Redistributing Wealth: Unfair and Useless
It is almost a decade since the fall of the Marxist empire, yet the crackpot ideas of its founder live on. The idea that wealth is a form of “social injustice” and that redistributing income is a worthy and progressive goal is persuasive to people in government and out. This attitude is enshrined, for example, in the capital gains tax, which specifically targets money earned from the creation of wealth. Marxist ideas even are insinuated into the language we speak. We refer casually to the “haves” and “have nots” as though in the beginning someone handed out life’s goodies to the few and withheld them from the many. By using the word “injustice” to describe unequal wealth, we imply that one man’s bounty can only be the result of another’s deprivation.
Why do we speak of “haves” and “have nots?” What about the “cans” and the “cannots,” the “wills” and the “will nots,” the “dos” and the “do nots?” Everyone can look around and see examples of each. Although some inherit substantial wealth, it is will, intelligence, ability, energy and desire that determine individual destinies, even of the inheriting rich. Yet we persist in using terms that deny what we know.
And what we know in our own world is true of the world at large. According to an academic study reported in the winter 1997 issue of Public Interest, to be in the richest 1% of U.S. households, a family has to have a net worth of more than $2 million. The report states further that most of these families that are among the richest 1% actually earned their wealth, since most of their wealth is in entrepreneurial assets, unincorporated businesses or investment real estate. Moreover, the group of the very rich has changed from year to year, as reflected from survey data on unincorporated businesses.
Redistributing wealth would be unjust and destructive as well. Redistribution is using the force of the state to reach into the pockets of those who have earned money and to take that money on behalf of those who have not. Socialism is theft. Not only is this not justice, but it also is destructive to the less fortunate. Suppose the government were to confiscate what Bill Gates “has”--all $20 billion of it, by a recent estimate--and distribute it to the homeless or the inner-city poor. We know what would happen to this wealth, because the government does just that every other week with welfare payments, taken from all of us who work and given to those who don’t. What happens to the money? It disappears. Sometimes it is used to purchase alcohol and drugs that destroy the purchaser over time. Other times it may be used to purchase food and other necessities for subsistence. In either case, it does not do what it does if Gates invests it.
If Gates keeps his capital, which he earned to begin with, there is a likelihood that he will invest it in ways that make the entire economy grow, creating jobs and even whole industries that didn’t exist before. It will expand our horizons and provide us with conveniences and pleasures that we could not have imagined ourselves. To redistribute income by government confiscation diminishes capital and expands waste.
But the doctrine of social redistribution is an even greater evil because it sows resentment and distrust. When liberal enthusiasts inveigh against the 1% of the nation’s households that own 50% of the wealth, it is an incitement of social resentment against the most productive members of the community. Of course there are undeserving rich, just as there are some deserving poor. But we can’t make laws for everybody based on the bad apples in the barrel. Most people with money are busily producing more jobs and opportunities for others and taking great risks to do it. That’s why the market rewards them as it does. On the other hand, the resentment of wealth can build to catastrophic consequences, as in the revolutions that created the communist empire and spread misery over half the globe. Or it can lead to merely corrosive effects, making it more difficult for entrepreneurs to accomplish their agendas, thus slowing the improvement of conditions for all.
The idea of “social justice,” as Friederich Hayek wrote long ago, is a “mirage,” a social fiction of the left. There is no entity “society” that distributes income unfairly and no entity “society” that could make the distribution “just.” But the incentives available to a Gates to accumulate billions of dollars resulted in a transformation of the world, which has made life better for billions of people. What would be accomplished by confiscating Gates’ billions and having them consumed in a matter of weeks? Better that the billions be invested in the creation of new enterprises and the expansion of old ones. That is the most just way to distribute wealth.
