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.

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3 Responses to “Why I don’t care if the gap between rich and poor is growing”

  1. Holly Says:

    “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.”

    This comment bothers me. Do you really think that it’s possible for every poor person in the world to escape poverty? Do you think everyone in Canada (for example) can land a high-paying job? There aren’t enough high-paying jobs in Canada to accomodate everyone. So your comment that “there are more opportunities to escape poverty than ever before” is meaningless, because there are far more people who need to escape poverty than exist opportunities to do so. So no matter how you look at it, some people are going to end up in poverty.

    And I do understand the poor, having been there myself for the first 7 years of my life (having a teenage single mother on welfare with 2 kids, me being the youngest). I honestly believe that there are some poor people with no practical opportunity to escape their situation by “socially responsible means”.

  2. Darko Says:

    Chrisyyyyyy:))))

    first, i would recomend the book “Rule by secrecy” – Jim Marrs.

    when i read the book, i said…damn, how can you ever get into these circles(Rockfeller, Ford, Morgan) and change something…cause everything that they do is how to keep the power that they have…

    and that was the general opinion…at the start.

    but after i started reading about what their seccessors do…their sons and family…and how many research centers for cure of AIDS, of cancer, or whatever they opened…how much money they invested in Africa etc.

    and yes, i can agree that is a diversion move in order to decept people from what they really do, or how much money do they make…

    but the fact is still there..that they invest those money. and every small thing that can be done, will help someone. doesnt matter that you maybe cannot change the global politics( maybe one day you will be UN Secretary General and you can:)))), but everything that is being done is in order to change … remember ours?… one by one…

    there are more rich people than before that is a fact. but we should support when they invest part of those money with good reason. no matter how bad they say that Bill Gates is i respect that he invested couple of hundred million $

    and if normal, avarige people give their donations too( 80% of worlds donations come from individuals …1.000US per capita in US a year for 2005) and imagine if everyone gives a piece…

    on a long run…i think that poverty is less and less…we just cannot notice that. however, the gap between extremly rich and poor is getting bigger, i agree.

    but the question is not how big is the gap, but in how many ppl are rich and how many extremly poor? i think worldwide, the gap is less.

  3. Leor Says:

    Hey Chris,

    As you might expect of me, I strongly disagree with the arguments in your Nov 4 blog entry. I am also dissapointed by your usage of the word “leftists.” Perhaps I don’t know what that word means to you but I would argue it’s archaic at best. I thought everyone outside of the White House already knew that the associations attached to the words ‘left’ and ‘right’ shattered once and for all along with the Berlin Wall. Our world isn’t that black or white anymore (in fact, it probably never was).

    Where I do agree with you Chris is in your argument that we need to define the context around what rich and poor actually means and this can be complicated. Commonly used is the measure of people living on less than a dollar a day. Personally, I would expand it to include all people without ready access to basic human services such as clean water, education and health services. I do realize this definition would still not even include much of the homeless population in Canada. Wealth also has many definitions, not all of which are measured in monetary terms (eg. relationships, time, and pleasant memories). For the sake of argument, let’s say that being rich means having so much money that it would be difficult for a person to spend it in one lifetime without being exaggeratedly wasteful and extravagant.

    I think you may have misinterpreted what de Soto and Prahalad are arguing in their books. They are certainly not saying that the poor are in fact not poor. What they are saying is that the poor simply do not have access to the same mechanisms rich people have for leveraging assets, developing formal relationships and meeting basic needs. This means that they tend to spend much more time and money to gain access to such things. While it’s true that they do not typically incurr debt, they also have a lot less time available than non-poor people. Changing this situation is not impossible. The recent Nobel Peace Prize winnner Muhammed Yunis and many like him have made a great contribution toward wedging the rich/poor gap through micro-lending schemes but it will take many more creative ideas to really make a dent.

    Part of the reason it takes so much effort is because of growing populations. Studies have shown a direct link between poverty and population explosions. Poor people without access to basic hygiene, sanitation and clean water have more children because they often feel it increases the chance that one or more will survive beyond the age of 5 (the age when immunity systems start to kick in). More children also means more help with the crops and more help carrying firewood and water for the family. Ironically, it also increases the need for more crops, firewood and water but that is a longer term view of the situation.

    Studies have also shown that rich people have fewer children, which leads to a concentration of wealth among a shrinking population. While I support your theory about rewarding those that create money, learn the ways of finance, spend wisely, take risks and provide what others want, there is the reality that wealth is not always distributed fairly. If you are not born into a favourable situation the odds are grossly against you and if you should be lucky enough to be born into extreme wealth, than you get to live off the interest your relatives worked for and pass on the benefits through your small and exclusive blood line.

    OK, this is getting longer than I intended so I’ll fly through my next points really quickly here…

    Trade vs. Aid

    While aid from rich countries to poor countries can be helpful to transition a society through major difficulties, there are too many horrific examples where it led to corruption, power struggles and colonial-type relationships where the funder gets to decide where the money goes. Often the money is channeled specifically toward infrastructure projects that benefit only a minority of the population and require the expertise of companies from the donor country. This is called Tied-Aid and has a dispicable history (I highly recommend Confessions of an Economic Hitman). The practice is still done today.

    Ironically, if the champions of free trade (USA, Canada, western Europe) were to ease trade restrictions aimed at protecting local businesses and limiting the amount of imports from developing countries and/or reducing/eliminating agricultural subsidies to local farmers, many developing countries would be better able to compete. The estimated potential derived from doing this is equal or greater than the amount of aid donor countries contribute. Best of all the beneficiaries of eased trade restrictions would be those that create money, learn the ways of finance, spend wisely, take risks and provide what others want.

    Lastly, equality of wealth has not always been such a terrible thing. Just ask anyone living in one of the Scandinavian countries who have free education and health care services far superior to ours.

    Take care,

    Leor


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