Skip to comments.How the Rich Make Us All Better Off
Posted on 05/11/2012 6:36:15 AM PDT by SeekAndFind
Sundays New York Times Magazine contained a controversial article about a former partner of Mitt Romneys at Bain Capital named Edward Conrad. Sounding a bit like the libertarian novelist Ayn Rand, Conrad argues, forcefully, that we are all better off because of rich people.
Rich people, Conrad says, do most of the saving and investing. They provide the capital that creates new businesses and industries, finances inventions and discoveries, and are willing to take many risks and lose a lot of money for every one that pays off spectacularly. If the rich didnt do these things, we would all be worse off.
Conrad concentrates on rich people as investors. But the wealthy also provide enormous benefits as consumers. Think of all the inventions of recent years that were enormously expensive when the first ones came on the market: personal computers, high definition televisions, cellular telephones, tablets, and so many others.
I still remember the first time I ever saw a mobile phone back in the 1980s. My friend Wayne Valis, a lobbyist, had one. It was the size of a car battery and had to be carried with a strap over his shoulder because it was so bulky and heavy. I dont think it was even a cellular phone, but a radio telephone. It undoubtedly cost several thousand dollars at the time, probably equivalent to about $10,000 today. Nevertheless, it was extraordinarily valuable to Wayne in his work to have instant contact with his office and clients back in the days of beepers and phone booths.
Today, of course, almost everyone has a cell phone. Basic ones with prepaid service cost less than $20. They are a Godsend to people in developing countries that would never have phone service if the only option was a land line. Fancy cell phones are like mini-computers with a staggering array of capabilities.
The point is that unless well-to-do people like my friend Wayne werent willing to pay exorbitant prices for early, primitive mobile phones, we wouldnt have cheap throw-away phones today. People like him effectively underwrote the enormous cost of creating the first cell phone not just the research and development and industrial capability of manufacturing one, but the enormous infrastructure of cell phone towers so that it can be used.
If you think about it, the same thing is true of every important technological development you can think of. The first person to have electricity in his home was undoubtedly a very rich person. Same goes for radio, television, microwave ovens, air conditioning and all kinds of other things that even poor people take for granted.
Economists have long recognized that conspicuous consumption by the wealthy served the beneficial social and economic purpose of creating initial markets for products that later became necessities of life used by everyone. As the economist Ludwig von Mises put it in his 1927 book, Liberalism:
The luxury of today is the necessity of tomorrow. Every advance first comes into being as the luxury of a few rich people, only to become, after a time, the indispensable necessity taken for granted by everyone. Luxury consumption provides industry with the stimulus to discover and introduce new things. It is one of the dynamic factors in our economy. To it we owe the progressive innovations by which the standard of living of all strata of the population has been gradually raised.
This fact is illustrated in a 2006 Pew study, which looked at a range of products and the extent to which they had gone from being luxuries to necessities. For example, air conditioning was considered to be a luxury by 72 percent of people in 1973, with only 26 percent saying it was a necessity. By 2006, those numbers were reversed, with 70 percent of people saying that air conditioning was a necessity and only 29 percent viewing it as a luxury. Between 1996 and 2006, microwave ovens went from being considered a luxury by 68 percent of people to being considered a necessity by 68 percent of people.
In his famous 1889 essay, Wealth, Andrew Carnegie, who sold his steel company in 1901 for the equivalent of $325 billion in todays dollars, agreed that the wealthy aided society both as investors and consumers. But at the same time, he said that the ownership of great wealth bestowed a heavy obligation on those with it.
Carnegie had no respect at all for those who merely inherited their wealth and simply sat on it; and he thought it was irresponsible for those who made great fortunes to leave them to those who didnt earn it. He believed strongly in an archaic concept known as noblesse oblige, which means that great privilege brings with it great responsibility.
Carnegie believed that not only should wealthy men leave little to their heirs, he also disdained those who left their fortunes to foundations, universities and such, viewing them as monuments to vanity. While the latter was better than the former, Carnegie felt that rich men ought to use the same skills that made them wealthy to properly dispose of their fortunes while they lived. The man who dies rich, he said, dies disgraced.
I think Carnegie would disagree strongly with Conrad, who appears to think that the responsibility of the rich man begins and ends with making a fortune. Sadly, far more rich people today appear to agree with Conrad than Carnegie.
Only in the sick, inverted mind of “Liberalism” is the Goose That Lays the Golden Eggs a villain.
The rich do some great things but we rely on them far too heavily. A man should be able to make his own way in life but its even harder for the little guy than it is for the big guy.
I totally agree. Oddly enough, "liberalism" used to mean the polar opposite of what it means today. It used to be associated with free markets and limited government. "Liberalism" comes from the latin "libor", meaning "free".
In his book Liberalism - In the Classical Tradition, Ludwig Von Meses discusses the luxury consumption of the rich paving the way for the average joe to enjoy technological advances. He cites examples like silverware and indoor plumbing, and ends with "...every man has his Chevy."
90% of people who want the government to "go after the rich" probably aren't thinking about the guy who runs the flower stand down on the corner (though 10% do want to send the capitalist running dog to a re-education camp, especially if he is not a protected minority) but he's the one the laws are going to be written to target because he can't afford to buy himself political exemptions.
And in the era of ‘Corporatism’, those at the top are buying political exemptions that pull the ladder out of the reach of the ambitous. That eliminates the competition necessary for a healthy economy.
For those who ‘gave away their wealth’, look at Detroit now. The ruins atests to the tragedy of the commons. When no one is required to create sustainable wealth but depends on the kindness of strangers to improve their conditions, eventually the vein runs dry.
Why work if there is no legacy to accompany your wealth? I plan to change the growth pattern of my family tree with fertile soil.
I refuse to give the word liberal to these people. I refer to them as Leftists or "Liberals". Their appropriation of this word my have been successful, just as the word gay has been successfully appropriated as a synonym for homosexual and as undocumented may successfully replace the accurate illegal alien, but I refuse to yield it.
It is the way of the Left--the way of newspeak--the fulfillment of George Orwell's terrifying predictions--that words will be used to mean their polar opposites. Everything is inverted by these people.
Of course the free market--which is freedom and liberalism--provides the greatest amount of good for the greatest number of people, but in the inverted, Orwellian world of the Left good is evil, and evil is good.
In a free society with a just government that provides an environment that values and encourages business, the rich, economic progress, and capital accumulation, the process of capital accumulation leads to more saving and investment and less hoarding and consumption by the rich. This leads to more productive expenditure which leads to more demand for capital goods and more demand for labor.
More demand for labor leads to higher average money wage rates for wage earners and employment of wage earners. Higher wages for wage earners and lower consumption by the rich lead to a higher wage share of consumption by wage earners.
More demand for capital goods leads higher production of capital goods which leads to a higher supply of capital goods which leads to a higher productivity of labor which leads to higher real wage rates and average standard of living for wage earners.
Thus, the self interest of wage earners is benefited in allowing the rich to be motivated by profit to pursue their own rational self interest.
Well said...I was actually thinking about Orwell when I was writing that first response. Great minds and all...
“War is peace, ingnorance is strength, freedom is slavery.” I think those are the ones repeated throughout “1984”, right? I’ve read it twice, but it’s been a LONG time now. :)
But we don't have to read it. We're living it.
Indeed we are living it. Someone should write a sequel called “1984 Revisitied” (or whatever) and discuss all the ways the lib left has rewritten history, changed phrasing, etc.
That is such BS. I studied economics in elementary school and learned what the rich REALLY do with their money...