The recent election featured more “class warfare” than
usual—a good reason to remind ourselves that politicians never “take
from the rich and give to the poor,” but, rather, take from
the productive and give to the government.
Derry Guarde
Name a European computer company. From any European
country. A computer company from Germany? Britain? Italy? France?
Name a European software company.
Name a European internet company.
While I’m sure these exist, I doubt many
of us could name any. I suspect that if most of us were asked
to name anything high tech from Europe we could come up with
a few kitchen appliances and some automobiles (though cars were
invented in the 19th century) and not much else.
Why is this? Why do we have a much more innovative economy?
The Economist wistfully talks about America being blessed with an enterprise
culture. This is nonsense. Our people are no different than those in Europe.
And it’s not because of World War II (which ended over half a century
ago) as most of us were taught when we were growing up. It is because of high
taxes and regulation. European governments tried to “help the working
man” with laws that take from the productive and give to the government.
High taxes on “the rich” and regulations to help “the working
man” adds up to less innovation.
Risk Takers
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I have put “The Rich” in quotes in the title
because so many people have a cartoon idea of “the
rich.” They have been taught to see the rich and the
poor much as they see the tall and the short—permanent
conditions
conferred at birth by chance. They are taught to believe
that successful people just “happen” to be
rich.
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Four out of five businesses fail in the first five years—half
of those in the first year. Nobody is going to take on odds like
these to make a little more than they would make working on salary!
Only if the rewards are commensurate with the risk will people take those risks.
That means that those who have enough guts, savvy and luck to be successful
can make a lot of money. If society reviles them for being “the rich” and
takes away that money, they won’t take the risk. And if they don’t
take the risk, the “working families” won’t have jobs to go
to.
This matters. The per capita GDPs for Italy, Britain, France and Germany respectively
are $21,531, $21,559, $21,132 and $23,010. For the Euro area as a whole it
is $21,407. For the United State it’s $32,328—literally half again
as much.
On average, everyone in Europe—every doctor, every dock worker, every
assembly line worker, every dishwasher, every teacher, every engineer—has
to work half again as much as their American counterpart just to have the same
income.
(Incidentally, the statistics show that black Americans have a higher standard
of living than white Europeans—ironic since many black Americans support
the kind of policies that put Europe behind America.)
For The Children
No government starts out by saying, “Let’s figure out ways to cripple
innovation and make our society poorer than it would otherwise be.” High
taxes and government regulations are all enacted to help people—usually “the
poor” or “working families” or “the children” or “the
earth.”
Europe is beginning to understand the problem. In many countries they are beginning
to reduce taxes and cut the regulatory burden. Of course, when they enacted the
high taxes and regulations it was always “for working families” or “for
the children” yet when they try to reduce those same taxes and regulations
it is always to “free static labor markets” without a word about working
families or the children.
Reductions in the size of big government mean
lower taxes. But, since the top 1% of Americans pay 30% of the
income taxes and the top 20% pay 80%, any reduction in the size
of government leads to squeals of, “Tax breaks for the rich!”
The Rich
I have put “The Rich” in quotes in the title because so many people
have a cartoon idea of “the rich.” They have been taught to see the
rich and the poor much as they see the tall and the short—permanent conditions
conferred at birth by chance. They seem to believe that successful people just “happen” to
be rich.
|
Joseph Kennedy was the fourth richest man
in America and all three of his sons became U.S.
senators while
one of them (JFK) became president. One could not ask
for a
greater display of “wealth and power.” Yet
one generation removed from fabulous wealth, the combined
assets
of the entire Kennedy clan could probably be purchased
by one black woman (Oprah Winfrey) who came from the
middle class
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This is a view that comes straight from the
middle ages. Then, the rich (the aristocracy) told the poor
(the peasantry) how much
of their grain they must give to the lord of the manor and
the lord had the men at arms to enforce the edict. And every
bushel
that went to the lord was no longer available to the peasant—the
poor were poor because the rich were rich. In addition, the aristocracy
was determined by birth—peasants need not apply.
In a modern democratic/market economy this simply has no relevance.
80% of millionaires in this country earned the money themselves—they came from the middle and,
occasionally, from the lower class. (Incidentally, this is the same percentage
as during the 1890s, the age of “Robber Barons.”) The five richest
men in America, including Bill Gates, are as middle class as you can get.
And this is not just because of the high tech revolution. Second on the list,
Warren Buffet, comes from Omaha, Nebraska and made his money in good old
fashioned stock selection. The richest man in America a decade ago was Sam
Walton who
came from Bentonville, Arkansas where the “general store” he founded
grew to be WalMart.
The Powerful
Joseph Kennedy was the fourth richest man in America in the 1930s. All three
of his sons who survived WWII became U.S. senators and one of them (JFK)
became president. One could not ask for a greater display of “wealth
and power.”
Yet how rich and powerful are Joe Kennedy’s grandchildren? Are they
among the richest people in America? No. One generation removed from fabulous
wealth,
the combined assets of the entire Kennedy clan could probably be purchased
by one black woman (Oprah Winfrey) who came from the lower middle class.
What does this say about “class?” Does the word really have any meaning
if it doesn’t refer to a more or less permanent group of people?
The idea that “the rich” are like a feudal aristocracy that have money
and power because they “took the trouble to be born” and who use
force to prevent anyone else from succeeding is simply nonsense in a democratic
society
with a market economy.
Moreover, the terms rich and poor refer to what a person HAS at a particular
point in time. Yet, what a person has is the result of what he DOES. A much
more accurate description of reality would be to take into consideration
what a person
does over time and refer to the successful and the unsuccessful. The “haves” and
the “have nots” should be replaced by the “doers” and the “do
nots.”
Conventional Wisdom
This magazine is not political and, while it has definite ideas on political
economy, it does not endorse one candidate over another. This is written
before the election and will be published after the election is over. I don’t
know who will win and this article can not change any votes.
That said, the Democratic nominee has chosen class warfare as his theme—he
is for “the people” against “the rich and powerful.”
