I would say that in this world, the greatest source of inequality has been special privileges granted by government.
The heart of the liberal philosophy is a belief in the dignity of the individual, in his freedom to make the most of his capacities and opportunities according to his own lights.
If freedom led to wider inequality, I would prefer that to a world in which I got artificial equality at the expense of freedom. My objective, my god... is freedom of individuals to pursue their own values.
"Free markets" is a very general term. There are all sorts of problems that will emerge. Free markets work best when the transaction between two individuals affects only those individuals. Most often, a transaction between you and me affects a third party. That is the source of all problems for government. That is the source of all pollution problems, of the inequality problem. This reality ensures that the end of history will never come.
The important issue is not how much inequality there is but how much opportunity there is for individuals to get out of the bottom classes and into the top. If there is enough movement upward, people will accept the efficiency of the markets. If you have opportunity, there is a great tolerance for inequality. That has been the saving grace of the American system.
In the US, the problem is primary and secondary education. We've had such an increase in inequality because a quarter of American kids don't finish high school!
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