My brother thinks that wealth should be redistributed. When we object that this will make people less likely to work hard and make everyone poor in the end, he responds that those who want to work only for recognition will still work (a tiny, tiny, minority I’m sure) and that it would be better if everyone were poor and starving and equal, than if some were richer because the poor and starving won’t know what they’re missing.

WINTERY KNIGHT

A whole slew of people are linking to this article by famous economist Thomas Sowell.

Excerpt:

The history of the 20th century is full of examples of countries that set out to redistribute wealth and ended up redistributing poverty. The communist nations were a classic example, but by no means the only example.

In theory, confiscating the wealth of the more successful people ought to make the rest of the society more prosperous. But when the Soviet Union confiscated the wealth of successful farmers, food became scarce. As many people died of starvation under Stalin in the 1930s as died in Hitler’s Holocaust in the 1940s. [Professor Sowell is referring to the forced collectivization of the Ukraine.  If you want to inform yourself of the horrors thereof, I recommend  Robert Conquest, The Harvest of Sorrow: Soviet Collectivization and the Terror-Famine, Oxford UP, 1986.]

How can that be? It is not complicated…

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Tracy

I’m Tracy

4 thoughts on “”

  1. You’re mixing up wealth redistribution with income redistribution. Wealth is a stock and Income a flow, or in everyday terms wealth is what you have and income is what you get. You could have a lot of wealth but very little income (a massive chest of treasure buried under your lawn) or a lot of income but very little wealth (a lawyer who spends everything they earn) If you take away people’s income (e.g. their wages) of course they’ll stop working. If you took away some of their wealth (e.g. their savings) they’d keep working because the amount they actually get from that hasn’t changed. The only thing they’d be likely to cut down on is saving.

    Redistributing wealth could actually make people work harder, or at least more efficiently. You need a stock of money to provide things like education or physical capital (such as machinery). These are well known to raise the productivity of workers, much more than if the same block of wealth were in the form of some millionaire’s back garden swimming pool..

    Even your income question is terribly oversimplified. You’re assuming that the only motivation people would have to work is recognition. Some genuinely work to help others, some work because they enjoy working, and ¡many would work for money! After all, you don’t have to knock their wage down to 0. Would some lawyer really stop working because they only get 80,000 a year instead of 100,000 after a tax rise? There’s actually a concept in economics that the labour supply curve is backward bending; as people get really high salaries they start to work less. They already have plenty of money but still only 24 hours in a day.
    At the same time, you’re assuming that you just give the confiscated income away to those less well off. There are many alternatives to consider. For example you could make the extra money conditional on working, essentially paying a chunk of newly employed people’s wages out of the tax pot instead of the company’s profit. That would make companies more willing to employ extra staff, especially young or inexperienced staff available under said program and give them experience in the workplace, while ensuring that those individuals have a decent amount to live on during the transition period into more competent workers.

    In short while a superficial look at the situation seems to suggest income redistribution isn’t a good move, you have to look a little bit harder at the range of options and how it affects different groups of people.

    1. After reading that I’m thoroughly confused! I can’t figure out if you’re criticizing my view, or my brother’s or Thomas Sowell’s especially since you wrote such a long reply to my two sentences.

      ” If you take away people’s income (e.g. their wages) of course they’ll stop working. If you took away some of their wealth (e.g. their savings) they’d keep working because the amount they actually get from that hasn’t changed. The only thing they’d be likely to cut down on is saving. ”

      I’m not quite sure about that. Wealth doesn’t fall from the sky. It comes from income. If I set apart a portion of my income as savings (what you call wealth) and it was taken from me, you have taken away my income, not just my wealth.

      Perhaps you’re just arguing for something that I haven’t disagreed with. The kind of redistribution that people like my brother propose is that kind in which any money made is taken by the government and divided equally among the populace, so that everyone has the same amount of money and we are therefore, ‘equal’. That is not taking 20,000 from someone who makes 100,000. That is (in and of itself) making hardwork more burdensome than it needs to be.

  2. “If I set apart a portion of my income as savings (what you call wealth) and it was taken from me, you have taken away my income, not just my wealth. ”
    No, I’ve taken away your wealth. You really do need to understand the difference. If a robber steals your car or a house fire burns up a bunch of your stuff, you lose wealth but your income remains the same (unless that wealth were somehow used to generate income, such as you hired out the car that was stolen). At the end of the month you’ll get the same amount in wages. Would you work less hard because your house was robbed, even if you could make the same amount as before the robbery?

    I don’t think that a system for complete income equality works, at least not on a secular national scale. (Some monasteries and other communes are a possible exception), but you mustn’t be trapped by an all or nothing approach. Yes, you could repeat the communist experiment. You could follow a pure capitalist path. Both have major problems, and a better option would be to examine the wide range of positions between them.
    One company that takes this seriously has imposed a rule that “No one in the organisation can earn more than nine times the salary of the lowest paid member of staff”. That’s not saying that the CEO has to have the same income as the janitor, but he can’t earn hundreds of times as much.

  3. All societies function through some wealth distribution. There are some third world countries that do not have this, but the state of the main populous is often terrible in them. Usually in modern world that is through income taxation. The government takes a persentage of income to redistribute it by building infrastructure and providing services. Sometimes those services include helping those who have lost their income by being unemployed to survive, by simply giving them money or helping the companies to hire them.

    If a society is in rapid growth there often is work for everyone, but when economic growth is slowing down then also the amount of unemployed grows. These are not people who are not willing to work, but most often quite the opposite. It is also in the interrest of the capitalist to have a labour reserve, to draw cheaper workforce from. If that reserve has no income from the society, they are desperate to work at any rate and as a result the price of work goes down. The gap between the poor and the rich grows and leads to higher crime rate, social unrest, or even revolutions.

    The main problem of communist countries was not that they had a wealth distribution system, but that they were terribly authoritarian nations.

    Here in northern Europe we have quite wide ranging system of “wealth distribution”. Even our conservative politicians are not against it, but more like arguing with our left about how to fund what we call a “wellfare society”. From time to time a company here threatens to leave for the third world countries where there is virtually no taxation and the labour is ridiculously cheap as there are no minimum wages there, most of them remain here. Why? Because the high taxes and “wealth distribution” provide a society where the crime rates are low and the general populous has a high standard of education wich provides the companies with quality workforce.

    I am not saying this is perfect, but even among the unemployed, who get a regular government allowance, there are very few people indeed who are not actively seeking for work. The problem is that active seeking does not provide more jobs than there are awailable.

    Is the purpose of the society to provide an opportunity for the minority of aggressive, talented or born rich people to satisfy their need for more wealth on the expence of the majority, or provide good income and equal opportunity for good life to as many people as possible? Could we face this challenge as humanity and not just as nationalistic societies?

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