Poverty Redistribution: Economics 101

politics_of_poverty

We hear a lot about “Wealth Redistribution”. I’m here to tell you, that is an inaccurate statement. You CANNOT redistribute wealth, and in trying to do so, all you do is spread the poverty. Hence, the term used should be changed to “Poverty Redistribution”.

 

The truth is, When you confiscate money from a producer, and hand it over to someone who produces nothing, the odds are very high that nothing will be done with it. This money will be spent either on bills or on a frivolous purchase of some sort. The odds are almost zero that it will be invested in anything that develops some sort of a return. Sure, even if it’s used on a flat panel TV or pair of Jordan’s, then that money is turned over into the economy. Stores are able to pay employees who then go out and spend that money again, and the cycle starts over again.

 

But what does a producer do with extra income? Usually, they put it toward something that makes even more income. Have you ever seen an episode of Shark Tank? The wealthy are often demonized, but here we have a shining example of the wealthy doing good. The premise is simple. People who have a small business they want to grow come to pitch the sharks in an attempt to get an investment. If they make a compelling case, they will usually get an offer. What does this mean? It means that the wealthy investor is now putting his money to work to help not only himself but the other person as well. Sounds pretty evil to me.

 

Okay, sure, there have been some glaring examples of corporate greed, and that makes the battle cry for “Tax the Rich” an easy sell to some, these instances are the exception to the rule, not the norm. Unfortunately, stories like Enron and others add fuel to that fire. These lies are easy to see through though, if you are only willing to look. It’s like any other story. The news media needs ratings, so they sensationalize the story to try and make their version of it sound better (or worse as is often the case) than the other guy’s. It’s sickening. Meanwhile, others are looked down upon, feared and reviled because of the actions of a few. Is that fair?

 

When one teenager gets a speeding ticket, to people protest that all teens should be banned from driving? When one restaurant has a health concern, where is the outrage trying to force all eating establishments to close their doors? So then why is it that one corporate executive is busted for shady business dealings and suddenly all business owners are the devil?

 

Martha Stewart is a prime example. People jumped on the hate bandwagon in droves when she was convicted of insider trading. She was a wealthy woman, and we all should have known they had to be ill gotten gains right? So where is the hate for Oprah? What about Barbara Walters? They are women who got wealthy from being on TV, so they must be evil personified too right?

 

So, back to the original point here. If you were to take the entire billion plus net worth of Oprah, and distribute it among the homeless population of her home city of Chicago, what would you expect to happen? It’s the same principle at work in the theory of what would happen if every dollar of net worth, world wide, were divided equally among the entire population. At that point, nobody would be wealthy, hence my original premise of “Poverty Redistribution” is supported, but there’s more to it than that. It is widely believed that within 5-10 years, the money would be distributed in a similar fashion as it was before the leveling.

 

No, it’s not a matter of greed, although in some cases it would be. The major driving force is determination. The people who got wealthy did so due to their efforts, not by accident. Therefore, it stands to reason that they would put forth a similar effort to get it back. Sure, you’d have a few who just needed that break, and would become wealthy where they were not previously. On the flip side, you’d have people who would take the opportunity and go live on an island or in a shack in the mountains somewhere and not worry about wealth. These are again, the exceptions, not the rules.

 

I will state it again. It is absolutely impossible to redistribute wealth. It has been tried. This country has tried it to varying degrees for over a half century. The USSR tried it. Much of Eastern Europe tried it. It does not work. It is a failed system. The free market leaves room for error, but the alternative leaves room only for oppression.