The Meaning of Wealth In Today’s America


I was browsing through the annual Forbes 400 list of the wealthiest people in America, and I was struck by the fact that 9 out of those in the Top 10 are essentially self-made. They did not inherit any substantial portion of their incredible wealth. And even #10 on the list (Alice Walton) is just one generation from the founding of her family’s wealth by her father Bill Walton.

My thoughts as I read the brief bios of people like Jeff Bezos (#1), Bill Gates (#2), Mark Zuckerberg (#3) is why do some people begrudge them their wealth? In each case, I can easily point to the values they have brought to my life. There is nothing abstract or hard-to-understand about where their wealth came from. Even if you’ve never ordered from Amazon, used a PC, or logged onto Facebook, you know what these innovators have created. Regardless of what you think of their politics, if you’re honest, it’s clear that they have created products and services that hundreds of millions of people use and enjoy.

But there are other types of rich people in America.

There are people who inherit vast amounts of wealth but have never created anything of value themselves. Most recently in the news (and #13 on the Forbes list) is Mackenzie Scott, ex-wife of Jeff Bezos. I don’t necessarily find these people admirable or even particularly noteworthy, but their wealth doesn’t bother me. The people who did create the wealth chose to give it to them (or were made to by contractual obligation, in the case of the ex-Mrs. Bezos). It is literally none of my business.

There are also the kind of wealthy people who obtained their money not through creation or even inheritance, but through expropriation.

Thankfully, we don’t live in a country where wholesale plunder is acceptable, so I don’t think there are any out-and-out pirates or robbers on the Forbes list (the Bernie Madoffs of the world usually get caught at some point).  Unfortunately, though, we do live in a country where it’s perfectly acceptable to use the force of government for more subtle forms of thievery (asset forfeiture laws and eminent domain aren’t actually all that subtle, but zoning laws and antitrust laws certainly are).

As cronyism has increased in America alongside statism, we have a growing class of people whose wealth comes, to a large extent, from government favors. It is no accident that nearly half of the top 20 richest counties in the US are suburbs of Washington DC. Nobody is even surprised anymore when a person of modest means goes into politics and within a few years is a multi-millionaire. What’s worse, the system of government spoils now in place forces productive businessmen to hire lobbyists to vie for special favors in self-defense. Bill Gates didn’t employ lobbyists until the Feds came after him and he was faced with having the company he’d founded and grown from nothing forcibly broken up.

When I look at the people topping the Forbes 400 list, I see giants of productivity. I see people who have created vast amounts of wealth. But I don’t think that’s what most Americans today see. How could they, if they believe (as virtually all our leaders now do) that the economy is a zero-sum game? If wealth is a fixed pie, then the “gains” of these wealthy must have come from the “losses” of others. And if that is true, who doesn’t want to be on the winning side of this grim equation?

When the average American who works hard and pays roughly a third of his earnings in taxes sees that politicians and elites have gamed the system (all done within the letter of the law, of course), how is he supposed to feel? If the rich and powerful get to benefit from government largess and laws tailored to their needs, no wonder so many people increasingly feel a sense of entitlement.  In America, we are supposed to have equality under the law. So if the rich are getting favors and handouts, shouldn’t we ALL be getting them?

Some demanding higher taxes on the wealthy or calling for the “abolition” of billionaires (looking at you, multi-millionaire Bernie Sanders) are radicals whose primary motivation is, as Ayn Rand said “hatred of the good for being the good.” But I don’t believe that’s true of most of the people who are concerned about income inequality. The truth is they don’t understand what wealth is or where it comes from – none of the intellectuals they pay attention to have ever explained it (because most of them don’t understand either). What they can see is that the system is rigged in favor of certain people, and that this has little to do with merit and everything to do with influence. This feels unfair to them.  And they’re not wrong.  If we are going to stop the rising tide of envy that threatens to engulf this country (and the world), we need to acknowledge the very real problems with our current system.  We need to explain the difference between wealth creation and wealth expropriation – and come out strongly in favor of the first and against the latter. People (and most especially our leaders) need to understand that the economy is not a zero-sum game, that Jeff Bezos’s gain is not our loss, but rather our gain as well.

Every now and then those on the right bemoan the generational shift to the left among young people. Yes, there are a lot of very naïve young men and women who don’t understand the history or true meaning of socialism. We need to educate them.  But they are unlikely to listen to us as long as we support the status quo, and equivocate on the real meaning of capitalism. Real laissez-faire capitalism does not mean that the government favors business or the rich. It does not involve tariffs, government subsidies, or restrictions on who may enter the workforce and on what terms. What it does mean is that the government protects individual rights and establishes the objective rule of law, thereby allowing everyone to thrive and pursue their interests in a win-win world. We need to make real to them a world where a rich man and a poor man are equally protected by their country’s laws.

Conservatives have rarely been particularly clear or principled in their defense of capitalism. Remember, it was Republican Richard Nixon who instituted price controls and took us off the gold standard.  Of course, Nixon isn’t exactly remembered fondly nor held up as a champion of capitalism. But Ronald Reagan certainly is. And yet, despite his small-government rhetoric, government spending under Reagan rose dramatically.  According to Sheldon Richman in the course of his two terms, the Gross Federal Debt tripled from $900 billion to $2.7 trillion [1]. A similar (but worse) mind-boggling debt expansion has been seen under Trump.

But Reagan and many conservatives in the past at least talked the talk. Now, most have abandoned even the pretense and rhetoric of defending capitalism. The free-market/libertarian wing of the conservative movement has been all but silenced. On the rise in the conservative movement are the religionists and the nationalists (both of which are more consistent with the altruistic morality that the conservatives have always clung to).

What that means is those of us who do understand capitalism’s true meaning need to do a better job of explaining it. And that starts by rejecting the status quo and embracing the truly radical nature of what we’re proposing. Ayn Rand called capitalism “the unknown ideal.” If we want to reverse the country’s slide into socialism, we need to make it known.  We need to call out the conservatives as well as the liberals when they advocate for statist policies. Tribalism and party politics are not going to fix the mess we’re in. But the right ideas, promoted with consistency and moral righteousness, just might.

 

References:

[1] Richman, Sheldon L. “The Sad Legacy of Ronald Reagan.The Free Market 6, no. 10 (October 1988). Writes Sheldon:

In 1980, Jimmy Caner’s last year as president, the federal government spent a whopping 27.9% of “national income” (an obnoxious term for the private wealth produced by the American people). Reagan assaulted the free-spending Carter administration throughout his campaign in 1980. So how did the Reagan administration do? At the end of the first quarter of 1988, federal spending accounted for 28.7% of “national income.”

Even Ford and Carter did a better job at cutting government. Their combined presidential terms account for an increase of 1.4%—compared with Reagan’s 3%—in the government’s take of “national income.” And in nominal terms, there has been a 60% increase in government spending, thanks mainly to Reagan’s requested budgets, which were only marginally smaller than the spending Congress voted.

The budget for the Department of Education, which candidate Reagan promised to abolish along with the Department of Energy, has more than doubled to $22.7 billion, Social Security spending has risen from $179 billion in 1981 to $269 billion in 1986. The price of farm programs went from $21.4 billion in 1981 to $51.4 billion in 1987, a 140% increase. And this doesn’t count the recently signed $4 billion “drought-relief” measure. Medicare spending in 1981 was $43.5 billion; in 1987 it hit $80 billion. Federal entitlements cost $197.1 billion in 1981—and $477 billion in 1987.

Foreign aid has also risen, from $10 billion to $22 billion. Every year, Reagan asked for more foreign-aid money than the Congress was willing to spend. He also pushed through Congress an $8.4 billion increase in the U.S. “contribution” to the International Monetary Fund.

His budget cuts were actually cuts in projected spending, not absolute cuts in current spending levels. As Reagan put it, “We’re not attempting to cut either spending or taxing levels below that which we presently have.”

The result has been unprecedented government debt. Reagan has tripled the Gross Federal Debt, from $900 billion to $2.7 trillion. Ford and Carter in their combined terms could only double it. It took 31 years to accomplish the first postwar debt tripling, yet Reagan did it in eight.

Read the Full Article here: >Capitalism Magazine