Wednesday, September 19, 2012

Who Creates Wealth?

So, who actually creates wealth?

If you believe Ayn Rand, talented people, and only talented people, do. For her, talent and wealth are equivalent in a logical sense: if you have wealth, that's because you are talented and you deserve it. If you have talent, you'll be wealthy and rightly so.

And if by accident you are born into riches, but had no talent, soon enough you will lose them and become poor.
 
In other words, wealth and talent/creativity/hard work are at least close correlates.

The fact, however, is that only a tiny minority are wealthy and getting wealthier, while the majority either stay put where they are, or go backwards. From today's news:
"Technology titan Bill Gates has been listed by Forbes magazine as the wealthiest American for the 19th year in a row, with a fortune of USD66bn (GBP41bn), up USD7bn from last year.
"There was no change in the order of the top five richest from a year earlier.
"The total wealth of the US super-rich grew 13% to $1.7tn, with the top 400 worth an average USD400m more in 2012.
"The group's assets are worth as much as one eighth of the US economy, and grew much faster than the economy at large."
(See here. Emphasis added)

Why is it a few go places, while growing numbers of others go nowhere? Clearly, in Rand's view, because the latter lack talent/creativity or don't work hard enough. Gina Rinehart was recently quoted for saying as much:
"Australia's richest person, Gina Rinehart, has issued a stern rebuke to those jealous of the wealthy: start working harder and cut down on drinking, smoking and socialising." (See here)
Bottom line: if you have no wealth, you have no talent; then, at best, you are an honest but unthinking brute; at worst, a lazy moocher or a dishonest and envious looter:
"Have you ever looked for the root of production? Take a look at an electric generator and dare tell yourself that it was created by the muscular effort of unthinking brutes. Try to grow a seed of wheat without the knowledge left to you by men who had to discover it for the first time. (...)" (Ayn Rand, Atlas Shrugged. Francisco D'Anconia's speech. See here)
In any case, you depend on the wealth the wealthy few create and you should be grateful for whatever scraps fall from their table: you survive on that.

While the previous quotation describes a fictional monologue, one can find eerily reminiscent, if more subtly expressed views in real-life (emphasis added):
"(...) You cannot have a strong economy without profitable business because only profitable business can invest; only profitable business can employ and without investment and without employment there is no strength, no bonds of cohesion. The social fabric unravels and this is what the Prime Minister and the Treasurer don’t understand. Success is good. We should be grateful to people who put their houses on the line so that others can be employed". (Federal opposition leader, Tony Abbott. See here)
Moreover, even if the brute/moocher/looter bit is yet to become popular, the notion that wealth, financial success, and talent/hard work are inseparable is seldom disputed: "if you are so smart, why ain't you rich?"

Ironically, even those claiming to oppose these views end up endorsing them in a slightly weaker form (emphasis added):
"We are all wealth creators, and the inference that small business owners, union members, the low-paid, the poor, the old and the ill have no legitimate voice in our economic debates, and have no right to share in our national wealth, is one that I'll fight to my last breath." (Treasurer, Wayne Swan (Labor), here)

In the next few posts, as time permits, I will attempt to challenge those views.

In doing so, I will try to shed light on the question "who creates wealth" by identifying who do not create it, because (and in this Rand was right) not all of us are wealth creators. I will also suggest who do.

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