In Praise of Redistributing Wealth

Wealth in the world is unequally distributed. That, at least, is a demonstrable fact. What is a matter of debate, however, is whether wealth is fairly distributed. For all but the most callous Ayn Rand sycophants (yes, I’m a libertarian who doesn’t like Ayn Rand), the “Nays” are likely the winning side of this proposition as well. If anybody in the comments section wants to present a cogent case to the contrary, be my guest. For everybody else, we must move from the apparent economic injustice in the world to viable solutions to it.

(Soapbox thought: We should learn to distinguish between fair and unfair means of gaining wealth. Hard work itself is not sufficient to gauge whether or not one came by their wealth honestly. There are many people who have worked very hard at screwing over other people. Goldman Sachs employees work very hard, I’m quite sure, but that doesn’t make their wealth honest. After all, I understand that mafia bosses work very hard and long hours too.)

For many people, the ‘obvious’ solution is the forcible redistribution of wealth by the State, employing its police powers and geographic and constitutional monopoly on violence.  This, they say, is a fast and effective means of achieving the desired ends. Unfortunately, history has shown it to be neither fast nor effective, and every time it has been tried, it has brought with it ruinous consequences, unnecessary repression, and economic destruction. Everybody has become poorer as a result. Even the “soft” socialism of post-World War II Europe and America, which have taken a Fabian approach to statist wealth redistribution, are seeing the fiscal consequences associated with such an approach. The 1960s and 1970s in America and the 1980s and 1990s in Europe proved that oppressively high marginal tax rates always lead to GDP stagnation. The alternative approach, deficit-financed redistribution is now proving itself to be even more disastrous, as we watch Europe and the American States implode under the weight of their entitlements (by this I do not only mean transfer payments like welfare, social security, and medicare, but in-kind entitlements such as public education and health care).

What is worse, wealth distribution hasn’t really improved. It has shown itself to be a persistent, sticky problem that does not respond easily to policy pressure. Soviet guns and gulags couldn’t equalize wealth. Public education and welfare haven’t been able to equalize wealth. The traditional approaches seem to have failed in their goals, not to mention the unintended consequences that have followed. (If anything, we have witnessed redistribution in reverse, from the middle class to the wealthy, particularly the financial elites. This is thanks to Central Banking and un-tethered fiat money creation, but that is another topic for another day.)

This does not mean, however, that we are doomed to a world of gross inequality. There are certainly elements of society that would prefer us to think this is inevitable, and far too many libertarians have accepted this premise as not only an unalterable reality, but an optimal one. Unquestionably, wealth and income inequality will always exist. Each human being is a unique individual with unique and individual talents and abilities. We are not capable of being the same, and it should not be desired to be so. Inequality is not in and of itself the villain. The problem is when the manifestation of inequality means that billions of people in the world live in abject poverty while others live lavishly.

Fortunately, we have a way to fight this that does not require wise and enlightened policies from government (since those are unlikely to be forthcoming) or the largess of multinational corporations being bequeathed sanctimoniously to the downtrodden. No, we have at our fingertips the tools and ability to lift ourselves out of this world of massive inequality and to redistribute wealth from the ground up without destroying any in the process.

This tool is entrepreneurship, and with the advent of the Internet Age, it is available at unprecedentedly low barriers to entry and to literally billions more people than have ever truly had access to it in the past. Unfortunately most of the people in the world don’t know how to use these tools effectively, and the current system of education exacerbates this reality. Entrepreneurship doesn’t mean the lone, Rand-inspired capitalist shrugging the Atlas and accumulating as much wealth as he can get his hands on. The romance of rugged individualism is dystopian and counter-productive, because it discourages vast swaths of potential entrepreneurs from starting out.

We are social creatures, we are diverse and unique individuals but who all have an internal desire to be part of a community (I do not mean a town or place, but in the way described by M. Scott Peck). Removing entrepreneurship from the context of community has tended to relegate the practice to the few driven egos (which I do not mean pejoratively) who can handle striking out on their own, more or less alone. Entrepreneurship means much more than that. It means groups of people taking control of their lives and their destinies and supplying their own needs better, faster, and cheaper than multi-national corporations can. In making such attempts, they will undoubtedly innovate their ways to solutions that can be packaged and sold to other groups of people for whom such a solution means they can concentrate on solving other problems. There is no requirement that such groups of people be organized around a capital-centric model of ownership. The Mondragon Corporation in Spain is an excellent example of a labor-owned cooperative that has achieved scalability.

Entrepreneurship increases the world’s wealth while simultaneously redistributing it. Entrenched corporate interests are effortlessly dismantled by the power of competition and consumer preference, when they are allowed to operate freely. More importantly, though, it is done without violence or the use of force, without malice or theft, and without the overreach of statist redistribution mechanisms. Where the State has no way of knowing who came about their wealth fairly, and treats all wealthy people the same, the market distinguishes between those who are meeting consumer needs and those who are taking advantage.

We should embrace the redistribution of wealth–it is something sorely needed. But we should seek means of fostering it that are voluntary and bottom-up rather than forced and top-down. One injustice cannot be remedied by another.