QUORA: ‘How does capitalism lead to the accumulation of wealth in the hands of the few?’

 QUORA: ‘How does capitalism lead to the accumulation of wealth in the hands of the few?’

I posted this answer:

It doesn’t. Capitalism leads to the opposite result — the spread of incredible wealth to “the masses.” Just travel through any commercial district. They are teeming with outlets full of goods, geared toward the average consumer. Who buys them? The “many.” Just look at your own life. It’s full of stuff produced by people you’ll never meet or will ever meet. Just look at the people around you. Same result.

Capitalism liberates the common man to voluntarily produce, trade, and gain wealth by protecting individual rights. This bannishes force from human relationships by the government protecting us from criminals, fraudsters, and foreign threats. It also protects us from the government becoming the criminal through a proper constitution that limits government power. The result is that wealth by force, fraud, or theft is banned, leaving only wealth by productive work and voluntary trade as the only option. Under Capitalism, wealth is gained by producing something that others value enough to pay you for. A person’s level of income and wealth is thus determined by how much value for how many people he produces. The greatest fortunes are earned by the people who produce the greatest value for the greatest number. But these fortunes of “the few” are held primarily in the form of monetary assets, such as stock, bonds, and savings. The actual wealth—the stuff—is held by consumers.

The Capitalist ideal, which today only exists in a form very diluted by statism, nonetheless led to The Great Enrichment—the explosive rise in the standards of living of the general populations of countries that adopted a decent amount of Capitalist individual liberty, such as rule of law and property rights. When you observe the world objectively, you’ll notice that the wealth spread throughout society in even semi-Capitalist nations dwarfs the combined Capitalist fortunes earned through the building of giant entrepreneurial enterprises like John D. Rockefeller's Standard Oil, Bill Gates’s Microsoft, Steve Job’s Apple, or Jeff Bazos’s Amazon. Who owns and consumes most of the cars, homes, computers, food, movie tickets, televisions, dishwashers, smart phones, gasoline, and other mass consumer goods? Well, the mass of ordinary people, not the few.

Far from leading to the accumulation of wealth in the hands of the few, Capitalism is actually the greatest wealth sharing social system -- in fact, the only peaceful wealth sharing system. All other systems are based on cronyism and theft that fosters fortunes by corruption and robbery taken from the many by wealthy aristocrats. Capitalism fosters only fortunes by work and trade—fortunes that raised the living standards of the people as they grew. If you favor ordinary citizens being able to accumulate wealth, then Capitalism is your social system.

Related Reading:

All Earned Wealth, No Matter How Big the Fortune, is Deserved Whether ‘Needed’ or Not

The "Hoarding" By the Rich Fosters Widespread Prosperity

"Trickle-Down Economics": Anti-Capitalists' Insulting Portrayal of the "Common Man"

QUORA *: 'How is capitalism good despite the fact that it creates higher and lower classes?'

QUORA: 'How is becoming a billionaire even possible, chronologically?'

Atlas Shrugged by Ayn Rand

Seattle’s ‘Poverty Excuse’ Policy is Driven by Hatred of Achievement and Envy, Not ‘Good Intentions’

One of the side effects of the 2020 Covid Pandemic was to trigger a movement to untether crime from consequences in some Leftist-governed cities. Brad Polumbo writes about one such city, Seattle. In a FEE article Why Seattle’s Proposed ‘Poverty Excuse’ for Crimes Would Destroy the City’s Economy, Polumbo writes that “This policy would basically give anyone with a good sob story a green light to violate property rights at will.” Indeed. Polumbo sights just one victim of the proposed “poverty excuse” policy:

Matthew Humphrey recently lost $4,000 worth of goods in a theft of his Seattle barbershop. Under a new proposal the Seattle City Council is considering this month, what happened to him wouldn’t even be a crime—if the thieves claimed they were driven by poverty, that is.

“I think it’s insane,” the victimized barber told a local news outlet. “It’s one of these well-intended concepts (of) we want to take care of people that can't take care of themselves. But what you are really doing is hurting other people." 

“Hurting other people” is the intention. This new “poverty excuse” policy lays bare the real motive behind the entire crusade against economic inequality—hatred of achievement and the individual virtues that lead to achievement. A policy like this is driven by that hatred. Destruction of people of virtue and achievement is the “intended concept.” They are the “other people” the barber speaks of. And it’s not “well-intended,” unless well-intended means nihilism.

First and foremost, this policy would obviously incentivize more crime and more theft.

First and foremost, it’s pointless to explain the consequences to the architects and supporters of this policy. They can’t fail to know where this must necessarily lead. Poverty is the natural state of man. Production and trade is the only way out. You can’t help “the poor” by destroying the non-poor—the producers and traders. If poverty justifies crime, it’s the end of production and trade, and man is reduced to a herd of predatory jungle animals. And that’s the whole point of a policy such as this. Karl Marx would approve. Civilized people will recognize this policy for the naked face of evil that it is, and fight this nihilism tooth and nail. And fighting back begins with not granting any benefit of the doubt to the perpetrators. The architects of the policy are not well-intentioned. They are not naive. They know full well what they are doing, and why. Mistakes of this magnitude are never made innocently.

The officially dubbed “poverty defense law,” which excuses the thieves and many other misdemeanor crimes from legal consequences if they claim poverty as their motive, never passed, to my knowledge. But just the fact that it was proposed and seriously debated in the city council of a major American city is an indication that we may be closer to chaos than we may have thought, at least in some cities.

Related Reading:

Hatred of Happiness, not Justice, Motivates the anti-Economic Inequality Crusader

QUORA *: ‘What makes someone a socialist?'

The Enemies of Charters Versus the Parents and Their Kids

QUORA: ‘How can libertarians justify wealth inequality since people are lucky for being born with natural talents as a result of the genetic lottery?’

 QUORA: ‘How can libertarians justify wealth inequality since people are lucky for being born with natural talents as a result of the genetic lottery?’

I posted this answer:

The question implies a false premise—that luck is the driver of economic achievement. So, I would counter this question with one of my own: How can economic Egalitarians justify forced wealth and income redistribution through coercive government policy—taxes and regulations—in the name of achieving wealth equality? 

Economic success is not based on a “genetic lottery” or luck. Natural talents don’t automatically transform magically into economic achievement, like winning some kind of lottery. The same goes for luck. It takes mental and physical effort and good character virtues, exercised over time, to turn whatever “luck” or “natural talents” one is born with into economic success. Plenty of people “win the genetic lottery,” but not all succeed. Why? Plenty of people get lucky breaks, but not all make something of that luck. Because. Some make bad choices, some are unmotivated, some simply misuse their natural endowments. Neither natural talents or luck are anywhere near not enough. They are a starting point, nothing more. Character and effort (and other factors like personal choice and relationships) vary from individual to individual, so wealth outcomes will vary. This human diversity leads to wealth inequality. That’s perfectly natural and morally just. 

Of course, it’s perfectly rational to question how a person achieved his wealth, but not that he has more wealth than the next person. Did he achieve it by honorable means, like work and trade, being respectful of other people’s property and liberty? Or did he appropriate it by force or fraud. Honorable people earn their wealth. Burglars forcibly take from others. But this is not a question of wealth inequality. It’s a question of justice. The fact is, there is only one valid way to reduce wealth inequality, if that is your focus—refuse to buy the wealthier person’s product. Any government policy to coercively reduce wealth inequality is legalized burglary.

If by “libertarian,” the questioner refers to advocates of free market capitalism, the libertarian has nothing to justify. Wealth inequality is not a flaw of Capitalism. It is a feature of Capitalism—that is, of a free society, because freedom allows every individual to advance as far as one’s talents, values, initiative, temperament, and moral character—and, yes, to some extent luck—will carry them. That’s one of the features that makes free market Capitalism the only moral social system.

The best resource for understanding wealth inequality in a free society that I can recommend is Equal Is Unfair: America's Misguided Fight Against Income Inequality by Don Watkins and Yaron Brook.

Related:

My QUORA answer to “How do capitalists justify the inequality/high disparity part of a capitalistic society that a socialistic system tends to stop?”

My QUORA answer to “ How do investment bankers justify earning 7 figures?”

Related Reading:

Free Market Champions Must Defend Economic Inequality

Billionaires' Likening of Today's Campaign Against the Rich to Nazi Germany is Frighteningly Close to the Mark

Hatred of Happiness, not Justice, Motivates the anti-Economic Inequality Crusader

Obama's Corrupt "Equality" Campaign and the 99/1 Premise

QUORA: ‘How do capitalists justify the inequality/high disparity part of a capitalistic society that a socialistic system tends to stop?’

QUORA: How do investment bankers justify earning 7 figures?

An Economic Egalitarian Acknowledges: Ending Income Inequality’ Begins With Legalized Theft.

The Justice of Income Inequality Under Capitalism by Ari Armstrong  for The Objective Standard

The Left’s Egalitarian Trap (and Why Republicans Must Not Step In)

Contra Obama’s Pandering to Cuba’s Dictator, Economic Inequality is America’s Strength and Equality is Cuba’s Tragedy

Star-Ledger Uses Socialist Rhetoric to Debunk Christie’s Socialist Accusations Against Biden

In a 4/27/21 editorial, Chris Christie’s lunacy about socialism, the New Jersey Star-Ledger Editorial Board (SLEB) wrote:

Gov. Chris Christie is telling friends that he may run for president in 2024, which explains why he’s now calling President Joe Biden a socialist for proposing a tax increase on the rich. “It’s nothing more than income redistribution,” Christie said during his regular appearance on ABC’s “This Week.” “It’s socialism!”

It’s a perfectly logical statement if his intention is to raise money from wealthy donors, or to tickle the fancy of the folks over at Fox News. And you can’t win the Republican presidential primary without doing this feather dance for them.

But to most Americans, that old dog won’t bark anymore. They can see with their own eyes that, that the top 1 percent now has 15 times the wealth of the bottom 50 percent combined, that the pandemic cut incomes for working people while creating 500 fresh new billionaires.

I want to focus on the last paragraph. 

“. . . the rich are capturing almost all the gains of economic growth these days.”

This is classic socialist rhetoric. The idea is that “society” creates economic growth, and that the wealth from that growth is a social (or tribal) product, not a result of individual productiveness, and that whatever wealth someone has is simply “captured” from that pile of tribal wealth. But “societies” don’t create wealth. Society is just a number of individuals, and only individuals create wealth through their own productive efforts (with the aid of free trade). The sentiment that informs that quote is the savage’s (or socialist’s) view of wealth as a fixed given, in which the “distribution” of wealth is a zero-sum game. Of course, no one has ever explained how society’s wealth comes about if no individual member actually produces wealth. A society in which its members go around capturing wealth is a primitive hunter-gatherer society, not a modern industrial one. But that rhetoric serves to disconnect producers from recognition, for political purposes.

“. . . the top 1 percent now has 15 times the wealth of the bottom 50 percent combined.”

This is a classic bate-and-switch. What the SLEB doesn’t want you to see with your own eyes is that wealth is not money, or that money is not net worth. Money is a means of the exchange of wealth, not actual wealth. Net worth is measured in dollars, but is not actual money. So, yes, the richest people have a high net worth, which is held in the form of stock in productive companies. As to actual wealth -- that is, stuff -- the wealth of the top 1% is an inconsequential pittance compared to what others hold. 

 

For example, the bottom 50% of households in America encompasses all of those earning less than about $75,000 per year. That group owns roughly half of all autos in America. Even if the top 1% owned all of the other autos, its a 1 -1 ratio, not 15 - 1 in favor of the top %. But hold on. What about the people in the 51 - 99%? Over $500,000, that’s how much. If you add in people earning up to $150,000, the auto ownership ration jumps to 91.6%. That leaves the income group earning over $150,000 with ownership of 8.4% of all autos. If you subtract people earning between $150,000 and $500,000, the percentage of auto ownership of the top 1% shrivels to an almost irrelevant percentage.

You can play this game with cell phones, homes, food, central heating, running water, air conditioning, and any other mass-market category of wealth ad infinitum, and come up with the same observation. The vast bulk of the wealth created by “the economy” is in the hands of the ordinary people. 

As to that net worth of the top 1%, most of it is held in stock, as I said. So the vast majority of the net worth of the richest people represents productive power, both as a measure of wealth created for “the masses” and of investors’ estimate of future production of wealth for “the masses,” including the bottom 50%. 

That “. . . the top 1 percent now has 15 times the wealth of the bottom 50 percent combined” is plain for “most Americans . . . [to] see with their own eyes” is a fantasy or deliberate lie perpetrated by socialists like the SLEB. You can see why Leftists would want to obfuscate the concepts of wealth, money, and net worth. It feeds their desperation to paint the American economy, and Capitalism (to the shriveling extent we still have it) as fundamentally unfair. But the act is, the wealth-filled lives we 99% dwellers enjoy is a direct corollary of the freedom of the most successful entrepreneurs -- the 1% --to build fortunes building companies that supply all of the mass-market wealth we hold, not to mention the jobs they provide.

Finally, “. . .  that the pandemic cut incomes for working people while creating 500 fresh new billionaires.”

The pandemic was not the main culprit that “cut incomes for working people.” That honor goes to the politicians’ draconian lock-down orders. That said, it was only those “working people” who lost jobs who had the incomes cut. By a 2-1 margin, Americans said they were either better off or the same financially. And as for those 500 “new billionaires,” keep in mind that many were the result of businesses that flourished as the pandemic economy shifted, saving us from a much worse economic catastrophe. Who benefitted? Working people. And remember that retirement accounts of tens of millions of ordinary savers also rose as the stock market soared. All of that aside, my answer is, So what? 

The upshot is that you need to take Leftists with a huge grain of salt. Truth is not their strength.

Related Reading:

Inequality Has Surged Since 1989, but the Lifestyle Gap Has Shrunk by John Tamny for FEE

QUORA: 'How is becoming a billionaire even possible, chronologically?'

From ‘You Didn’t Build That’ to ‘The Nation's Wealth’

All Earned Wealth, No Matter How Big the Fortune, is Deserved Whether ‘Needed’ or Not

Oxfam Attacks Prosperity, Part 1

Oxfam Attacks Prosperity, Part 2

How is it Possible that ‘1% control over 95% of the wealth?’ It’s Not, and They Don’t.

Related Viewing:

"The Unrelenting Beauty of Wealth Inequality" by John Tamny

QUORA *: ‘Does capitalism reinforce or lessen the separation of classes?’

QUORA *: ‘Does capitalism reinforce or lessen the separation of classes?’

I posted this answer:

There are no classes in a capitalist--that is, fully free--society. No one is locked into a caste from which he cannot escape. Under capitalism, the rights of all individuals to live peacefully--to take whatever actions economically and intellectually one deems necessary to the furtherance of one's well-being--are fully protected by the government. The only condition of this freedom is to respect the same rights of others to live by their judgement, and to deal with others only on a voluntary, consensual basis--or peacefully go their separate ways, agreeing to live and let live. This is accomplished by banning aggressive (or intiatory) force from human relationships, including relations between private citizens and government officials.

Of course, given the individual diversity of humanity in terms of ability, ambition, interests, moral character, personal circumstances, and so on, there will be a wide diversity of individual economic and social outcomes. But that is the natural consequence of a free society. But no one is preordained or “locked in” to any particular outcome. Thus, there are no classes under capitalism.

Related Reading:

QUORA: ‘How do capitalists justify the inequality/high disparity part of a capitalistic society that a socialistic system tends to stop?’

QUORA: 'Can certain forms of capitalism be made to work for the people instead of just the elite?'

QUORA*: ‘Is it fair to claim that capitalism does not create better lives, but simply shifts the suffering somewhere else?’

QUORA: 'Why do people think capitalism is ethical?'

QUORA *: 'How is capitalism good despite the fact that it creates higher and lower classes?'

QUORA: '[W]hy do we ignore all the examples of capitalism failing, like the major divide between the wealthy and the poor in the US?'

QUORA: ‘Given that I live in a capitalist society, how can I avoid having my labor exploited?’

* [Quora is a social media website founded by two former Facebook employees. According to Wikipedia:

Quora is a question-and-answer website where questions are created, answered, edited and organized by its community of users. The company was founded in June 2009, and the website was made available to the public on June 21, 2010.[3]Quora aggregates questions and answers to topics. Users can collaborate by editing questions and suggesting edits to other users' answers.[4]

You can also reply to other users’ answers.]

An Economic Egalitarian Acknowledges: Ending Income Inequality’ Begins With Legalized Theft.

A letter published in the New Jersey Star-Ledger on 9/21/20 under the heading Millionaires Tax, Rebate have Kennedy-like Vibe makes explicit the horrid consequences of the war on economic inequality. In support of NJ Governor Phil Murphy’s proposed “millionaires tax”, which increases by 2% the income tax rate on incomes over $1 million, to fund $500 handouts to lower/middle class families defined as “households in the state with income below $150,000 and at least one child,” Robert R. Salman wrote:

In keeping with . . . [what] John F. Kennedy said in his 1961 inaugural address] . . .,  "If a free society cannot help the many who are poor, it cannot save the few who are rich," Gov. Phil Murphy and Democrat legislative leaders have agreed to provide New Jersey with a true millionaires tax.

This new tax will also attack the scourge of income inequality by providing relief to certain middle- and lower- income families. 

Taking one person’s money at gunpoint, even if giving the loot to another, is theft. Income inequality is a natural and just consequence of an economically and politically free society. In a civil society, theft, not personal achievement, is the scourge. Salman inverts this principle of civil society, claiming that personal achievement is the scourge, and theft is virtuous. Salman’s moral perversity is stunning.

But this is economic egalitarianism. Cut through all of the posturing against income inequality, and you find that no argument has ever been advanced to explain why it is wrong or unjust or unfair or harmful for people to achieve at different levels. 

Salman clearly demonstrates that “fixing” the non-problem of income inequality begins with redistributive theft, and in the end no one’s income is safe from it. Today it’s an assault on incomes over $1 million. No amount of rationalization, like “it only affects a tiny minority who can easily afford the extra tax,” can change the fact that there is nothing to prevent the $1 million threshold from being ratcheted down. The principle involved, like all principles, is open-ended. Under the principle that income inequality is a “scourge,” everyone has an automatic claim on anyone with higher income, and can legitimately use the government’s legal, i.e., gun-backed, apparatus to seize the more affluents’ wealth in the name of income equality. The flip side is that no one is safe as long as there are others who make less, and who in turn can claim a portion of his wealth via armed government agents as “hired guns.” 

It starts with the “top 0.1%.” But there is nothing to prevent the 0.1% from morphing into the 1%, then the 10%, then the 25%, and so on and so on. There is no logical limit to the downward pull, a downward pull that ultimately must, by definition, end in universal poverty, as every communist state has demonstrated. And as communist states like Soviet Russia, Red China, Pol Pot’s Cambodia, and Castro’s Cuba amply demonstrate, what begins with theft often ends with murder.

How this redistributive tax will “save the few who are rich,” or any of us who achieve more than the next guy, defies logic. There is no moral or economic justification for any government program to coercively “remedy” income inequality, because there is nothing inherently wrong with income inequality--not when free markets and free trade are the source of the inequality. Greed and/or envy—cutting down the more successful because they are successful—is the real motive of anyone who ever preached against “the scourge of income inequality.” 

Related Reading:

Free Market Champions Must Defend Economic Inequality

Billionaires' Likening of Today's Campaign Against the Rich to Nazi Germany is Frightenly Close to the Mark

The Justice of Income Inequality Under Capitalism by Ari Armstrong  for The Objective Standard

The Left’s Egalitarian Trap (and Why Republicans Must Not Step In)

The Justice of Income Inequality Under Capitalism Ari Armstrong  for The Objective Standard

Laughing Joe’s Egalitarian Aim Ari Armstrong  for The Objective Standard

Equal Is Unfair: America's Misguided Fight Against Income Inequality—by Don Watkins and Yaron Brook

Contra Obama’s Pandering to Cuba’s Dictator, Economic Inequality is America’s Strength and Equality is Cuba’s Tragedy

QUORA: ‘What is the distribution of wealth in socialist countries vs. capitalist countries?’

 QUORA **: ‘What is the distribution of wealth in socialist countries vs. capitalist countries?’

I posted this answer:

Under socialism*, the government has first claim on all wealth, and can seize it from those who earned it, in whole or in part, and redistribute it as it sees fit. The distribution of wealth is thus determined by coercive governmental means, as determined by political considerations.

Under capitalism, wealth remains in the hands of the people who earn it through their own productive work, in whatever quantity they earn it or otherwise acquire it honorably, based on the moral principle of property rights, secured by the government. To the extent wealth is redistributed, it is through strictly voluntary means, such as trade, charity, inheritance, etc. The distribution of wealth is what it is as determined by the cumulative sum of all voluntary transactions, and is of no concern to the government.

Most countries today are mixed economies—part capitalist, part socialist. So the distribution of wealth is determined partly by voluntary private choice, and partly by coercive governmental policy.

* [I’m assuming that the question refers to state, or political, socialism, not voluntary socialism. See my essay Criminal Socialism vs. a Free Society for clarification]

Related Reading:

Socialism vs. Welfare Statism: Why These Terms Matter

QUORA: 'How is becoming a billionaire even possible, chronologically?'

Equal Is Unfair: America's Misguided Fight Against Income Inequality—Don Watkins and Yaron Brook

QUORA: ‘Is capitalism voluntary?’

A Socialist Confirms that the Basics of ‘True’ Socialism is Totalitarianism

QUORA *: ‘What makes someone a socialist?'

QUORA: ‘How do capitalists justify the inequality/high disparity part of a capitalistic society that a socialistic system tends to stop?’

QUORA: 'Can certain forms of capitalism be made to work for the people instead of just the elite?'

QUORA *: 'How is capitalism good despite the fact that it creates higher and lower classes?'

QUORA: '[W]hy do we ignore all the examples of capitalism failing, like the major divide between the wealthy and the poor in the US?'

QUORA: ‘Given that I live in a capitalist society, how can I avoid having my labor exploited?’

** [Quora is a social media website founded by two former Facebook employees. According to Wikipedia:

Quora is a question-and-answer website where questions are created, answered, edited and organized by its community of users. The company was founded in June 2009, and the website was made available to the public on June 21, 2010.[3]Quora aggregates questions and answers to topics. Users can collaborate by editing questions and suggesting edits to other users' answers.[4]

You can also reply to other users’ answers.]