Is Wealth Zero Sum

The postulation that wealth is zero sum, meaning that whatever wealth I have has been gained at the expense of others, in effect total global wealth is finite but is inequitably distributed. This argument rests on the assumption that wealth cannot be created and wealth can be defined and quantified. I submit that this is a fallacious argument.

First wealth can be defined in many ways such as the value of knowledge, a great many friends, honors, respect, or many other abstractions where the “wealth” is self determined or determined arbitrarily by others. This type of wealth is not finite and can be both created and destroyed. Therefore, for any meaningful argument wealth must be defined in terms of tangible goods such as gold, money, art, land, etc. But the postulation is that wealth is zero sum meaning that it is finite when it is obvious that the world’s available wealth today is far greater than it was a hundred years ago. But the professor / philosopher avoids this inconsistency by stating that his zero sum argument only applies to the moment and cannot be viewed in any historical context. But this refutes his argument that wealth cannot be created because global wealth has increased and he acknowledges this. This reduces his argument to the total global wealth is finite at any given moment, which is true at that moment, but in the next moment new wealth can be created e.g. a gold strike, oil strike, new invention, etc. The professor / philosopher acknowledges this but then moves to the more abstract view of wealth common to those who argue that wealth can only be gained at the expense of others – hence that wealth is finite.


The argument then becomes increasingly doctrinaire as he attacks – without noting – capitalism. He argues as follows:

“Material wealth obviously originated in the creation/origin of the universe (that is where the stuff comes from). Once we had the earth and people, people could start acquiring material goods like land and resources. These resources can be made more valuable by the addition of labor, thus creating wealth. They can also be made more valuable by other means, such as creating scarcity and controlling pricing. These material goods can be acquired in various ways, fair and foul. The classic method is, of course, conquest.”

How this argument supports a zero sum conclusion is beyond me because it demonstrates how wealth can be created and shared yielding a wealthier population overall. The actual argument appears to be the inequity of some people being wealthier than others based on the assumption that unethical and even illegal means were used to accumulate that wealth. He leaves no room for wealth accumulation via fair means. But his argument has ceased being the creation of wealth but instead has shifted to the sharing of wealth.
At this point the argument shifts to the abstraction of money “the pieces of paper” whose value is commonly agreed to but his real argument doesn’t appear to be the creation of wealth but how that wealth is created.
“Monetary wealth is obviously a social construct: we made up the financial game and the “creation” of wealth depends on the sort of game being played at any given time. For example, some folks “created” wealth by clever repackaging of toxic assets. Other people “create” wealth by working and investing their money (which is supposed to give them more money). In many ways, this is “fictional” wealth in that we are literally just making this stuff up and its value depends entirely on how far we are willing to all play make-believe. Yes, I play the game-it is a convenient way to handle exchanges in some ways. But, I always remember that it is just a game we are playing (I work, I get some paper, I hand the paper to someone and they give me an apple).”
The point being made here is a little fuzzy to me because everyone knows that paper money is an abstraction whose value is set by common agreement and backed by the government. The creation of wealth followed the same rules when commerce depended entirely on gold and silver currency. It appears that he is simply opposed to how wealth is created and how it is inequitably distributed. But he concludes his argument that wealth is finite by arguing that currency (paper) is finite because printing more doesn’t create wealth but results in inflation. That is true but then at a stroke he reduces wealth to how much money you have and since that is finite wealth is finite and zero sum. That is ridiculous of course because tangible wealth can be created in many ways and the currency is simply a method of measuring the wealth created.
In my opinion this entire argument illogical and rests on false assumptions. And when the argument is reduced to its core it appears that it is anti-capitalism and the unequal distribution of wealth.


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THE RICH, THE POOR, AND THE REFORMERS

Civilization as we know it probably began in the Middle East and probably in Mesopotamia or Egypt. These societies were agrarian with each family farming for itself – essentially a subsistence life. However, very quickly these societies divided into farmers and craftsmen and not long after that came military and governors. Of course the governments and the military were consumers not producers so the society had to support them in the form of taxes. Naturally as the society continued to evolve it began to stratify into classes with the military and officials becoming the upper class, the nobility, and the rich. The point of this obvious historical review is to point out that mankind has always been divided into the rich and the poor and that wealth has never been equally distributed. In fact the very idea of equality much less egalitarianism is a relatively modern concept.

Nevertheless this idea that business, businessmen, and capitalists are evil and that the primary purpose of government is to distribute the wealth of society equally. The underlying principle seems to be that the capitalist has no right to the profits because those profits are earned by the workers he employs, therefore, the revenues generated by the business rightfully belong to the workers. Because these capitalists are reluctant to return the profits to the workers who earned them it is the responsibility of government to seize those profits and redistribute them to the workers. The fact that this has never worked in practice is ignored by these social activists who generally have never actually had to earn a profit or been accountable for the results of their decisions. Currently we see this philosophy being employed by Hugo Chavez in Venezuela. He has seized the assets of foreign investors, fixed prices, over employed people, and then blames the US and others for the failure of his policies. The standard of living is declining, goods are disappearing, and while prices are fixed the items are only available on the black market. This result was first observed under the Emperor Diocletian. Lessons from history don’t seem to be learned by social activists.

Of course the most famous of these social reformers was Lenin, who corrected the abuses of the aristocracy by slaughtering all who disagreed with him, seizing all methods of production, confiscating all revenues in the name of the state, and eliminating private property. Theoretically this was supposed to take the revenues generated by the workers and return the wealth to the workers equitably. Of course as George Orwell observed in his famous satire “Animal Farm” some animals are more equal than others. In practice the wealth was not distributed equally but along selective party lines and the result was the stratification of society into the rich and the poor – a fact either ignored or denied by the social activists who even today believe Marx was right and Lenin failed to implement Communism correctly. Hugo Chavez seems to be one of those who think Lenin was wrong and Marxism is right. His failures to make Marxism work he attributes to interference by the US.

But these are the obvious actions of these social reformers whose failures are highly visible. However, there are social activists among us today who still believe in the tenets of Marxism but don’t use such inflammatory names; instead they call for social reforms through legislation. This began with the infamous book “Silent Spring” by Rachel Carson. This book was later determined to be a hoax but the damage was done, industries ruined, and DDT was banned. Of course the damage to public health was ignored in favor of the animals which were alleged to be endangered by DDT. This was followed up by various other efforts at social reform and perhaps the most famous was the ban on smoking. Any empirical ties between smoking and cancer remain statistical even though the incidence of lung cancer has remained steady even as the number of smokers declines. But these were just warm-ups for the social reformers because they really are after business and the rich. These are their real targets because they truly believe that the rich have no right to what they earn as long as there are people living in poverty.

They are attacking capitalism as evil and as allowing the wealth to be concentrated into fewer and fewer hands. They believe that the profits earned by a corporation should be shared with the workers through profit sharing and not distributed to the shareholders – who of course capitalized the business to start with. The idea that it was the capitalists who created and grew the business is ignored. The workers wouldn’t have jobs and there would be no revenues much less profits to share without the capitalists who funded the enterprise initially. These social reformers rarely have actually run a business or have held positions where they were required to earn a profit. Instead, they are opposed to layoffs as a cost cutting measure because in their eyes that is immoral. For them the socialist ideal of employment over efficiency and profit is what should drive industry, not return on investment.

These are the people who are horrified at the “obscene” profits being generated by the oil companies. What is being ignored is the difference between gross revenues and net profits, but this subtlety is ignored in their drive for wealth distribution which is and always has been their objective. This is the whole purpose of the graduated income tax – it is a legislated method to strip the wealth from those who earn it and redistribute it in the form of handouts to those who did not. These are the people who feel that there is something morally wrong with some people being rich while others are poor. They never make the connection between decisions, lifestyle, responsibility and wealth. Those who work hard and make responsible decisions prosper and those who do not suffer the consequences of their bad decisions and efforts to redistribute the wealth to the poor has historically only resulted in increasing the number of poor and lowering the quality of life for everyone. The reality is there are poor and there are rich and there has always been this dichotomy and every effort to form an egalitarian society has failed.

The Rich and the Poor

Once again we hear the cries to tax the rich, to make the greedy corporations share their profits, that the number of people living in poverty is criminal and that the government should do something to alleviate the suffering of the poor. These cries to help the poor are delivered with heartfelt emotion and with such passion that it appears that the poor among us have just been discovered. These cries to help the poor take many forms and among them we see concerts held to raise money to save the family farm. We see charitable organizations like Habitat for Humanity building homes for the poor. There are various government programs already in place to help the poor and indigent, there even re-training programs offered by both private industry and the government, yet year after year we hear these cries to help the poor and more needs to be done. Perhaps it is time to step back and conduct a critical review of the situation, but first perhaps a little historical perspective is in order.

From 4000 BC until 1800 AD the larger portion of the population was devoted to agriculture with a small proportion of the population occupying themselves with trades, government, and the military. Effectively the population was divided into the rich and the poor with the greatest majority being the poor. The stark reality is that farming has always been a subsistence living and only the largest farms could generate enough income to allow for expansion, which enlarged the size of the farm and the income. The large farms evolved into estates and the children climbed the ladder of success reaching senior government posts and aristocratic status, the smaller family farms remained as they were and yielded a subsistence living. Occasionally the sons of these subsistence farmers were join the military and rise through the ranks to positions of great power. Obviously it can be concluded that the family farm provides for a solid family structure and solid foundation for nation states, it does not lend itself to wealth generation or career opportunities for the children. It can further be concluded that society naturally separates itself into the rich and the poor or the haves and have-nots. But if some of the have-nots are able to rise just as some of the haves fall into poverty then the people in these categories are not forever fixed there like the Indian caste system, then it can be concluded that a person’s situation in life to some extent is self-determined.

But if the poor have always existed and in all likelihood will continue to exist, why hasn’t someone or some government solved the problem? Well there have been numerous attempts to solve the problem of poverty. The Gracchi in Rome observed that there was a large number of unemployed in Rome who were subsisting on the state while slaves were tending the fields. Their attempts to reduce the number of slaves tending the crops in an effort to provide more employment to the unemployed in the city resulted in the mob killing them. Since that time there have been numerous efforts to reduce poverty and unemployment through various redistribution programs. The French Revolution was an attempt to establish an egalitarian society, which failed and gave rise to Napoleon. Then there was the Russian Revolution and the rise of Marxism which also failed, although there continue to be many determined Marxists who insist that the failure of Communism was not in the philosophy but in the execution. Jack Kennedy established the Peace Corps which was an attempt to alleviate the condition of the poor in various foreign countries. Whether or not this was a successful program can be debated but there is no doubt that the poor throughout the world still exist. Closer to home President Johnson declared a “War on Poverty” and attempted to establish “The Great Society” which was a program fueled by taxation. This was a huge welfare program intended to improve the lives of the poor which collapsed under its own weight and left a legacy of welfare recipients that now span generations.

After all of these failures to help the poor it would seem obvious that wealth redistribution punishes the rich but does not reduce poverty or the number of the poor. However, to those people who know precisely how the rest of us should live and who seem to abound in every time period, they are once again determined to reduce poverty by taking wealth from those who earned it and give it to those who – in their opinion – deserve it even though they have done nothing to earn it. The complaint is that the number of poor people – not necessarily the poverty stricken but just the “poor” is increasing while the wealth is being concentrated in fewer and fewer hands. It is their idea that corporations should be responsible to their employees rather than to their shareholders seems to be one of the cornerstones of those who are seeking to remake the world of economics. The reality is that most of those employees also own stock in the corporations in the form of mutual funds, common stock, or 401(k)’s. The idea that corporate profits should be returned to the investors rather than to the employees in the form of bonuses and profit sharing is fundamental to their view of economics. The reality is that it was the investors who took the risk and it was their capital that allowed the company to create the jobs that those employees hold. To strip the corporations of their profits may give an immediate boost to the employees but in the long term it will result in fewer jobs as the corporation cannot upgrade equipment, expand the business, or even effectively compete. The basic premise in this philosophy is that the objective of business should be employment and not profit. This is the very foundation of socialism and it had always resulted in stagnation, high taxes, and a lower standard of living.

Currently Hugo Chavez, the President of Venezuela is in the process of redistributing the wealth. He has nationalized business, seized foreign assets, and fixed prices, all in an effort to improve the lot of the poor and improve their standard of living. Of course the result has been just the opposite as goods become scarce, black markets grow, and prices soar. While a laissez faire market may not be necessary for prosperity any plan to redistribute the wealth to alleviate poverty is doomed to failure. The poor are poor for a reason and universally that reason is not the luck of the draw but the result of their decisions. The government might mitigate their suffering but solving the problem of poverty cannot be done by government, the solution is in the hands of the poor themselves.

The Wealth of Nations

For some people the purpose of government is to redistribute the wealth so that all can share equally. This of course was the foundation of that cornerstone of Marxism “From each according to his abilities, and to each according to his needs.” Of course this didn’t work well in practice because very quickly those with ability stopped producing and joined the ranks of those in need. The result was the grinding poverty, hunger, and alcoholism that characterized the Soviet Union. However the failure of Marxism has not deterred those “progressives” who feel it is their moral duty to take the earned wealth of the few and distribute it to the poor. These programs were first introduced by Robin Hood in the 12th Century and not unexpectedly were hugely popular with poor but less popular with those who were being robbed. Since that time the Robin Hoods have abandoned their weapons and become politicians who now use the power of government to legally take the wealth of the industrious and distribute it to the “needy”.

Those individuals who have resisted this governmental robbery have been labeled “filthy capitalists” who exploit the poor for profit. Of course “poor” is a relative term, much like “rich” but those who feel they must provide for the “poor” never actually want to define precisely who is “poor” and who is “rich”. So precisely who is “rich?” In a shocking study conducted by the Helsinki based World Institute for Development Economics Research of United Nations, it was discovered that the world’s wealth is more unequal than the world distribution of income. In this study wealth was viewed as “assets minus debts”. On this basis, assets of $2.200 per adult was enough to place a household in the top half of world wealth and assets of $61,000 would place the household in the top 10%. For those with assets of $500,000 or more, they are in the top 1% of the world’s wealthiest people, which equates to approximately 37 million people, not exactly an exclusive club.

What is missing from this study is any correlation between the government and the wealth of individuals. The collective wealth of those countries with Socialist Governments amounts to 23%:

Germany == 4%
Italy ==4%
France == 5%
Britain == 6%
Netherlands == 2%
Canada == 2%
Spain == 1%
Switzerland == 1%

However, those countries with a capitalist economy account for 65% of the top 1% of the wealthy:

United States == 37%
Japan == 27%
Taiwan == 1%

It is worth noting that both Japan and Taiwan are small countries with relatively small populations, yet these countries account for more individual wealth than France, Germany, Italy, and Britain combined. Of course the socialists tax profits at confiscatory rates and in general consider it the responsibility of government to redistribute the wealth and to assure all citizens are comfortable. This comfort also translates into lower productivity because the attitude of these socialists is that work is the means to pleasure. The United States and Japan have the highest productivity in the world and control 64% of the total 1% of world wealth and the prevailing attitude is that work is pleasure, yet both countries have considerable tax requirements.

Naturally this opens the argument regarding the “quality” of life. The Europeans are more relaxed, have more fun, and don’t work as hard as the Americans and Japanese. But is that really true? Do Americans work for money like the Europeans or do they work for pleasure? If they work for pleasure then they are having as much fun as the Europeans and are living considerably better. Americans have greater material wealth in the form of assets – which equates to single family homes unlike Europeans who generally live in apartments. The list of course is virtually endless but the end result is that the Europeans have fewer possessions but more vacations. They have high unemployment but the government subsidizes the poor through the high tax burden, which penalizes the industrious and leaves them little money to invest or save – if they are to enjoy their vacations.

It seems that the lesson here is that the capitalist countries have higher productivity, greater wealth, lower unemployment, and a better life in general than those socialist countries who hold themselves up as superior but in reality have considerably less other than vacations.

Save My Victims

Once again the liberals have raised their voices to accuse those who insist that every one is in a position they created for themselves of being “uncaring” and lacking in compassion. These are the people who wring their hands, shed tears, and demand that some one should do something to help all of these victims. Of course how these victims became victims is never really discussed and certainly their actions prior to their victimization, is never criticized, because that would be cruel. Naturally their demands that someone do something to help these victims never actually includes them, it is always the government – meaning the taxpayer – meaning the undeserving rich, because the poor should never be taxed because they are victims of capitalism and business, not their own poor decisions. The result is everyone is called on to sacrifice and help these victims of earthquakes, floods, drug addiction, AID’s, and whatever problem that can be blamed on “big business”.

The reality is that these victims are almost universally the result of their poor judgement and bad decisions. People flood into California and build homes on every piece of land ignoring the fact that the entire region is subject to devastating fires and earthquakes. But when these disasters strike somehow these liberals feel it is the responsibility of others to pick up the pieces and help these people rebuild – in the same place! Then we have the “poor’ and “homeless” and surely something needs to be done about that. The rich don’t deserve their wealth so we – the liberal elite—should take their wealth and give it to the poor and homeless. The fact that these people are poor and homeless is the direct result of their decision not to get an education, to not develop any skills, to not development any self-discipline, to take drugs, or to foolishly spend what they do have – these are never considered. These are poor people so the liberals think the rich should be robbed of their wealth without regard to the risks they took, the sacrifices they made, or the effort they expended to gain their wealth.

The rich are those people who receive compensation for what they produce. They do not get unearned rewards. No one is forced to buy their products or hire their abilities – this is called a fair exchange – compensation for an exchange of goods or services. This is simple fairness and it is not the responsibility of those participating in this exchange to share anything with others. If they choose to do so, that is called “charity” and is a personal choice and not something that should be forced on them by the government or some well meaning person who thinks something should be done. The happiness or the well being of everyone is their own responsibility and not the responsibility of the government. No one – especially the government – has the right to take by force the wealth of one person and to give it to another simply because that person is poor and unhappy being poor.

Naturally this assessment is viewed as overly harsh, uncaring, unfeeling, and by many as “immoral”. However, this does not mean that the rich should not give to the poor or that they should not share their wealth – quite the contrary – the wealthy can do as they choose with their wealth and many do use their wealth to benefit others. The point is that this sharing should not be foisted on them through legal force in the form of taxation or the use of public funds to alleviate the results of bad judgement. But what about the morality of those who stand around with their hand out and willingly accept the money that has been wrested from the rich through legal force. Is it moral for one to accept the gift of goods that have been taken from another? When this is done by an individual it is called stealing but when it is done by the government it is called “helping the poor” or “welfare” but the result is the same. Why is immoral for a person to want to keep what they have rightfully earned but moral for a person who hasn’t earned it to accept it from the government. What is really at play here is guilt. The liberals are actually plagued with guilt because they have more than someone else – by definition that person with a dollar less is poor in their eyes and the extra dollar they have is rightfully his. This guilt is translated into the continuing pressure to take those extra dollars and give them to the poor but in practice it isn’t their dollars they are giving but the dollars of those whom they feel are too rich. The result is a whole gaggle of people who think it is their “right” to have a job, to get food stamps, to consume more than they earn, and to take without regard for giving of for the source of what they are taking.

What is wasted on these liberals who feel sorry for all of these poor people is that their “love your brother” morality and “rob the rich to give to the poor” panacea’s don’t work and worse they are killing the goose that laid the golden egg. This “rob the rich” mentality is displayed daily in calls for the rich to pay their fare share without actually defining who is rich, what their fare share is, and what would be the fair share of the poor – are they free from giving anything back – ever?
We see any effort by those who earn and produce the wealth in this country to protect what they earn as evidence of how big business is destroying the country and something should be done to protect the little guy from the rapaciousness of these rich fat cats.

The fact is that it is these “fat cats” that provide the jobs and generate the wealth for everyone, not those parasites who take and take and take as if it were their right. In fact, the liberals have convinced them that it is their right. If you can just sneak across the border then you are entitled to a job, to welfare, and to medical care at no cost to you because those undeserving rich people can share some of their wealth. The reality is that the liberals have created and perpetuate a society of victims, where no one is responsible for the result of their decisions because they are victims of some one else or some businessman – never their personal decisions. Without victims the left wing would have nothing to do so to exist they must perpetuate this fiction that business is evil and that personal decisions don’t matter.