SubscriberWrites: In praise of making money & why it’s a good idea to let a thousand billionaires bloom

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Indeed, the progressives are already up in arms demanding higher taxation on the ‘unearned’ billions of these 21st century ‘robber barons.’ Several others who run the opinion mill everywhere and especially in India have been railing against the rich getting richer and the rising inequality.

Here are some fundamental assertions traversing morality, logic and political economy.

1. Unequal is Fair – each individual is unique in his / her genes, circumstances, luck, opportunities, aptitude, passion and aspirations. Given that, we cannot be equal in fortune and means. Wealth is created when you create value for others through peaceful and voluntary exchange.

Each person’s ability to create value for others differs – this difference grows bigger with division of labor, specialization and technology. The billionaires’ wealth is a reflection of the accumulated value that they and their ancestors have created (after discounting for cronyism which emanates from State power). It is unfair to grudge inherited wealth – the right to gift or bequeath is at the core of property rights. Taxing them in an extortionate manner amounts to theft. Also, there are great difficulties in taxing wealth, which is a ‘stock’ variable as opposed to taxing income, which is a ‘flow’ variable.

2. This backlash is not new – it is probably as old as capitalism itself. When we were hunter-gatherers and consumed everything we produced (read – killed or foraged), there was no surplus and no capital. The standard of living did not change for millennia. We were poor, dying of mystery diseases, starvation or violence; women were always pregnant or nursing, dying during childbirth – life was hard and short. 

However, we had that one thing today’s Left dreams of – equality. Absolute equality of back-breaking poverty. After the advent of agriculture, first surplus was produced leading to capital formation, increased productivity and prosperity – inequality soon followed. Today’s idealistic leftists are actually hankering for a return to that abject misery. 

The cynical ones are looking for political gains through mobilization of mass anger directed at the super rich. Ignorant masses buy into the simplistic narrative of billionaires capturing a large portion of their societal wealth. Except there is no ‘societal’ wealth, only individuals create wealth and wealth creation is a positive sum game.

3. The Pareto principle – is the famous 80-20 rule that governs natural asymmetry of outcomes. 20% of the employees contribute 80% to a company’s fortunes, 20% customers bring in 80% of the revenue and so on. (Closer to home, we tend to wear 20% of the clothes in our wardrobes 80% of the time.) It follows that 20% people control 80% of the wealth. Since this elite group is big enough for the Pareto principle to be applied recursively, we arrive at 4% people controlling 64% wealth and further, 1% people capturing 50% of the total wealth. At the other end of the spectrum, 50% population must make do with 1% of the total wealth – there is no way around it. The only way to alleviate poverty is to make the pie bigger and historically, only free markets have delivered this outcome.
4. The billionaire wealth is actually saving us from a bigger catastrophe. The liberals demand unending intervention to re-ignite the economy through ultra-accommodative monitory policy (read: printing of untold trillions by the central bank). This money mostly flows into financial assets and ends up on the balance sheet of billionaires. Almost nothing goes into consumption, though some could be productively invested. Imagine if all this liquidity starts circulating within the economy, with no real increase in the total goods and services. The consequent inflation would turn us into Venezuela. The billionaire balance sheets are like a dam, stopping the flood of money from drowning us in hyperinflation.
5. The final truth: No amount money-printing is going to stimulate the economy one iota. It will only cause the super-rich wealth to explode and eventually, massive inflation as well. Directing public anger at the wealth creators, besides being morally reprehensible, is also bad economics (though good politics in the short run). The world has paid a very heavy price in the form of economic destruction and genocides that socialism unleashed in the last century. We need more economic freedom, not less; more billionaires, not fewer; less state intervention, not more. The only practical, sustainable and moral path to prosperity is through unbridled, unhindered, unregulated free-market capitalism backed by sound money.

Also read: SubscriberWrites: ‘If only I had seen/Grey as Grey…..I might have been saved/This Black day!’

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