom claimed that because they feared that elites might use their power to enact punishment, lower-class people rarely retaliated.

In Yoruba, as in many precapitalist societies, kings could expropriate the wealth of their subjects with ease. Kings were not required to solicit permission or to compensate their subjects for the expropriation of property. At the communal level, however, older men exercised tremendous authority over young men, women, and children. Not only were the young required to consult elders in village matters, but elders were entitled to more food and gifts than youngsters at significant events.

Although there were some opportunities for social mobility in Yoruba and Asante, as some highly intelligent slaves and commoners did attain important positions. Such appointments invariably led to new dynasties. When commoners or slaves rose to become warriors or senior political officials, they were rewarded with titles and wealth.

Historian Akosua Perbi in her discussion on mobility in precolonial Asante shares the story of the slave Opoku Frere, who became gyasewahene (head of exchequer). As a result of his diligence and loyalty, Opoku Frere ensured the success of his descendants, who became the beneficiaries of a stool. But, as Perbi explains, such mobility was contingent on loyalty to the crown: “The creation of stools in pre-colonial Asante for people of low status was therefore no casual gesture. It was a mark of great honour and achievement of the highest mobility. . . . In their new political office, these elevated servants continued to serve the king and state faithfully.”

Outside of Africa, precapitalist societies had equally rigid class distinctions and inequality. For example, members of the Aztec nobility were granted the right to wear cotton, construct homes on elevated platforms, and own special types of jewelry. Vast differences in wealth also existed between commoners, with merchants (the pochteca) and artisans being richer than farmers. Commoners were deprived of the right to own land, but many still acquired property via relationships with royals and nobles.

Likewise, tax collectors and other bureaucrats occupied positions of wealth and authority and resided in palatial homes. Inequality in noncapitalist societies is more likely than we assume and more persistent, because individuals are bestowed with privileges that perpetuate the status quo.

The upshot of capitalism is that it undercuts traditional authority, thereby making it easier for market forces to reward talented individuals. Hence, capitalist societies are more mobile and less likely to create special privileges for elites. Research shows that economic freedom promotes less inequality by availing more opportunities to ordinary people.

Economist Niclas Berggren demonstrated in an influential study that policies that aid economic freedom, like trade liberalization and financial deregulation, are correlated with a reduction in inequality. Our paradox is that while markets lead to inequality by driving innovations, market societies also eliminate special privileges that previously resulted in unjust inequality. Therefore, since inequality is a feature of all societies and since market societies engender less inequality and more fairness, then critics ought to advocate for more rather than fewer markets to achieve the goal of fairness.

*About the author: Lipton Matthews is a researcher, business analyst, and contributor to Merion WestThe FederalistAmerican Thinker, Intellectual Takeout,, and Imaginative Conservative. Visit his YouTube channel, with numerous interviews with a variety of scholars, here. He may be contacted at [email protected] or on Twitter (@matthewslipton).

Source: This article was published by the MISES Institute


The Mises Institute, founded in 1982, teaches the scholarship of Austrian economics, freedom, and peace. The liberal intellectual tradition of Ludwig von Mises (1881-1973) and Murray N. Rothbard (1926-1995) guides us. Accordingly, the Mises Institute seeks a profound and radical shift in the intellectual climate: away from statism and toward a private property order. The Mises Institute encourages critical historical research, and stands against political correctness.

2 thoughts on “Capitalism Does Not Create Social Inequality – OpEd

  • December 15, 2022 at 7:58 pm

    Where a person ends up has alot to do where they start. I was born white male upper middle class in the US, I worked hard and invested well and so I am pretty well off. If I were born into poverty in South Amarica or China or India or even in the US, I would have had to work 100 times harder to get to where I am now. If I was born a person of color or a woman I would have had to work 10 times harder. People who get wealthy or are born wealth in capitalism don’t work 1000 timed more than the rest of us. They succeed in a big way because the rest of us sacrifice ourselves in war, in digging ditches, in being Police or teachers or in a million different ways. Everyone deserves an equal opportunity. The wealthy pay little in tax while the rest of us can’t afford health care. Screw the way it was 100 years ago or 1000 years ago, everyone deserves an equal opportunity with education and equality of opportunity.

  • December 19, 2022 at 5:56 pm

    If I recall my Karl Marx at all accurately, he also believed that capitalism was superior to the various forms of social organisation, e.g. feudalism, that preceded it.

    Given the “economic law” of diminishing marginal returns” which include utility returns to wealth, it follows, other things being equal, that societies more equal (in wealth and income) will be “happier” than the less equal. Of course other things are not equal, for example, any society needs to incentivise innovation and certain forms of risk taking. Also, if capitalists are allowed more monopoly power than they need to innovate, then overall utility will be reduced.

    How all these matters get knitted together for some optimal state, which state is likely to be dynamic in response to changing circumstances, is a complex matter well beyond my ken. And I’ve not even thought of public goods, such as national defence. But that complex mix is where we should be directing our research efforts.


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