We hear a lot of sneers directed at the rich. Like “the 1
per cent,” “greedy” or “fat cats.” Today, I’ll ask: To what extent do the rich deserve
these insults? Then, I’ll look at poverty, and ask: Why are so many people poor?
And how might the problem of undeserved poverty be solved?
First, is being “rich” a relative or an absolute thing?
Were, for example, the Roman emperors rich? At one level, they were indeed rich;
they had far more money and resources than the people around them. At another
level, because of economic expansion over the centuries, many Western people
today can afford things the Roman emperors could not have dreamed of. Beef from
Argentina, bacon from Denmark, wine from Chile, or out-of-season fruit from
Morocco, for example. So, while absolute standard of living is important in
determining whether or not someone is “rich,” it’s also necessary to look at what
they enjoy relative to those around them.
I’ll briefly re-cap the economic fundamentals. It is natural
for convivial human beings to create well-being. That is, to deliver what
others are voluntarily willing to pay for. There are many ways to do this;
every one of us must find the way or ways that best suits us. To support this
vital function, and to encourage it to continue, a framework is necessary, in
which each individual will receive just rewards in exchange for his or her skills
and efforts.
In an earlier essay I identified four things this framework
must provide. First, sound money. Second, property rights. Third, a system which
implements objective, individual justice; that is, the condition in which each
individual is treated, in the round and as far as practicable, as he or she
treats others. And fourth, a free market, in which there are no arbitrary
barriers or obstacles to who may trade and with whom.
There is, however, a fifth condition necessary before people
can flourish economically; and that is a negative condition. Unlike today, there
must be no privileged political class, that has the power to bleed individuals
and the economy, and to use the proceeds for their own selfish gain, to enrich
their supporters and cronies, or to fund their pet – and often nefarious –
projects.
So, how can people become rich, or at least comfortably off?
There are several ways. First, and very much foremost, by earning it. That is, by
creating wealth through honest work and business in the free market. Not only
is this by far the most praiseworthy means of building personal wealth; but it’s
also the one which is natural for convivial human beings. In a free market with
justice, good people can fully enjoy the well-being, which they have justly
earned through delivering what others are voluntarily willing to pay for.
Unfortunately, the rapacious political classes and their cronies
make it forever harder and harder for people to reap the rewards they deserve
for their good work. They see the profit from honest business – that is, the
excess of the value produced for others over the costs of producing that value
– as a bad thing, not the unmitigated good which it really is. They seek to
re-direct as much of that profit as they can to themselves, and to their
cronies and supporters. To make things worse, many new business ventures today
fail before they ever really get going. And for professionals (like me) who
have developed strong and saleable skills, it’s worse yet; we are denied access
to the market by bad, political “laws” that favour big companies over small
ones.
A second way to get rich is through luck. For example, by
inheriting the millions that Daddy earned, or by winning a big lottery prize. There
is nothing wrong with these; but for obvious reasons, very few get rich in such
ways. A third way to get rich is through canny investment; by providing
resources to people who will use them well, in exchange for a share of the
profits. The problem here is, that you must be already quite well off in order
to do this at all.
Moving down the scale, another way to bring in money – often
in large quantities – is to suck wealth out of the system like a parasite. For
example, through asset stripping of companies, or through becoming adept at
corporate politics. Further down again is scheming, gaming the system to your
own advantage. For example, accepting subsidies, or lobbying for advantages or
to harm your competitors. Then there is the criminal means; such as theft,
fraud, intimidation and violence, as practiced by organizations like the Mafia.
And at the very bottom of the scale is what Franz Oppenheimer called the “political
means,” in essence, legalized robbery.
It’s plain from all this that – luck aside – it is extremely
hard for anyone to become rich without either already being rich, or taking money
from others by means parasitic, criminal or political. Thus, sneers directed at
the rich are entirely justified, if their riches have been acquired by such
means. Meanwhile, those who deserve
to be comfortably off, or even to become rich, are drained of their earnings and
life-chances by the criminal political class and their parasites and cronies. Further,
these good people are often the targets of hatred and slurs from those that are
draining them dry. So the rich get richer, the poor don’t get any better
off, and those in the middle get screwed.
The opposite of rich is poor. And like riches, poverty has
both absolute and relative aspects. Clearly, in those Western countries which
have had a history of relative economic freedom, most people are better off
than those in third world countries with no such history. This is not
surprising; for social structures, that are based on political power and
cronyism rather than on the free market, virtually always result in a few rich
and very many poor.
There are many reasons why individuals are, or become, poor.
But all of them can, I think, be put into one of four categories. One, lack of
access to the free market. Two, lack of ability to create wealth or well-being.
Three, lack of just reward. And four, debt.
Lack of access to the free market can be due to a variety of
causes. For example: Wars or political oppression. Regulatory burden, such as
business licensing, or bad laws made to favour some economic actors over
others. Tariffs, prohibitions or sanctions. Anti-business culture. Or minimum
wage legislation, which prevents people not yet skilled enough to be worth the
minimum wage from getting jobs at all. It’s sobering to realize that most, if
not all, of these causes of lack of access to the free market are down to acts
of political governments.
As to lack of ability to create wealth, there are two main
groups of causes. First, things which are the individual’s own fault. For
example, if they’re too lazy or too dishonest to use Franz Oppenheimer’s “economic
means,” that is, honest work and fair exchange. And second, things which are
no-one’s fault, like accident, illness or disability.
Lack of just reward can sometimes be caused by exploitation
of the individual, for example by abusive management or by criminals. But more
often, it’s caused by political action. For example, by heavy taxation. Or by deliberate
currency inflation, making it impossible for people’s savings to keep pace with
ever rising prices. Or by a dishonest, unstable banking and financial system.
Or by a lack of respect for property rights.
Lastly, debt can be a self-caused source of poverty, such as
when individuals have spent on credit beyond their means, or done real damage
to others for which they must pay compensation. But debt for individuals can
also be brought about by the deliberate actions of others. For example,
overblown damages or maintenance payments imposed by a politicized legal
system. Or a corrupt, gluttonous state that seeks any means possible to force
its debts on to those it rules over.
To look for solutions to poverty, I’ll re-arrange the causes
I listed above according to who is at fault for each.
If an individual is poor through that individual’s own
fault, the remedy is in the individual’s own hands. No more need be said than:
reform your conduct, get earning, and if you’re still in debt, pull yourself
out of it.
If, however, individuals are poor through someone else’s
fault, then it must be the responsibility of those at fault to fix the problem.
In today’s system, those at fault – common criminals excepted – are almost
always the political class, their henchpersons or their corporate cronies. But
the framework of justice, which I outlined above, would solve the great
majority of these problems. Removing political operators and their cronies from
positions of power and privilege, bringing them to justice as they deserve, and
making them compensate their victims, would go a long way towards achieving
this. And the combination of sound money, freedom of trade, property rights and
objective justice will then be able to fix the problem for good.
Where individuals’ poverty is no-one’s fault, then it is
appropriate to set up systems of insurance or mutual aid. Such schemes existed
in the 19th century, for example the friendly societies. But they
were elbowed out by politicized welfare states.
Welfare is a large subject, which demands an essay in
itself. But in the framework of justice
I described, re-vitalization of private welfare schemes is one of three
elements which I think can help to cure poverty. The second is removal of
disincentives to saving for the future. And the third is non-politicized means
of education and training for whatever skills are in demand. These elements
together should be enough to ensure that no-one becomes poor through no fault
of their own. But even so, voluntary charity is always available as a final
back-stop.
To sum up
Today, a rapacious political class makes it far harder than
it ought to be for people who deserve to be comfortably off, or even rich, to
get what they deserve. Instead, good people are ripped off, and the benefits go
to the state and its political class, and their cronies and supporters. The
rich get richer, the poor don’t get any better off, and those in the middle get
screwed.
Many of those, who today are rich, have not earned their
riches, but got them through parasitism, cronyism or politics. Such individuals
fully deserve all the sneers and slurs that we hear so often directed at “the
rich.”
Undeserved poverty is often the fault of individuals and
groups other than the people who are made poor. Leaving aside laziness and
dishonesty, most poverty is caused by the acts of political governments and
their parasites and cronies.
The problem of undeserved poverty can be solved by a
combination of the following: Sound money. Property rights. Objective justice.
The free market. Removal of the political class and their cronies from their
positions of power and privilege, and bringing them to justice. Removal of
disincentives to saving. Re-vitalization of private systems of insurance and
mutual aid. And de-politicized systems of education and training.
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