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A Lesson in the (Re)distribution of Wealth

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Through the company where I worked more than 35 years ago, I had an opportunity to meet an unusual man. I had not seen him since, but his recent obituary caught my eye. His name was Wayne Field, a name I’m sure few, if any, of you will recognize.

In his 87 years he accomplished a great deal. He founded 51 corporations in 21 states. In his best-known venture, he founded the oldest and largest privately owned assisted-living facility in Minnesota, then built 20 more, employing 2,000 people in eight states.

His success in business made it possible for him to assist many charitable organizations financially and with his time and organizational skills. He was state chairman of the Minnesota March of Dimes for 10 years and was active in supporting the American Red Cross, the Minneapolis Boys and Girls Club, the Minnesota Cancer Society, and many more. His last project was Erik’s Ranch, Inc., a nonprofit organization to which he donated land in Montana to provide opportunities for young adults with autism.

Barack Obama, in his presidential campaign, had a brief but much-publicized dialogue with “Joe the plumber,” in which Obama advocated taking money from people like Joe and spreading it around to people less well off, claiming the nation would be better off that way. What Obama was espousing was the old Marxist doctrine from each according to his ability, to each according to his need. Such redistribution of wealth has led to a failing economy in every country that has tried it.

When government takes money from people like Joe the plumber or Wayne Field and “redistributes” it, it is not stimulating the economy but slowing it down. It is taking money from the productive entrepreneurs who create jobs, wealth, and opportunities and dispersing it to those who are less productive. This is more obvious in the case of Wayne Field, but the same principle holds true for the millions of “Joe the plumbers” throughout the nation who advance society by the exercise of their liberty and the property rights to their own earnings. “Redistribution” of wealth is a violation of those rights — it is simply stealing — in order to support some alleged broader social objective. Noted economist Walter Williams says,

Two-thirds of the federal budget consists of taking property from one American and giving it to another. Were a private person to do the same thing, we’d call it theft. When government does it, we euphemistically call it income redistribution, but that’s exactly what thieves do — redistribute income.

It is not only immoral but ineffective as a national policy.

Two thousand years ago, the Roman statesman Cicero observed that democracies usually choose a leader “who curries favor with the people by promising them other men’s property.” George Bernard Shaw said, “A government which robs Peter to pay Paul can always count on the support of Paul.” And there will always be more Pauls than Peters (or Wayne Fields). So in a democracy, politicians will campaign for the Paul votes, at the expense of the rights of the productive minority, and the economy will be worse off — as will the majority of Pauls, who will not experience the job opportunities, better products and services, and other benefits created by the entrepreneurial minority.

Spending other people’s money

If the government sends out stimulus checks of a few hundred dollars to everyone, the politicians hope it will bring them votes in the next election, but it will have minimal effect on the economy. Nobel Prize-winning economist Milton Friedman warned that doling out money to taxpayers as a stimulus measure doesn’t increase consumer spending, as its advocates hope. He said people will simply save most of the money or use it to pay off existing debts, rather than make new purchases. Research confirms he was right.

A government policy of thinly spreading other people’s money among millions of poorer people won’t lead to the creation of 51 new corporations or the construction of new assisted-living facilities or other large-scale projects. Those require a sizable concentration of capital in the hands of a highly capable individual. If someone like Wayne Field is allowed to accumulate capital, he will do something with it that meets a need in society and provides permanent employment for 2,000 people. Those are not jobs that will evaporate when the government stimulus money runs out. Most of Field’s key staff were employed by him for more than 20 years, some for 30 and 40 years.

Should government instead subsidize people like Wayne Field? Of course not. It would be as much a violation of other people’s property rights to give him their money as it is a violation of his property rights to give his money to them. Such a man doesn’t need other people’s money; just let him keep his own, and society will be better off. Furthermore, how would the government know whom to subsidize? Can the government pick winners? How would it know who the next Wayne Field will be? Or the next Bill Gates? Nobody knows. The only way to find such people is to allow them to emerge by their own talent and ambition in a free market, where industrious, talented, entrepreneurial people are rewarded. Research has shown that only 5 percent of the population are innovators. An equalizing distribution of wealth transfers the earnings of the creative minority to the 95 percent who are not innovators. And society will be worse off.

Robbing the rich for the benefit of the poor not only deprives the creative, entrepreneurial minority of the capital necessary for producing further wealth; it also undercuts the incentive for doing so. Successful business ventures always entail some risk, and where the rewards are not commensurate with the risks, they will not be pursued. Then society — including the poor — will never benefit from the jobs, better products and services, and overall economic growth that would have been created. Nor will they see the charitable donations and other secondary benefits that wealthy people, corporations, and foundations contribute to society. The latest available data show private charitable contributions in the United States are $306.4 billion per year. That is wealth that first has to be created before it can be donated or taxed and “redistributed.” If people were allowed to keep more of their wealth instead of turning it over to the government, they would not only generate more wealth but increase charitable donations. And they would do it much more effectively than government welfare and social programs, which are notorious for waste and ineffectiveness. There are 64,000 private philanthropic foundations in the United States, yet they have very few of the problems with misallocation of funds, fraud, and other corruption that plague government handouts.

Spending foolishness

President Obama has no idea how wealth is produced. At the signing of his $787 billion stimulus bill, he announced, “Some people say this is a spending bill, not a stimulus bill.” He then paused momentarily for effect before humorously adding, to the amusement of reporters, “What do they think a stimulus bill is?” As though spending — for anything — will be an economic stimulus, an idea he got from Franklin Roosevelt, who got it from the British economist John Maynard Keynes. Roosevelt once demonstrated his belief in the Keynes idea by saying that, if necessary, he would put people to work digging a ditch from one end of the country to the other and then pay them to fill it up again. Obama seems to have the same idea that merely spending, any kind of spending, will stimulate the economy.

Can anyone really believe that Obama’s spending will disburse money more efficaciously than the creators of wealth would do themselves if allowed to keep their money? Nobody spends money more wisely than a man spending his own. Congress passed the $787 billion bill in two days and no senator or representative had even read it! How could they when it was more than a thousand pages? Obama didn’t read it, either. It sat on his desk for three days while he was away on holiday. Then he quickly signed it, ignoring a pledge he had made to check every earmark line by line to see whether it was justified as an economic stimulus. The bill contained more than 8,500 earmarks. To authorize such enormous spending without any scrutiny would certainly seem to indicate that, like Keynes and Roosevelt, he thinks all spending is stimulating to the economy. No owner of private wealth would spend a significant sum of his own money so hastily and without examination.

Back in the 1950s when I was traveling behind the Iron Curtain, it was not uncommon to hear people say, “Under socialism we have no unemployment. Isn’t that good? Government gives everyone a job. So workers’ basic needs are provided for, and their collective economic activity [i.e., their spending] makes the economy go around.” But the make-work jobs of any government can no more create wealth than Roosevelt’s ditch-digging scheme could. What neither Roosevelt, nor Obama, nor other advocates of socialism have grasped is that only profitable work in the private sector creates wealth and raises a nation’s standard of living. Government make-work projects are simply another form of wasteful spending, which leaves less capital for wealth-producing enterprises in the private sector. And the workers in America, far from being “exploited” and kept down by the rich — as alleged by the class-warfare propaganda of the socialists — have benefited from the success of the rich. Meanwhile, the workers in socialist “paradises” behind the Iron Curtain endured shockingly low standards of living until their failing governments disappeared. The lesson from all that, which apparently has been lost on Obama, is this: when people are free to make the advancement of their own interests the cause of their actions in the marketplace, the effects are beneficial to others and advance society. And those beneficial results cannot be obtained by trying to reverse that cause-and-effect relationship.

There is a reason Roosevelt’s Keynesian policies were not continued. They didn’t work. In 1939, late in Roosevelt’s second term, his Treasury secretary, Henry Morgenthau, wrote,

We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong … somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat.

We have never made good on our promises…. I say after eight years of this Administration we have just as much unemployment as when we started…. And an enormous debt to boot!

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    Edmund Contoski is the author of the award-winning book Makers and Takers: How Wealth and Progress Are Made and How They Are Taken Away or Prevented, and of The Trojan Project, a novel about restoring America. His website is www.amlibpub.com. He is also a columnist at Forces International Liberty News Network.