Monday, January 26, 2015

Forbes vs. Oxfam

It’s hardly news at this point, but a new report from British anti-poverty charity Oxfam predicts that the world’s richest 1 percent will soon enough amass wealth that will be greater than half of the world’s total.  If so, those not among the 1 percent (including this writer) should all be giddy with excitement.

Simply put, when the wealth gap widens, the lifestyle gap shrinks.

What’s unfortunate about the report is that rather than celebrating the rewarding of enterprise on the way to global plenty, Oxfam Executive Director Winnie Byanyima seeks “urgent action” to reduce the inequality.  Adding her voice to a chorus of economists offering evidence-free assertions about inequality being the cause of poverty, Byanyima has said that “Failure to tackle inequality will set the fight against poverty back decades.” She adds that “The poor are hurt twice by rising inequality – they get a smaller share of the economic pie, and because extreme inequality hurts growth, there is less pie to be shared around.”

Readers can relax.  What Oxfam presumes about inequality is belied by simple history.  What we’ve actually seen is that inequality and the economic growth that lifts all boats go hand in hand.  Of course they do.

Readers can relax.  What Oxfam presumes about inequality is belied by simple history.  What we’ve actually seen is that inequality and the economic growth that lifts all boats go hand in hand.  Of course they do.

The above is true simply because wealth achieved in the capitalist system is more often than not a function of turning obscure luxuries into ubiquitous goods enjoyed by all.  The great Thomas Sowell has written that before John D. Rockefeller came along, evenings were rather bleak.  Sowell has noted that during the 19th century the phrase “the night cometh, when no man can work” was the sad truth.

Rockefeller not only made the kerosene that lit up formerly dark evenings a common, low-priced reality, but he eventually did the same with the fuel that powered automobiles.  Henry Ford got exceedingly rich by virtue to turning the once unimaginable-to-own luxury that was the car into something everyone could buy.

More modernly, Michael Dell earned his billions turning once expensive, slow and bulky computers into pedestrian gadgets that a growing number of people own several of, including ones that fit in our pockets thanks to people like the late Steve Jobs.  Bill Gates became the world’s richest man by virtue of designing software that rendered the computer easy to use, while Amazon’s Jeff Bezos made it possible to order the world’s plenty all with a tap on one’s computer, tablet, phone, and according to rumors, soon enough from the timepiece on one’s wrist.

The above examples are so unrelentingly true that it’s almost shooting fish in a barrel to mention them.  But they cannot be denied no matter one’s ideology, or dislike of achievement.  If Gates, Dell, Jobs and Bezos had been layabouts inequality would no doubt be less, but life would be much less enjoyable, and much more uncomfortable.  Thinking of music alone, Paul McCartney is said to be worth billions, but would the class warriors in our midst return the joy he and the Beatles brought the world just to reduce the wealth gap?

To state what is obvious, to look at the Forbes 400 is to see people who’ve made our lives better, healthier, more interesting, and more abundant. Patrick Soon-Shiong is worth billions for having advanced the search for a cure to cancer, Steven Spielberg is a member for having entertained millions, and possibly billions, while Mark Zuckerberg is on the list for connecting us to friends, ideas and conversations around the globe.

Oxfam presumes the need for “urgent action” to fix what isn’t a problem, but implicit in urgent action is that politicians will act as wealth allocators over the color, class and gender blind markets.  In short, what wealth gap worriers unwittingly seek is wealth destruction by politicians over the provision of always limited resources to the most talented.  Thinking about this yet again, readers need only ask themselves who has done more to better the world: Mitch McConnell, Harry Reid and Silvio Berlusconi, or Jerry Jones, Oprah Winfrey and Sergey Brin?

The answer to the above non-riddle stares us in the face every single day.  Politicians invariably get rich when they redistribute the wealth we create, but in ways that do the opposite of improving our lives.  Conversely, when market forces allocate the economy’s resources the wealth gap surely soars, but we’re all made better off.  Again, can any reader say with a straight face that life would be better if Jones, Winfrey and Brin were on the dole?

What can’t be forgotten is that great, inequality inducing fortunes are made and lives beautifully enhanced (in my upcoming book, Popular Economics, I argue that inequality is beautiful) when meritocratic markets are allocating capital instead of politicians.  In that case, we should cheer loudly assuming Oxfam is right.

Indeed, Oxfam says inequality is set to soar.  If so, this can only mean that the economy’s resources are set to be allocated a great deal more by market forces, and a great deal less by politicians.  Inequality is once again beautiful, and a signal of rising lifestyles for those not rich.

All that’s left is to wonder what the rich of the future will make commonplace for all? It says here private jets, self-driving cars and near-instantaneous recovery from knee injuries will be among the advances.  If so, inequality will soar.  Let’s hope.  It’s when the wealth gap is not increasing that we have reason to worry.

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Surprisingly, I see only one comment (by Sean Durkin). “Are YOU kidding? Is this really theonion.com? Anyone who swallows this propaganda is an idiot.”

More Forbes articles mentioning Oxfam

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