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Disdain for the Wealthy

Jim says: One topic that seems to span parties, political persuasions, and even country allegiances is disdain for those who are “rich” (whom I assume is anyone who has twice as much wealth and/or income as the person complaining). Here in the United States there is currently talk of salary caps and other measures. When new taxes are talked about, they are progressive, and we are going to “get the rich” (or some such words).

I have never understood this, although I can agree no one is worth a salary of USD 300-400 million per year (current dollars) based solely on their mental or physical exertions (notice I am excluding investment income). Yet, I don’t think I or anyone else or any entity has the right to deny them this if it is in their contract—it is the fault of the contractee(s).

I am not going to try to cast all of those with large wealth as being kind and generous, but I will say the people I know that have been or are in this category are very decent human beings. I’ll not argue the subject on the merits of their character, for I think that is not important except in one little area I’ll bring up as I close below.

Let’s look at the wealthy for a moment. More importantly, let’s look at what they do with their money. I can only think of four things that the wealthy can do with their money that are beyond the things that normal working class people may be able to do. They can
   1. buy large quantities of discretionary goods and services,
   2. invest it,
   3. bequeath it to family members, and
   4. create endowments.

The purchase of discretionary goods and services creates jobs for the working class. Patek Philippe watches have to be made by somebody. The construction of large mansions require stonemasons, master craftspersons, interior designers, and so forth and so on. Goods and services require all sorts of employed people, in fact the mayor of Las Vegas was complaining to the White House last spring that the White House’s clamping down on corporate entertainment was costing jobs of working class people in Las Vegas.

Investments can do a number of things, all good for the economy. One wealthy person is currently investing in a renewable energy plant here in Georgia, a plant “rational” investors would perhaps not have attempted. Buying houses, land, or gold props up the price of these assets. Some wealthy people buy land and place it in wildlife conservation trusts, preserving it in perpetuity. One can even invest money in more businesses that create jobs for many — I have worked for a number of the wealthy that have done this when the easier and less risky path would have been to put their money in bonds and “clip coupons.” Daniel K. Ludwig invested close to USD 10 billion in building a pulp mill in the Amazon for the purpose of providing jobs for the indigenous people (this was before we all became “enlightened” about indigenous people and the Amazon).

It can be bequeathed to family members, who in turn can do all four of the items above all over again.

Finally, they can create endowments, and this is where, especially from the liberal point of view, criticism is so confusing to me. For in the case of long-term endowments, the subsequent trustees seem to move, after several generations, to some of the most liberal views possible. Do you think Alfred Nobel is happy with all the prize decisions that have been made and awarded in his name? Would Henry Ford be happy with the current work of the Ford Foundation? Do you think Andrew Carnegie would approve of all the performances in Carnegie Hall? Endowments, the evidence shows, largely move from a conservative view of the founder to the liberal view of the current times. Liberals ought to be delighted they can get their fingers on all this money carefully husbanded by those “nasty” captains of industry.

Then we must consider that accumulated wealth does not last. When Cornelius Vanderbilt died in 1877, if his estate could have been cashed out at going prices, it would have taken 1/20 of all money in circulation and demand deposits in the country to do so. Name me a living wealthy Vanderbilt today. I am sure there are some, but their percentage of the pie has been drastically reduced. The Forbes 400 list has dropouts and new entrants every year; the list of 25 years ago is barely recognizable today.

Now, there is one area, not in the four above, which can be harmful to society. When a wealthy person with evil intent wants to cause havoc, they have the means to hire others to do their dirty work (lawyers, assassins, you name it). But this could all be stopped if the recipients of this largess had any ethical or moral backbone themselves. It is the willingness of these underlings to accept payment to do evil deeds that I see as the root of this problem, not the wealthy themselves.

Criticism of the wealthy, when examined closely, can most often be attributed to the jealousy of the criticizer, not any condition or flaw in the wealthy themselves. The wealthy create jobs and we should be thankful for this.

Travis says: I agree with you that the populist-left and the populist-right are both guilty of stoking negative sentiments – greed and envy – in disparaging “the rich.” As long as someone plays by the rules, legally and ethically, then there is nothing wrong per se with individuals accumulating wealth.

However, I would draw a distinction between wealth and the pursuit thereof. If someone leads a virtuous life and gets rich along the way, great, but pursuing wealth for wealth’s sake causes a great deal of grief – in terms of family breakdown, crime, misallocation of resources, and other consequences. As George W. Bush’s favorite political philosopher said, “Woe to you who are rich, for you have received your consolation.” (Luke 6:24).

The reason why criticism of the wealthy resonates with citizens across the political spectrum is the common perception that many of the rich do not become so on merit but through manipulation. There are a few outright frauds – the Ken Lays and Bernard Madoffs – and many more that make great sums of money without providing anything of real value. Consider flash-traders on Wall Street. Paul Krugman laments that “high-frequency trading probably degrades the stock market’s function, because it’s a kind of tax on investors who lack access to those superfast computers – which means that the money Goldman spends on those computers has a negative effect on national wealth. As the great Stanford economist Kenneth Arrow put it in 1973, speculation based on private information imposes a “double social loss”: it uses up resources and undermines markets.

A society that values wealth over service, research, and art will see its best and brightest disproportionally enter fields of frivolity.

Ironically, your theme overlaps with the subject Ralph Nader’s recently published first novel, a 736-page tome titled “Only the Super-Rich Can Save Us!” The premise is that Warren Buffet and 16 other billionaires try “to become the driving force in America to organize and institutionalize the interests of the citizens of this troubled nation.” Nader’s fictional vision of “a practical utopia” rests on the premise that the very wealthy are best-positioned to challenge the status quo, if only they would. In this are echoes of President Kennedy (and the Gospel according to Luke): “of those to whom much is given, much is required.”

As I write, I sit in Forsyth County, Georgia, which supported John McCain at a 78.4% rate in the last election. My niece, who is 3 years old and doesn’t know any better, recently told a playmate that she liked Barack Obama. Her friend, who is 6, replied, “My daddy hates Obama.” “Why?” “Because he’s rich.”

The politics of this encounter are irrelevant, but the narrow context troubles me. On a global scale, anyone who can afford a home in my sister’s neighborhood (where the aforementioned conversation took place) are all doing quite well by American standards; in the developing world, they would be extravagantly, inconceivably rich; 3.14 billion people live on less than USD 2.50 per day.

As we celebrate Thanksgiving next week, I hope that we will be mindful of just how lucky most of us are.

I am concerned with how the rich exploit the poor, how the rich unconsciously buy goods with little thought for where they came from and the conditions under which they are made, and how possessions disrupt our relationships with others. These problems may be magnified for the super-rich, but they apply to you and me as well.

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