What did America’s founders say about economic inequality? Rather than unload statistics about the reality of inequality in America today, which we have done on other occasions, this post considers inequality based on the economic principles on which our republic was founded. These principles remind us why economic inequality is not necessarily an injustice, but rather a necessary component of any prosperous society.

Property Rights

Far from the notion of merely owning physical property, the founders understood property rights to include “natural rights.” In an essay on property rights in 1792, James Madison wrote:

He has a property very dear to him in the safety and liberty of his person. He has an equal property in the free use of his faculties and free choice of the objects on which to employ them…Conscience is the most sacred of all property…the exercise of that, being a natural and unalienable right.

Property rights, therefore, include utilizing our faculties to acquire property, which precedes the ownership of physical property.

Economic Inequality

The founders were very aware that protecting the faculties of individuals would lead to inequality. In Federalist 10, Madison said that “From the protection of different and unequal faculties of acquiring property, the possession of different degrees and kinds of property immediately results.” But is this just?

Thomas West writes that the first reason the founders understood this to be just is that “property rights benefit all classes equally insofar as they protect the body and mind of every individual from exploitation or enslavement by others.”

Secondly, the founders knew that protecting individual faculties likely helps the poor if it enables economic productivity that creates more jobs.

Madison articulated that industry and labor left to their own courses will be directed to “those objects which are most productive, and this in a more certain and direct manner than the wisdom of the most enlightened legislature could point out.”

Likewise, Alexander Hamilton noted in his Report on Manufactures that individual faculties organically create a division of labor, which “has the effect of augmenting the productive powers of labor, and with them, the total mass of the produce or revenue of a country.”

Consider a person who freely uses his own talents to create wealth, like Steve Jobs. The creation of Apple products has led to the employment of tens of thousands of individuals who design, assemble, and manufacture these products; not to mention that each Apple building employs janitors, maintenance workers, landscapers, and others.

Government’s Role

Also in Federalist 10, Madison stressed that protection of natural rights is the first job of government: “Diversity in the faculties of men, from which the rights of property originate…. The protection of these faculties is the first object of government.” Any violation of these rights was considered morally unjust. Government also has a role in enforcing contracts, and encouraging and defining ownership of property.

Throughout the first century of America, government adhered fairly closely to these principles. Even spending on “internal improvements,” or infrastructure projects, was acceptable only if it was in the national—as opposed to the state or local—interest. Aiding the interests of some over others was considered unconstitutional, hence the word “general” in the general welfare clause.

That’s why in 1822, President James Monroe vetoed a bill that redistributed wealth to a local interest, contending that government spending was restricted “to purposes of common defence, and of general, national, not local, or state, benefit.” This tradition was followed by Presidents James K. Polk and James Buchanan, in 1847 and 1857, respectively. They each vetoed measures that were not in the general interest. Likewise, in 1893, President Grover Cleveland vetoed a $10,000 bill to help farmers in Texas during a depression, stating: “federal aid in such cases encourages the expectation of paternal care on the part of the government and weakens the sturdiness of our national character.”

The Right Focus Regarding Inequality

America’s founders certainly believed a minimum safety net was desirable. Nevertheless, they would view the current focus on income-growth disparity as misplaced and poisonous. Prosperity is inseparable from economic inequality; conversely, forced economic equality tends toward destitution. The more government attempts to equalize incomes, the less an economy produces. Who wants to produce when one doesn’t receive the full benefits of his or her labor? Founder James Wilson captured it best: “Who would cultivate the soil, and sow the grain, if he had no peculiar interests in the harvest?” The focus should be encouraging people to utilize their inherent rights, rather than discouraging doing so by focusing on differences in income growth.