printBravo to Mr. Bush! He recently endorsed the socialist idea of a widening gap between rich and poor, agreeing that it needs to be remedied, presumably through coercive wealth distribution. (See “Addressing Wealth Gap.”)
The concept of an income gap is meaningless in its circularity. Some people are richer than others. Some don’t like it. It’s called envy. In a free society, governments would be unable to placate the envious by stealing from those they envy. In an unfree society that’s precisely what governments do: they pacify the multitudes by mulcting the few.
To lend legitimacy to theft based in envy, intellectuals, members of the “Idiocracy” (bless Mike Judge for coining that catchall caption), constructed grand theories of which Marxism is one. Reasoning backwards, the illogic of these theories is, “If rich therefore exploitative.”
Try substituting wealth with some other individual difference: eye color. Or better still, beauty. Is it fair that some people are so much more beautiful than others? The socialists will argue that beauty is genetic; wealth is not. Wealth is a more complex variable than beauty, for sure. However, why does IQ correlate so well with income? One look at the wild Jim Kramer in action is enough to conclude that the wildly wealthy are a unique —often very brilliant and certainly very daring —breed. As it is, the benefits of their wealth-generating activities redound to us all. Big time.
Update: Socialists weasel with words in order to justify their thieving intentions. Point out that the top earners also pay most of the nation’s taxes, and they invariably reply that the very rich also earn most of “the nation’s income.” The problem is, there’s no such thing as the “nation’s income.” There is no pre-existing income pie from which a disproportionate amount of riches are gobbled up by the greedy rich. Wealth doesn’t exist in nature; individuals create it, and therefore should own it. It is a return for desirable services and resources they supply to others. Labor productivity is the main determinant of wages.
The Marxist-Leninist zero-sum analysis, whereby wealth is seen as having been achieved at someone’s expense, is false. And dangerous. This envy based fabrication has propelled the persecution of “ethnic minorities — which have achieved prosperity from poverty — Jews in Europe, Levantines and Indians in Africa, Chinese in south-east Asia,” in the words of P.T. Bauer.
Alas, the words of another late, great economist explain why The Truth is so unintuitive. In the introduction to F.A. Hayek’s The Road to Serfdom, Milton Friedman wrote: “The argument for collectivism is simple if false; it is an immediate emotional argument. The argument for individualism is subtle and sophisticated; it is an indirect rational argument.”
Someone once said: “The government that robs Peter to pay Paul will have the undying support of Paul.”
Even if it were a moral practice, the equal distribution of all wealth by government force would not achieve the effect intended. My favorite quote on the subject is from “Liberalism” by Ludwig von Mises:
“The first objection to this proposal [the equal distribution of all wealth] is that it will not help the situation much because those of moderate means far outnumber the rich, so that each individual could expect from such a distribution only a quite insignificant increment in his standard of living. This is certainly correct, but the argument is not complete. Those who advocate equality of income distribution overlook the most important point, namely, that the total available for distribution, the annual product of social labor, is not independent of the manner in which it is divided. The fact that that product today is as great as it is, is not a natural or technological phenomenon independent of all social conditions, but entirely the result of our social institutions. Only because inequality of wealth is possible in our social order, only because it stimulates everyone to produce as much as he can and at the lowest cost, does mankind today have at its disposal the total annual wealth now available for consumption. Were this incentive to be destroyed, productivity would be so greatly reduced that the portion that an equal distribution would allot to each individual would be far less than what even the poorest receives today.”
A few points to Ilana’s short but excellent analysis. Ilana is correct in saying that wealth is a product of hard work. In addition, it cannot be emphasized too strongly that under capitalism large and very large fortunes can come about only as a result of greater entrepreneurial wisdom of how to serve the consumers with highest quality products, higher relative productivity and a high propensity to save. Also, it is precisely the saving and productive expenditure of businessmen and capitalists which constitute the very financial means for the demand for labor, which appears as wages and salaries.
Once this basic idea is grasped, it quickly becomes apparent that any claims for redistributionism are simply vicious. This is because if the government deprives businessmen and capitalists of their profits and capitals by taxing them away, it is the production process and the workers who suffer. Just consider. First, by depraving businessmen and capitalists of their capitals and profits the government directly reduces the monetary demand for labor. As a consequence, wages rates and salaries are lower than they would otherwise have been. Second, the lack of savings hits the production process to the extent there are fewer funds that go into purchases of capital goods such as equipment, machinery, raw materials, various instruments etc., which constitute the very physical basis for the production of consumers’ goods in a modern division of labor economic system. By weakening the production basis of the economic system the government weakens the only mechanism that can raise the level of material welfare for everyone, in particular the poor and the needy.
Redistributionists are oblivious to two basic facts of nature. First, large fortunes are products of intelligence, rationality and far-sightedness. Second, in a free society the wealth of few, precisely because it is in the form of CAPITAL, is of benefit of many, particularly workers and the poor.
As P.J. O’Rourke once said,”You may be able to take all of Bill Gates money but you’ll only be able to take it once.”
Congratulations to your reinforcement of “first principles,” to use one of your favorite phrases. I would like to add another pillar. You say that socialism is based on envy, and that – quoting from Friedman – the argument for capitalism is subtle whereas the argument for socialism is more intuitive. Well, I would modify that as follows.
The argument for freedom is not “envy is bad,” because telling an envious person that “envy is bad.” But why is envy bad? Envy is an emotional desire to steal from someone, so better yet – Why is theft bad?
Theft is bad because the production of wealth is good, and the destruction of wealth leads to retaliation. In a world of fools such as this, people undervalue the production of wealth, and they are able to get away with theft by voting away property rights. In a wise world – which can only be facilitated by good philosophy – people value productivity to the fullest, and theft – be it by individual or government – would be met by certain retaliation.
What this world needs is good philosophy. Without good philosophy, libertarianism is nothing but words.
The difference between “unearned” wealth, as versus equally unearned beauty or IQ, is that redistributing wealth is possible.
If beauty and brains were as alienable as wealth, we’d all be plain and stupid.
I believe it was George Bernard Shaw, a socialist who managed to admire both Hitler and Stalin, who said that about Peter and Paul. I guess he should know.
Now I’d like to know who observed that, “Envy is the only one of the Seven Deadly Sins which brings the sinner no pleasure at all.”