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The Wealth of the Wealthy

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09/02/2019

The Walton family (the owners of Walmart) is currently worth about $190 billion. The Koch Brothers and Mars families (candy bars) are both worth over $100 billion. Such facts are intolerable to socialists, communists, “progressives,” and, sad to say, today’s Democrats.

Senator Bernie Sanders wants a tax of 77% on estates over $1 billion. He relishes the prospect of the Waltons having to pay $147 billion in estate taxes.

Bernie and his followers simply don’t know that the wealth of capitalists is not in their refrigerators, pantries, and wardrobe closets, and not even in their automobiles or homes. It's in the means of production.

The means of production are the foundation of the supply of goods that everyone buys and of the demand for the labor that wage earners sell. The greater this wealth, the more abundant and lower priced is the supply of goods and the higher is the demand for labor and thus wages.

For example, the Walmart family’s fortune is invested in 11,000+ stores, each one of which is full of vast amounts of merchandise and requires a large building and plot of land. $191 billion are easily accounted for by an average investment of less than $17.4 million per store.

In addition, these stores employ a total of 2.1 million workers, more than two-thirds of them in the US. If their average wage, including benefits, was just $400 per week, this would imply a weekly payroll of $840 million and an annual payroll of $42 billion.

Walmart’s main contribution to wages, however, is not through its payrolls, but through its low prices. Its low prices increase the buying power of wages throughout the economic system.

It thus raises the real wages of the tens of millions of workers who are its customers or who are the customers of other retailers who charge lower prices because of the competition that Walmart gives them.

Bernie and his gang want to take away the equivalent of more than three-fourths of these stores and correspondingly reduce Walmart’s contribution to the supply of goods and demand for labor. Thus, they want to largely undo the lower prices and higher real wages that Walmart is responsible for.

To whatever extent the wages that Walmart pays its workers may be low, those wages will be lower still if Bernie and his gang can seize three-fourths of them to spend on their cockamamie schemes. Walmart (every business) makes wages higher than they would have been without its payrolls.

Bernie’s spokesman refers to Walmart’s workers’ wages being so low that the government has to subsidize their housing, food, and healthcare. In reality, of course, the government doesn’t have to do any of these things.

The fact that it does so and largely pays for it with funds that otherwise would have been spent on means of production and wage payments, thereby keeping prices up and wages down, is exactly the sort of thing that keeps workers poor.

Workers are kept poor because ignorant politicians like Bernie are constantly preventing them from being better off. They enact laws, such as minimum wage and pro-union legislation, that prevent employers from employing workers they otherwise would have employed.

In particular, these laws prevent less capable workers from successfully competing with more capable workers. For example, a half-as-productive worker can outcompete an average worker if his wage is less than half, but not if it’s compelled to be more than half, let alone equal.

Compelling employers to provide benefits or improvements in working conditions that don’t pay for themselves reduces workers’ take-home pay. Instead of being paid a wage equal to the employer’s cost of employing them, they’re paid a wage that is less by these extra costs.

Bernie and his gang believe that because the Walton family is rich, Walmart can afford to do whatever Bernie et al. would like it to do, such as raise wages to $15 per hour.

Actually, apart from a relatively small cash reserve, Walmart has already spent all of its money and doesn’t have the means of substantially increasing its expenditures until additional sales revenues come in. It’s spent its money in building and stocking its stores.

Walmart could borrow. The Walton family could sell some of its shares and make a gift of the proceeds to Walmart. The effect of that would be to deprive other firms of the use of the funds involved, i.e., to reduce their demand for means of production and labor.

Bernie wants us to fear billionaires. Actually, the billionaires work for us — for the great mass of average people. They want to acquire money from us. Unlike the government, they cannot simply come and seize our money.

We have to want to give it to them, because we value what we receive more than the money. They have to make their product such that we will value it more than the money they ask. One of the best examples is a delicious Snickers or Milky Way bar for a mere dollar.

Any force in connection with such a voluntary transaction would be force to prevent it, not to compel it. Bernie and his gang know only the gun and the club. They want to destroy the free market and replace it with the brute force of socialism.

George Reisman, Ph.D., is Pepperdine University Professor Emeritus of Economics and the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996; Kindle Edition, 2012). See his Amazon.com author's page for additional titles by him. His website is Capitalism.net and his blog is GeorgeReismansBlog.blogspot.com

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