American politics today seems to be downright nasty. In analyzing the various issues involved, it really seems to boil down to a key issue, perhaps best epitomized by Joe The Plumber’s iconic question to then candidate Barack Obama about wealth redistribution. In answering that question, Barack Obama clearly indicated that he stood in favor of wealth redistribution. It was equally clear that Joe The Plumber apparently did not favor wealth redistribution; in particular, his (Joe’s) wealth redistribution. Believe it or not, all of the other issues in play this election season can essentially be distilled down to this fundamental ideological disconnect.
Take, for instance, the debate over big government versus small government. Well, in order to effectively redistribute wealth, it is necessary to grow the government in the form of more taxes, agencies to collect and enforce those taxes and agencies to redistribute the resulting revenue.
Or how about the proper means for economic stimulus? Well, relying on the private sector and therefore capitalism necessarily means that wealth disparities stay at the same level as they are today or perhaps even grow more disparate. Conversely, relying on government leads to higher taxes and larger government (see above).
What about health care? The new health care bill is a prime example of wealth redistribution. The new health care regulations increases the cost of delivering their services for insurers, which would lead to higher insurance costs unless everyone is forced to buy health insurance by way of forcing them to pay a penalty if they do not. You may look at that penalty as a sort-of tax. So, tax some people in order to deliver “affordable” health insurance to others. Yes, that would be wealth redistribution.
But what about Cap and Trade? Ah, this one is tricky but watch this. Cap and Trade is an energy tax on polluting companies that eventually filters back down to the individual per the analysis of the Congressional Budget Office. This tax ends up as higher energy bills in the form of higher rates for energy consumption. Wealthy individuals use more energy than poor individuals. It takes more heat to warm 5,000 square feet of house versus 1,000 square feet of house. Wealthy individuals own jet planes, which require fuel while poor people do not. Thus, wealthy people end up paying a larger share of the tax than poor people just like a progressive income tax. Presto chango! Wealth redistribution.
Immigration? Easy. People immigrant from poor country (Mexico) to wealthy country (United States) which obviously redistributes wealth to that those immigrants, and often their families back home, from the United States.
Class warfare? Even easier. Class warfare is essentially a synonym for wealth redistribution. What are the classes warring about if not wealth?
And what about social justice? Super easy. Social justice, by definition, is the creation of an egalitarian society or institution based upon the principles of equality and solidarity. In other words, part of any social justice agenda is more equal wealth distribution, which necessarily means wealth redistribution in a society of unequal wealth distribution. So actually, social justice is basically a synonym for wealth redistribution while the other items in the list are more appropriately thought of as manifestations of a policy of wealth redistribution/social justice.
OK, so, since wealth redistribution is at the heart of all issues this election season, and perhaps at the heart of all issues in all election seasons, one might consider it a worthy topic to explore. God knows that is not the case with candidates and the media, but a logical mind can come to no other conclusion. Thus, the central question is what is the correct view of wealth redistribution? Is wealth redistribution a positive or a negative?
Supporters of wealth redistribution claim an ethical basis for its implementation, that the rich have an obligation to help the poor and that the rich exploit the poor. They also argue that a larger middle class is beneficial to the economy, economic inequality contributes to crime, fairer access to education and health care and even greater voter participation. Greater voter participation…no joke. Look up Roland Benabou if you don’t believe me. He’s the Professor of Economics and Public Affairs at Princeton University. Roland Benabou. Wow. Apparently he never heard of Acorn.
Detractors view wealth redistribution quite simply as government sanctioned theft and believe that it can never possibly be done in a just manner or without crippling effect on the economy, particularly economic efficiency and overall economic output. In addition, critics argue that wealth redistribution creates a “nanny state” upon which people totally rely thereby usurping all real freedom and individual liberty.
So, who is right? It is purely academic question based upon personal ideology that no one can possibly answer, right? Well, not so fast…let’s give it shot.
First, since we are ostensibly redistributing or not redistributing it, we need to define “wealth”. What the hell is “wealth”? Well, there are actually a number of different ways to define wealth, but for our purposes let’s define wealth the way most people think about it, as net worth. In other words, wealth is the value of physical and financial assets less debts. Therefore, wealth defined in this way represents the ownership of capital. This is how most people think about wealth anyway and capital is widely believed to disproportionately impact economic success and overall wellbeing.
With that out of the way, just what wealth are we redistributing? One might argue that the wealth redistribution debate is really purely a national debate. In other words, it is really only about redistributing wealth locally within the United States. But the immigration debate pretty much blows that view out of the water. Plus, we here at The Objective Observer are not into namby pamby half-ass-ism. If wealth redistribution is a good thing, then it is good for the United States and it is good for the world as a whole. Remember that, no half-ass-ism allowed at The Object Observer.
So, what would world-wide wealth redistribution look like? What a mind bogglingly impossible task to envision such a thing. Well, not really. In fact, there is this handy dandy report from the World Institute for Development Economics Research of the United Nations University (UNU-WIDER). Not exactly certain that fits the strict construction principles of an acronym, but what the hell, that’s what they call themselves.
According to this report, using currency exchange rates, global household wealth amounted to $125 trillion in the year 2000. That amounted to $20,500 per person. After adjusting for differences in the cost-of-living across nations, the wealth per person comes out to $26,000 when measured in terms of purchasing power parity dollars (PPP$), whatever the hell those are.
So what does this really mean? What this means, my friend, is that under a world-wide wealth redistribution plan, you would be allowed to own exactly $26,000 worth of assets or money. So, what does this mean?
Well, consider the following items that you might have in your house and what the Salvation Army says they are worth in charitable donation value:
Now, we will give you the benefit of the doubt and assume you shop at Kohls or Target or something and thus your items are valued on the “low” end of valuation. If you add up all of the items that you have in your possession that you own, it comes out to $1,994.50. Subtracting that from $26,000 you would have $24,005.50 which is just enough to buy a small, single-wide, 600-800 sq ft mobile home of “economy construction” with $5.50 left over in your bank account.
God forbid you shop in higher end stores, have more than 5 pairs of socks, or have any of the following in your house:
- Ceiling fan
- MP3 Player
- Fishing rods
- Roller blades
- Christmas tree
All those items mean that you can’t even afford to live in a trailer park, you might be able to afford a nice tent perhaps. Also consider that even though you may have enough money to live in a trailer park, you most certainly do not actually own the land upon which that mobile home sits, not when that land is going to cost you $1,000-$10,000. Note, $5.50 < $1,000.
But, let’s take this a step farther. What happens to the economy in a wealth redistributed world? Well, let’s assume that everyone is like you, the reader, with your 5 pairs of socks and other items, your single-wide mobile home and your $5.50 in the ol’ bank account. This means that the entire economic output capability of the entire world is exactly $5.50 per person.
With 6 billion people, that is $33 billion, which sounds big until you realize two things. First, that the GDP of the United States is around $14 trillion. $33 billion is about the GDP of Bostwana. You know, Botswana, with the Kalahari desert? Of course you don’t. Second, once everyone spends their $5.50, that’s it, no more purchasing power, everyone has everything they need, in total parity with one another, the economy is dead. You can’t spend any money to get anything else because then you would be above the wealth parity threshold and the Orwellian wealth police would come haul your sorry, highfalutin, rich snobby ass away.
Therefore, what can we conclude about wealth redistribution? Well, for starters, it seems to really suck out loud. For those of you that desire a more in-depth analysis, it basically makes everyone poor and destroys the economy i.e. “sucks”.
But wait, you say, forcing everyone to live in trailer parks with five fiddy in their wallets isn’t really the aim of wealth redistribution and could never be practically possible. Well, first off, of course it is possible. Given a tyrannical police state of sufficient resources and power, people could be forced into trailer parks in mass. As proof of its practicality, one need look no further than the recent health care legislation and proposed cap and trade legislation which has been/is being pushed through in the United States by a single party hell bent on ignoring populist sentiment.
Second, if true equality of wealth worldwide isn’t the goal, then what is? Perhaps the goal is instead redistributing the wealth only to a degree that it fits with and benefits one person’s or one party’s particularly goals and consolidates and enhances their power? Is that any better or is it perhaps even worse since one is simply using what might initially be seen as good intentions only to achieve greater power and control? Stopping short of true world wealth equality can only be viewed as hypocritical and a power grab. And, could the implementation of even marginal wealth redistribution be achieved by any means other than outright tyranny? No, as again evidenced by recent history in the United States.
OK, but what about income inequality? What happens if that is taken to its logical conclusion where a single person owns all of the world’s wealth? Isn’t that also practical and wouldn’t that be equally bad? While one might very well be able to fantasize about such a scenario, it is; as a practical matter, an impossible scenario. Such an outcome is simply not achievable in a free market system.
Look at the United States, the best embodiment of a real free market system. This has not happened and, in point of fact, has led to many “super rich” individuals and a burgeoning middle class. Income inequality may grow but it will never reach the limits of all and nothing. Instead, as wealth; and perhaps income inequality, grows, the wealth of the entire population is increased. The “poor” in America live like kings compared to the poor in most other countries. In fact, the only way for such an extreme income inequality to happen would be to have a single individual with enough power and control to force everyone else to give up their wealth, which is again an implementation of tyranny, not capitalism.
In conclusion, it can therefore be stated unequivocally that wealth redistribution ends up making everyone just as poor as everyone else. There is simply not enough wealth in the world that could be redistributed to allow everyone to live equally in any other state than abject poverty. And, perhaps even worse, a society with such an equal wealth distribution would effectively destroy the world economy and thus provide no hope of improving anyone’s situation and household wellbeing.
Wealth redistribution is, on its surface, an attractive notion that speaks towards the charitable and sympathetic nature of mankind. Unfortunately, its practical implementation is pure tyranny and ends up harming everyone, including the people it was originally designed to help. Capitalism and its associated income inequality may seem unfair and unjust on the surface, but then such is often the case with “tough love”.