Some health professionals say we Americans eat too much red meat but not enough fish or poultry. Others say we eat too much red meat and too much poultry. Most agree that we don’t eat enough fish. You don’t need to hear from the beef, fish, pork or poultry producers to know where they stand on such matters. The influence of self-interest is as predictable as it is powerful. We’d do well to remember that applies to all human endeavors.
Our government’s economic experts come from money and it’s to money that they return. If they haven’t already been on the payroll of Goldman Sachs or the like when they begin their public service, you can bet your bottom dollar they’re headed that way when they’re done with it. We need to keep that in mind when they speak to us about our economy. They aren’t objective observers any more than those they ultimately serve. They have a vested interest in maintaining the status quo, the continuing narrowing of the distribution of wealth. The Great Recession and our government’s bailing out the perpetrators at our expense were clear evidence of that.
The reasoning behind the bailouts was that some companies are too big to be allowed to fail. If they are in fact too big to be allowed to fail then they are too big to be allowed to exist. There is no place in a fair and free market for companies that don’t have obey its rules to compete in it. Why didn’t our government just let those companies die natural, well deserved deaths and reimburse their depositors? How can it be wrong to let a tiny number of super-wealthy companies fail but right to let a great number of smaller companies and millions of families suffer all the consequences and bear all the costs? It’s outrageous that those responsible came away with all they made from defrauding the masses and had the companies they pilfered restored by their victims. The entire episode represents the worst kind of interference in the economy by our government on behalf of the super-wealthy. They dismantled the laws that had prevented it, failed to stop it when it was clearly happening and since bailing out those that caused it have done nothing to prevent it from happening again. They stepped in only to prevent the outcome that would have best served our collective interests, the redistribution of ill-gotten wealth.
The distribution of wealth influences how well capitalism works for us all. If everyone can afford to buy your product you’re going to sell twice as many as you would if only half as many people could afford it. For most products and services the biggest markets exist in populations at a point approaching completely even distribution of wealth (a Gini coefficient of 0) and the smallest markets exist at a point approaching no distribution (a Gini coefficient of 1). Paralleling the sizes of markets are the numbers of jobs required to support them. Bigger markets mean more jobs and less poverty. Smaller markets mean fewer jobs and more poverty.
As the distribution of wealth shifts, so does the distribution of labor. The more densely concentrated is wealth, the less work there is providing goods to fill the needs of the masses and the more work there is in providing services to indulge the whims of the wealthy. Since there are much fewer wealthy people than people in general, shifts from products to services of that nature mean still fewer jobs and more poverty. Then there’s the whole matter of manufacturing base. It isn’t prudent to become dependent on other countries for basic necessities.
The more narrowly wealth is distributed the more people lose access to goods and services for less obvious reasons. One of these is exclusionary pricing strategies. Let us say there is a patented medicine for a disease for which there are 100,000 sufferers and it costs the patent holder $5.00 per dose to manufacture and distribute it. The manufacturer determines that all sufferers would pay $5.00 per dose, 90% would pay $10.00, 50% would pay $50.00 and 2% would pay $2,000.00.
| Price | Customers | Gross | Cost | Profit |
| $5.00 | 100,000 | $500,000.00 | $500,000.00 | 0.00 |
| $10.00 | 90,000 | $900,000.00 | $450,000.00 | $450,000.00 |
| $50.00 | 50,000 | $2,500,000.00 | $250,000.00 | $2,250,000.00 |
| $2,000.00 | 2,000 | $4,000,000.00 | $10,000.00 | $3,990.000.00 |
Their most profitable marketing strategy is to exclude 98% of the people who need the medicine. The manufacturer has no financial incentive to serve anyone unable or unwilling to pay $2,000.00 per dose. What’s more, they have disincentives for selling to anyone else but the 2%. Small production quantities mean small production costs. Small facility, small workforce, small risk of law suits over discrimination, sexual harassment or injury, and so on. Fewer customers means less exposure to lawsuits from them as well. This type of pricing strategy works regardless of how wealth is distributed when a product or service is sheltered from competition, by things like patents or excessive licensing requirements, but it works for increasing numbers of products and services as more wealth becomes controlled by fewer people.
The more narrowly wealth is distributed, the less diverse the markets become. Diversity in demand follows diversity in participation. Were your total market 100 Alaskans it probably wouldn’t include any regular consumers of gamalost, limburger cheese, lutefisk or thousands of other products sustained largely by regional or cultural influences. Another reason distribution of wealth influences product diversity is that the greater the number of people with less than average purchasing power, the less cost effective it is to offer options for products that fill low-end mass market niches. You can witness this influence at your local grocery store where you are unlikely to see more than a few varieties of corn or potatoes though there are hundreds of varieties of each grown around the globe.
Naturally, all of these things are rejected by those who claim that we’re all better off as the rich get richer. A recently popular label for their theory is ‘growing the pie’. Its proponents assert that no one can be too rich, nor can wealth be too narrowly distributed, because, they say, wealthy people don’t just consume the economic pie, they create it. Among its many flaws is the ridiculous notion that infinite quantities of wealth can be produced from finite quantities of labor and raw materials, especially given that narrowing distribution of wealth means diminishing markets. What they are advancing isn’t capitalism, it’s consumerism and it isn’t sustainable.
In their typical presentation they attack their opponents more than their opponents’ arguments. You will find they typically portray their opponents as lazy and unethical people who would rather steal than work. They make no allowances for a host of other possibilities, not the least of which is that people perform all manner of work simply because they enjoy it. The balance of their argument is supposition. They presume that those who reject their claim do so because they consider the economy zero-sum game. They assume complete equivalence between the analogue and target of a common analogy (zero-sum game and a pie) and then assume that to prove there is a quality of the target not shared by the economy (an economy may grow, a pie does not) is to prove their opponents’ position is invalid. Finally they assume that it must then follow that their their own argument is valid. It reminds me of a scene in Monty Python’s The Holy Grail in which it is reasoned that witches are burned because they are made of wood, wood floats, ducks also float, and therefore a witch weighs the same as a duck.
What the ‘growing the pie’ crowd refuses to acknowledge is that ‘too rich’ isn’t just about wealth, it’s about power and influence. If within any system you have enough wealth to subvert its controls and bend it to your will, you are too rich. If you have enough wealth to determine the outcome of an election, despite the will of the majority, you are too rich. If you have enough wealth that your lawyers, your connections or your ability to successfully bribe persons of authority allows you to act with impunity, you are too rich.
That a wealthy person may also create wealth is irrelevant. Despots create wealth. Serial killers create wealth. That something creates wealth does not excuse it for all other things. That something creates wealth is also unremarkable. Drunken celebrities behaving foolishly in public create wealth. Rich heiresses choosing not to react to video cameras in their bedrooms create wealth. The creation of wealth is just a transition of something to a state of recognized value and it isn’t always for the better. Often wealth is created without regard to the true cost of the transition, as when forest is turned into tract housing or when an extraction process renders land unusable.
I’m not proposing that we start confiscating wealth to redistribute it. I am proposing that it is in our collective best interests to discourage and counteract the single-minded pursuit of wealth. I am also proposing that those of us of like mind start working together to exploit the opportunities created by modern realities to enrich the lives of the many instead of the few. It is logically and demonstrably better to make 10,000 people $1,000,000 richer than to make one person $10,000,000,000 richer. 10,000 people with $1,000,000 would buy tens of thousands of cars, TVs, saunas and so on. That does far more for us all than what any one person would buy, no matter how rich.
