The Wealth Redistribution Myth

Social justice, economic justice or wealth redistribution what ever term is useed the idea is the same. The myth is that through taxes the Government takes the wealth of the rich and redistributes that wealth to the poor to raise them out of poverty.

 

The idea of wealth redistribution is based on two false assumptions. 

• The total amount of wealth in the world is constant. One of the results of this assumption is the notion that becoming wealthy automatically means others become poor as a result.
• The rich just sit on their wealth such that it does nothing but make themselves comfortable.

The  reality is that the total amount of wealth is not constant because  the labor to turn raw materials into a product creates wealth that did not exist before. Furthermore since the people supplying that labor are paid they share in the wealth produced by their labor. Furthermore the rich do not just sit on their wealth leaving it in bins of money that they swim around in, they use it to buy things made by others and they invest it in one or more businesses thus providing work for others providing them with wealth they would not otherwise have.

 

Not only are these assumptions wrong but in practice most of the wealth taken in the name of wealth redistribution actually goes to those running the redistribution programs what portion the poor actually is just enough to keep them dependent on the system. If you doubt this look at the size of the salaries of bureaucrats some time. 

 

The final blow to this myth comes from look at the automate expression of the idea of wealth redistribution. If you took a population of people and confiscated all material wealth and then redistributed it equally to every one in area so that they all had an equal amount. If you then gave them the freedom to use it as they pleased with in a few years there would once again rich and poor they would not necessarily be the same people as before but the difference would still occur. This is the case because not every one would use their resources the same way. Some would blow their resources all on products the other would produce with their resources.

This is because material wealth is not the only form of wealth and no government can take away immaterial wealth. Every person as different abilities and they are a form immaterial wealth that one way or other can be used to acquire material wealth. The key is that we all have immaterial wealth and how we use that immaterial wealth often means more than what material wealth we start out with.

What is important is having the freedom to use your immaterial wealth to its greatest potential. If that freedom is taken away then that immaterial wealth gets wasted. Efforts to redistribute material wealth by force only encourage the squandering of peoples immaterial wealth making them poorer.

Myth Busted