It’s not exactly unusual these days to hear someone screaming that we’ve got to take all that wealth away from the rich. Sure, it’s flawed, but it’s a common narrative.
The latest installation in this long-standing stupid argument comes courtesy of the website inequality.org. The website notes that between March 18 and April 10, the holdings of the very richest increased by 10%.
The article carefully fails to mention the nearly 1,000 points, or 29%, fall in the stock market in the month before March 18. It also does not mention that the same S&P 500 rose 16% while those plutocrats made their 10%. The average man’s 401(k) did better than the billionaires, that is.
This is propaganda being shouted at us. It’s not intended to illuminate. The actual evidence does not matter. Rather, all that matters is the policy goal of taking all that cash off the people who generated it and giving it to liberals to spend instead.
This policy suffers a distinct logical error. As the article says: “If expanding billionaire wealth ‘lifted all boats’ and created, in effect, a society that worked well for everyone, we could perhaps afford to worry less about billionaire fortunes.”
It actually does, and, therefore, we absolutely should worry less about how much money rich people have.
In fact, the existence of billionaires does so much to “lift all boats” that we should worry about whether enough billionaires are being created. For, in the absence of bribing politicians into granting special favors, the only way to gain wealth is to produce something that we’re all prepared to pay for. We should all condemn crony capitalism and bribery on both sides of the aisle. But those who gain by making us richer? We want more of them, not fewer.
The Nobel laureate William Nordhaus tells us why. Entrepreneurs end up with about 3% of the total value created by their activity. It’s consumers who gain the vast majority of the rest of it.
Their new methods give us access to new innovations or make existing technology and goods cheaper. This means, in effect, we’re richer. Former President Barack Obama adviser and not exactly a right-wing hack Jason Furman has pointed out that Walmart saves consumers some $263 billion a year.
Walmart’s insistence on everyday low prices means everyone else has to cut costs and become more efficient, too. This is a general feature, not a bug, of free market capitalism.
Entirely reasonable calculations have the existence of Amazon shaving 0.2% and upwards off inflation each year for the past couple of decades, cumulatively. If everything we buy stops getting more expensive so fast, then that’s our real wages, our real incomes, rising by that same rate.
Sure, Jeff Bezos has a great big pile of money, but, compared to the real income of every worker rising as a result, it’s a somewhat trivial pile.
All of this is why this free market capitalism works. It also tells us why we don’t need to go steal everything off the rich folks. It’s not about morals or righteousness. It’s pure pragmatism.
We must allow the people who made this generation richer to keep their vaults of cash to encourage the next person with a bright idea to have a go. There’s no reason to upset this grand bargain. Other than indulging in propaganda, that is.
Tim Worstall (@worstall) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute.
