Monday, January 3, 2011

Let's Stop Demonizing the Rich

Once upon a time in America, there were some popular sayings. "It's none of your business," is one that we seem to have lost, and we need it back badly. How many times in the past few years have we heard rumblings about windfall profits, corporate profits, executive salaries, etc. Why should this matter? When did profits become evil? When did becoming rich become evil? This pseudo-socialistic ideal is spreading far, but before we go tarring and feathering, let's remind ourselves of the purpose of wealth accumulation.

Capital and finance are oft forgotten parts of the economy. When a factory wants to buy a new machine, where does it get the capital to finance such a project? The factory will get a loan. And who imparts these loans? Well either directly or indirectly, that would be people who save money. And who saves (and invests) the most money? The rich of course.

With more production, we get a lower average price of goods, higher real salaries, and in general a greater standard of life. All of this is possible because of capital. Without the rich, there is no capital in a free market. Well, there would be some capital from the lower income earners, but the bulk of capital in our economy comes from the rich. Instead of demonizing the rich, we should be thanking them for furnishing the jobs that we have.

But couldn't the government invest just as easily? Why not just tax the rich, allow the government to invest, and then distribute the profits amongst the people? The fact is, we should never trust the government with such a responsibility. Not only would it be very liable to corruption, it simply would not work. The man who lends his money has in his best interest the greatest net return on that money. He never wants to lose money. The government, on the other hand, may not have that as its highest goal. Furthermore, it is slightly less concerned with earning a profit. The man who lends could lose everything if the investment does not succeed. What will happen to the government bureaucrat who does the same thing with that money? Probably not much, he has a secure salary. So then the rich who have an interest in keeping their money will be the best investors. The best investments help all of us.

So before we get mad about record profits and executive payouts, let's realize the function that the rich serve. Sure, get mad at profits that are unjustly earned (such as by sweetheart deals with the government), but the honest businessman that becomes rich by his work should be thanked. Without capital, we would still be peasants just barely avoiding starvation our entire lives. Thankfully we have developed and can live a relatively opulent lifestyle. Wealth accumulation has made life enjoyable and not just laborious.

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