Where Does Wealth Come From?

Over at the National Review, Jonah Goldberg is waxing philosophical about the tax bill and contrasting America with Venezuela. In his essay he takes on the Rawlsian thought experiment of the “original position,” imagining a disembodied soul waiting to be born.

Goldberg thinks that such a soul should really choose to be born right here, right now in the good ole US of A because we are such a great capitalist country and we know how to produce wealth.

Goldberg says, “But if you recognize that humans create wealth with their brains and their industry and that it therefore belongs to them, you’ll be a little more humble about the state’s ‘right’ to take as much as it wants to spend how it wants. Human ingenuity is the engine of wealth creation, and there is no other.”

His argument is a mix of sensible commitment to the foundations of Western liberalism…and a healthy dose of naïveté.

Yes, ingenuity produces wealth, so does good old fashioned hard work. A culture that does not value these qualities is not with its salt.

But it is not the only way wealth is created. Not by a long shot.

For one thing, his assertion that there is “no other” factor is fanciful. Wealth begets wealth all on its own in 21st century America. If I already had a few million dollars, I could just put it in the market and let it ride, living quite nicely for all my days off the churning capitalist engine of Wall Street.

I suppose Goldberg’s answer would be that I’d still be generating wealth from good ole human ingenuity–just not my own.

Exactly. Not my own. There’s the rub.

Goldberg’s idolatry toward capital rivals Ayn Rand’s. But just as her novels crafted a fantasy world to make the capitalist class mythic heroes, Goldberg’s simplistic rendering ignores reality–mostly by ignoring the contribution of others, of the working class and middle class, to the creation of wealth. Not every wealthy person sits atop wealth they created solely through their own labor and genius.

Take Jeff Bezos. Now the richest man alive. Good for him. If you look at his story, you’ll see a man with a vision to transform retail. That vision has paid off.

Goldberg would say that he deserves to be rich.

And yeah, he does.

But does he deserve to be that rich? How is it that he came to control so much of the wealth his company has produced? It was not, after all, a sole proprietorship. Bezos was not burning the midnight oil packing all those smiling brown boxes himself. It took thousands of people working together to create his empire. What’s more, it took a whole landscape of infrastructure and culture to allow him to accrue this wealth on behalf of Amazon.

Wealth is not the inevitable byproduct of ingenuity. You don’t just input your genius into a machine and POOF! out comes your fortune. Wealth flows through a system and right now, the way that system channels wealth is skewed.

Here’s the crux (and I’ve said this before). If it was only ingenuity and hard work that dictated how wealth is created and who gets it, then something interesting has happened in the world since the 1970s:

The wealthy have gotten much, much more ingenious and are working much, much harder.

Inequality is the bugaboo for people like Goldberg, but they won’t talk about it. In their world view, wealth is the straightforward reward for hard work, oh and “ingenuity,” nothing more. But for over a generation now, that wealth is becoming increasingly concentrated in a few hands. So how can they account for this?

The simple answer is that they can’t and don’t. Republicans largely ignore the issue of inequality. Partly because their plutocratic donors don’t want them to, but more so because it represents a clear a challenge to their world view. CEO pay, for example, has grown 930% since 1978. You’re seeing that right. Not 93%. Nine hundred and thirty. As a ratio to average worker pay, the average CEO now makes 271 times as much. That’s up from CEOs earning around twenty times what average workers made back in the 70s. Mr. Goldberg, are today’s CEOs really more than ten times more ingenious than in the past? If not, how can you account for this inequality? Whence comes this massive concentration of wealth?

It is not just the product of hard work or ingenuity–unless you mean the ingenuity to rig the entire economic system to screw over workers and benefit the investor class.

Sorry, Mr. Goldberg, there is another way to accumulate wealth. You can design an economy with systemic channels of wealth that invariably favor supply-side factors like capital and grant the wealthy disproportionate access and influence to politicians, and you can refrain from taxing huge investments in any meaningful way to allow existing wealth to grow and grow without limit.

So, for your hypothetical floating soul out there in the aether, it would be a good time to be born here in 21st century America…if you were sure you were going to be born rich.

Because the rich are only getting richer,

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