In the controversy raging over whether income inequality in America is growing a lot or a little, some pro-market people say it doesn’t much matter. This attitude is unjustified, not to mention harmful to the cause of individual freedom because it misses the bigger picture.

How could growing economic inequality not matter? I’d understand that position if the American economy were not saturated with government actions that serve privileged interests. Under those circumstances, we could say, with Ludwig von Mises, “Inequality of wealth and income is an essential feature of the market economy. It is the implement that makes the consumers supreme in giving them the power to force all those engaged in production to comply with their orders.”

But we live in an economy that is far from a free market. The hand of government is pervasive—and not just in the obvious ways. There is an invisible political hand, which is different from the invisible hand Adam Smith famously wrote about. In a thousand ways, government intervention at the behest of dominant business interests squelches competition and protects incumbent firms.

In itself, inequality born of political privilege should be worrisome simply on grounds of justice, even though the position of most income groups has improved in absolute terms. But the problem goes deeper. Writing at The New Republic Online, Bradford Plumer identifies another reason for concern: “Over the last few years, political scientists have been converging on the view that massive disparities in wealth and income really do distort the democratic process—by allowing a tiny segment of the population to wield outsized influence in the political realm. The idea isn’t terribly groundbreaking—even casual observers of American politics know that money can buy power—but recent research is slowly nailing down exactly how this process works.”

Plumer cites research by Larry Bartels of Princeton and Lawrence Jacobs of the University of Minnesota and Benjamin Page of Northwestern showing that influence with Congress and the White House in both domestic and foreign affairs correlates strongly with income. It doesn’t seem to matter which party is in power.

What Bartels and Jacobs/Page find is something that libertarians have theorized about for ages. When government has the power to determine the fate of economic affairs, getting hold of that power is paramount. Since the life and death of profit-seeking projects hang in the balance, people will spend huge sums of money to shape policy. Who is more likely to succeed in that form of competition, the rich or nonrich?

This is not to suggest that people who buy political influence act purely defensively and that the state is the only culprit. On the contrary, most of the growth of government in America came at the behest of business interests unwilling to trust their fortunes to free and unpredictable consumers.

The upshot is that in a corporatist state, wealth influences policy, which influences the distribution of wealth, which further influences policy. And so on, ad infinitum.

What can we do about it? What we shouldn’t do is attempt directly (that is, forcibly) to redistribute wealth. It wouldn’t get at the interventionist roots of the problem and would fail to distinguish legitimate economic gains from illegitimate political gains. Thus it would fall short by justice and incentive standards.

Moreover, as a solution it is logically flawed: If the political system is dominated by wealth, how can we be confident in any political approach to economic inequality? As Anthony de Jasay said in a related context, trusting government to solve the problem is like trying to jump over one’s own shadow.

The key to ending politically induced inequality is to build a mass constituency for depoliticizing society. An appealing justification for radically reducing government power is that unjustified inequality would end and economic reward would be more closely aligned with service to consumers. To be sure, there would be income inequality in a true market economy. But it would most likely be less than we see today. How much less? We won’t know until after the liberal intellectual revolution.

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The government can’t figure out the best way to assure safety on airplanes, but it’s not the first time a mode of transportation was threatened by outlaws. Maybe we should take a page from the railroads’ book. Becky Akers has the history lesson.

China has made great strides economically, but not so much politically. Who’d have thought there’d be a statue of Adam Smith in Chengdu? James Dorn asks. What’s next, John Locke?

Politicians and pundits are mystified about how to reduce poverty. But as Jude Blanchette shows, we’ve had the answer all along./p>

The state interferes with our lives in big ways and small. So when is enough enough? Dick Foley wonders.

The hot concept in political thinking today is Deliberative Democracy. What is it and will it make any difference? James Bovard has the answers.

Japan is going through a fascinating transformation. It’s becoming Americanized. Norman Barry explains.

It’s politically safe to say, as the President does, that we are addicted to oil, as if running our cars and factories with it is irrational. Roger McKinney says that one person’s addiction is another’s intelligent use of resources.

Here’s what our columnists have cooked up this issue: Richard Ebeling notes that the difference between conservatives and statist liberals isn’t so great. Lawrence Reed contrasts love and power. Thomas Szasz shows that the First Amendment has limits when the subject is psychiatric abuse. Stephen Davies attributes cultural diversity to freedom. David Henderson pays tribute to the personal side of Milton Friedman. And Roy Cordato, reading yet another claim that a carbon tax would work miracles, protests, “It Just Ain’t So!”

The book reviewers pass judgment on volumes about immigration, George W. Bush’s big government, what a liberal world would look like, and how to shrink government.