Wasted wealth

Much of the nation’s wealth is wasted on the wealthy, who, by hoarding it, prevent it from doing as much good as it could be doing [1]. The wealthy get away with their hoarding because of the general acceptance of the mythology they use to justify their actions.

One myth is that the wealthy create jobs. Instead, it is an increased demand for goods and services that makes producers hire more people to meet that demand.

Another myth is that the wealthy create the nation’s wealth. On the contrary, they acquire it; it is the working people who actually produce goods and services, and who thus create the wealth that others acquire.

These myths are sometimes referred to as “supply-side economics” and “trickle-down economics”, the false idea that subsidizing production stimulates sales, and the equally false idea that hoarders of wealth tend to shower it upon the work force.

The truth is easy to understand: Money entering into the lower income brackets is mostly spent on goods and services. The producers of these goods and services turn around and spend much of it on the products they use as raw materials to produce their own goods and services, and so on “up” the economic hierarchy, each step adding value, until the wealth reaches the “top”.

In other words, the economy is most effectively stimulated from the lower end of the income scale, and money moves inexorably toward the top. Putting money in at the top, as with tax cuts or subsidies, does little to stimulate the economy; it merely gives money to people or companies that have done nothing to earn it.

Thus, we do not have a “trickle-down” economy, but rather a “bubble-up” economy. The mythology says otherwise because the truth has unpleasant implications for the wealthy: the nation’s wealth must not be hoarded, but must be redistributed “downward” if we wish to keep the economy healthy.

Downward redistribution is accomplished by taxing higher incomes and using the revenue to provide jobs, services, and infrastructures that support the general welfare of the entire nation [2].

Since it is inevitable that a few relatively powerful citizens will try to acquire and keep the wealth generated by the many, it is the duty of government to make sure that they are appropriately restrained [3]. Appropriate restraint is accomplished with taxation and redistribution.

The nation’s wealth should not be wasted on the few.

Notes

[1] Evidence of hoarding is clear:, on the one hand, a small class of enormously wealthy families, and on the other hand widespread poverty, unemployment, and infrastructure decay.

[2] It should be noted that when this taxation is appropriately progressive, it is never the case that a person is “poorer” in any realistic sense after taxes than before. Wealthy people do not become “un-wealthy”.

[3] Every society that is concerned about the welfare of its citizens must restrain some citizens for the benefit of the rest. Obviously, robbers and murderers must be restrained. Business, market, financial, and environmental regulations restrain the dishonest, the incompetent, and the unethical. And progressive taxation restrains the hoarders of the nation’s wealth.

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