The redistribution of wealth

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meambobbo replied on Tue, May 20 2008 10:32 AM

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Is the main premise here, "The rich get richer and the poor get poorer" ?

This can only be true if wealth is a zero-sum game.  That means that there is a fixed, finite amount of wealth, which cannot change over time.  Every trade has a winner and loser, rather than a mutual gain.  Furthermore, as the population grows, this would mean that society as a whole will become poorer and poorer.

Such a view is preposterous.  All wealth is created from some kind of labor, whether that labor is in creating capital goods or consumer goods.  Considering that most people work most days of the week, wealth must be growing.  Population growth is a net economic benefit, if it provides more labor rather than just more consumption.  Wealth may grow for some people faster than others, but these people will generally be creating more wealth per workday.

But even with such a promise of infinite wealth, we don't get a thriving economy.  Division of labor and money go hand in hand and provide the missing elements to a highly efficient economy, where capital investment can occur, allowing more wealth to be created without an increase in quality of labor.  Just as population growth allows greater division of labor and greater economic efficiency, capital growth allows greater amounts of capital to be created, as well as greater diversity in capital and greater numbers of capital owners.

Given that our money system is monopolized and our economy is regulated, we should see some fuedal abuse, where the rich and powerful become richer and more powerful; but the extent of this is fairly limited.  Many of the richest Americans came to fortune through the market, and their products have improved the lives of millions of people.  Many poor people become millionaires.  And even the poor have become richer.

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Pliny replied on Tue, May 20 2008 4:56 PM

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Preposterous. Yes. You must be American. Definitely not Danish where the poor all disabused of the idea of being a millionaire. Expending that much energy must have something wrong with it.

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RickWeber replied on Tue, May 20 2008 7:26 PM

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When I was a kid in Canada (when I still had the common Canadian attitude) I used to bring my grades home, excited, and say "Look Dad! I got above average!" And he would say "That's stupid! Forget about the average, you got B's and C's. You can do better than that. Don't compare yourself to other people, compare yourself to yourself" Sort of an apples and oranges thing. We're all different; some of us have what it takes to become rich; it doesn't matter what your nationality or skin color is.

The poor in Western nations have a quality of life that exceeds the quality of life of the middle class 100 years ago. In America poor people have been (certainly not always) upwardly mobile. A free market allows the poor to make something of themselves, even a millionaire or billionaire. In America there is an attitude (that is being killed by big government, public schools and the examples of people like the Kennedies, Clintons, Hiltons, etc.) that anyone who is willing to provide the market with what it wants can become rich. I don't know the Danish view, but I'm proud of the American attitude (what's left of it) and it's why I left Canada (where the view is that expending that much energy must have something wrong with it).

In response to the initial question:

In a statist society wealth will pool amongst those who have political power. In an ideal world those people would also be the people who contribute the most to their society. In an ideal world puppies would also crap rainbows.

In a market economy wealth will pool amongst those who are best able to earn the most money (by providing the most value the most competitively to the most people... "greatest good for the greatest number") while squandering the least (i.e. by putting their money back into investments that will continue to make money and provide even more good). Of course eventually that person will reach diminishing marginal returns (They will get too busy to run so many businesses eventually).

I had a little Marxist day-dream where I was a kid--what would it be like if I owned the whole world. First I had to establish my assumptions: how did I get to own the whole world? Well I had to provide something of value, obviously (I also had to kick some serious butt with my sweet laser rifle, but naturally not everyone, or there would be no point in owning everything). So I had to get rid of all the bad guys and I had to provide something of value and at the same time I had to enjoy myself. So I had super-efficient robots that could do everything for me. As my rise progressed I ended up with robots making more robots until I had a few robots for every customer providing everything they needed at a price nobody could beat until capital drove labor out of the market completely. Then suddenly I didn't have a market to sell to. I had become a benevolent ruler asking for nothing more than a life of robot slaves, wine, women and song.

Cheers,

Rick