Why I don’t care if the gap between rich and poor is growing

The point from my last post that attracted the most attention was the one challenging you to tell me why it is bad that the gap between the rich and the poor is growing. It’s a commonly uttered phrase that assumes that there is something inherently wrong with this gap and its growth. What is wrong with it? Let’s take a closer look at the phrase and our assumptions.

Assumption #1: The gap between the rich and poor is growing.

Whether or not this is true is irrelevant. This phrase is entirely without context. Who are the rich and how much wealth do they own? Who are the poor and how much wealth do they own? Do you mean the differences between the upper one percentile and the lower one percentile? Do you mean all over the world, in one country, in the developed or developing world? Or is it simply a blanket statement made by leftists to argue their points? If we do not define our terms properly, there is no point in our arguing. And if you think the poor are truly poor, read the Mystery of Capital by Hernando de Soto and the Fortune at the Bottom of the Pyramid by C.K. Prahalad.

Assumption #2: The poor are getting poorer.

If the poor were poorer, if the rich were cheating or stealing from them, then we should take action. But they are not. By all accounts, the poor are getting richer. It is easy to say that the rich are getting richer at a faster pace than the poor, but do not begin to think that they are getting there at the expense of the poor. If anything, they are bringing the poor up with them.The poor have more opportunities to escape poverty today than they ever had. Do not pity the poor until you understand them; and something tells me you don’t.

Assumption #3: The rich want to keep the poor poor.

This statement has not been true for at least 100 years, when industrialists like Henry Ford and John D. Rockefeller began paying their employees more, in part so that they could buy from the corporations for which they worked. No one who is not simply cruel wants the poor to stay poor. The more buying power the people have, the better off the rich, as well as the poor, are.

Presuming the evil of the rich is ignorant. First of all, do not generalise over a big (and as I said before, poorly defined) group of people, whatever single characteristic binds them together. Some rich people are greedy and spend all their time finding new ways to make money; some do not. Second, the rich do not simply hoard every penny and not give any of it to anyone else. Some of it goes into taxes, some of it goes to banks, insurance companies, stockbrokers, lawyers, doctors and so on, and believe it or not, some of it even goes to charity. Either way, almost all of it goes back into the economy; and if you have enough initiative, you can get some of it. Third, when the rich make money, they make it providing things that society wants. Rich people own corporations (you can too, by the way) that provide goods and services for society while creating jobs. Moreover, how do you think hundreds of millions of people in Asia have found their way out of poverty over the past forty years? The right economic policies and a lot of help from big corporations. (On this note, I don’t care that Americans are losing their jobs because for each job offshored from the United States, at least one other is created.) I get tired of hearing these people talk about why big corporations and rich people are inherently bad. They look at a small number (relative to how many big corporations there are) of cases of corporate malfeasance and infer that the entire capitalist system is irretrievably perverted. Don’t paint all corporations or rich people with one brush—that is stereotyping. If you want to learn a little about the effects big corporations have on poverty, check out this article on Wal-Mart. It might surprise you.

Assumption #4: Equality of wealth is a good thing.

If all of us were equal in every way, we should all be equally wealthy. BUT we all have different goals, motivations and values. Some of us value economic security, some of us value a big screen tv; some of us want to retire early, others want a nice car with a big stereo in it. We are all different, we save and spend differently, we take different opportunities and risks, so why would we have the same wealth? And tell me this: why else has every attempt in history to equalise wealth led to dictatorship, poverty and the collapse of the state? Because no one is in a position to decide who deserves how much wealth, many people squander what you give them, no one can use their capital and people tend to cheat their way out of receiving the minimum.

What should be equal for all of us should be opportunity. Provided we do what we can to give everyone the same opportunities to attain their goals and live their values (as long as they do not infringe on those of other people), mostly through education, it is not important to have the same wealth and possessions.

Here is the only reason why the gap between rich and poor is a bad thing. The rich have money because they create money: they learn the ways of finance, spend wisely, take risks and provide what others want. If you are not willing to do these things, fine; but do not be resentful of those who have. When people see others who have more, they want to possess more; and many people, instead of patiently working hard, educating themselves, saving, sacrificing and investing, they feel they should not have to work for it and instead try to expropriate the wealth of the wealthy. When that happens, they elect governments that put up trade barriers, tighten labour markets, raise taxes, redistribute incomes and otherwise satisfy their voters in the short term and make things worse for everyone in the long term. Envy and its consequences is the only reason this gap is a problem.

In conclusion, I believe that, while we should be tackling poverty at its roots, it is counterproductive to tackle wealth as if it were a problem of the world. Instead, become wealthy yourself through socially responsible means and then you can decide what to do with the money you have created. If you do not want to be wealthy, you can still do good in the world; but do not avoid money out of guilt. That guilt comes only from ignorance.