Skip to comments.Charity Begins With Wealth Creation
Posted on 12/26/2012 5:03:39 AM PST by Kaslin
Charity -- helping people who have trouble helping themselves -- is a good thing two times over. It's good for the beneficiary and good for the donor, too. Stephen Post's fine book, "The Hidden Gifts of Helping," reveals that 76 percent of Americans say that helping others is what makes them most happy. Giving money makes us feel good, and helping face-to-face is even better. People say it makes them feel physically healthier. They sleep better.
Private charity is unquestioningly better than government efforts to help people. Government squanders money. Charities sometime squander money, too, but they usually don't.
Proof of the superiority of private over government efforts is everywhere. Catholic charities do a better job educating children than government -- for much less money. New York City's government left Central Park a dangerous mess. Then a private charity rescued it. But while charity is important, let's not overlook something more important: Before we can help anyone, we first need something to give. Production precedes donation. Advocates of big government forget this.
We can't give unless we (or someone) first creates. Yet wealth creators are encouraged to feel guilt. "Bill Gates, or any billionaire, for that matter," Yaron Brook, author of "Free Market Revolution" and president of the Ayn Rand Institute, said on my TV show, "how did they become a billionaire? By creating a product or great service that benefits everybody. And we know it benefits us because we pay for it. We pay less than what it's worth to us. That's why we trade -- we get more value than what we give up. So, our lives are better off. Bill Gates improved hundreds of millions of lives around the world. That's how he became a billionaire."
Gates walks in the footprints of earlier creators, like John D. Rockefeller, who got rich by lowering the price of oil products, and Cornelius Vanderbilt, who did the same for transportation. The clueless media called them robber barons, but they were neither robbers nor barons.
They and other creators didn't just give us products to improve our lives, they also employed people. That's charity that keeps on giving, because employees keep working and keep supporting their families. "That's not charity," Brook said. "(It's) another trade. You pay your employees and get something in return. But the employee is better off, and you are better off.
"And when you start thinking about the multiplier effect, $50 billion for Bill Gates? That's nothing compared to the value he added to the world. That is much greater than the value he'll ever add in any kind of charitable activity." Gates now donates billions and applies his critical thinking skills to charity. He tested ideas in education, like small high schools, and dumped them when they didn't work. Good. But if he reinvested his charity money in Microsoft, might he have helped more people? Maybe.
Brook points out that Gates gets credit for his charity, but little credit for having created wealth. "Quite the contrary," Brook said. "We sent the Justice Department to go after him. He's considered greedy, in spite of all the hundreds of millions of people he's helped, because he benefited at the same time. (When) he shifted to charity, suddenly he's a good guy. My complaint is not that he's doing the charity. It's that we as a society value not the creation, not the building, not the accumulation of wealth. ... What we value is the charity. Yes, it's going to have good impact, but is that what's important? ... Charity is fine, but not the source of virtue. The source of virtue is the creation and the building."
What especially offends Brook, and me, too, is stigmatizing wealth creators. The rich are made to feel guilty about making money. I sometimes attend "lifetime achievement award" ceremonies meant to honor a businessman. Inevitably, his charity work is celebrated much more enthusiastically than his business creation. Sometimes the businessman says he wants to "give back."
Says Brook, "It's wrong for businessmen to feel like they need to 'give back' as if they took something away from anybody."
He's right. They didn't.
If we value benevolence, we must value creation.
What the public dislikes about the wealthy is the perception of “idle wealth”, which though they blame the wealthy is, for the most part, the fault of government.
Begin with the Laffer curve, in which when taxes are raised on the wealthy, or anyone else for that matter, beyond a point that they are willing to tolerate, they will shift their money so that it is less heavily taxed. The end result being that government gets less revenue for higher taxes.
The zinger here is the simplicity of the logic of the Laffer curve, that those politicians who ignore it are doing so, raising taxes, *not* for greater revenue, but because they want to *punish* their wealthy. So in truth, the higher taxes are “hate taxes”.
However, if government *does* take the Laffer curve into account, a new path is clear, that it is a tool that can be used to *encourage* the wealthy to not invest in unproductive, (rather dishonest) gambling-type investments; but instead to put their wealth to *work* in ways that benefits the wealthy and the nation.
That is, a higher tax rate for wasteful investments than for more productive investments, which make the latter more profitable.
Instead of putting their money into things like derivatives, that are “money games” like rigged gambling, to put their money into research & development, for example.
This is not in any way unfair.
VERY good piece.
Ah, but individual private wealth and the accompanying private charity is actually NOT what the left wants.
Such wealth and charity is out of their control, and inherently thwarts their ability to reward and punish behaviors, beliefs, and worldviews.
I thought so too.
The Russian and Chinese billionaires?
Let's stop this nonsense about great fortunes only being made by providing a service to society. Fortunes are also, indeed historically much more often, made by crony capitalism or governmental corruption. Or by financial manipulation, usually helped along by the previous two.
The Laffer Curve is almost always misused, by both sides of the argument.
Leftists deride the entire notion of lower rates creating higher revenues, while Rightists almost universally assume that lower rates do mean higher revenues.
In actual fact, the LC says no such thing. Any given rate crosses the LC at two points. On the left side of the curve, a decrease in the rate results in a decrease in revenue, on the right side an increase.
Rightists almost universally assume we’re on the right side of the curve, and possibly they are correct. But they should demonstrate in their argument why this is the case, not just assume it.
As the destructive consequences of the Left becomes more and more evident the article is well timed. They would do well to understand that all wealth is not “bad” and that we need it in order to sustain our own lifestyles and realize that it also created many marvelous inventions and created the great cities and even allowed us to protect our environment if you believe that.
The best way to help the poor is to not become one of them - Reverend Ike
This reminds me of something in “Atlas Shrugged”. I think it was Dagney who said something about when people look out for their own best interests, all of society benefits in the end. Not sure if I read it or if it was in the movie (maybe both), but it made so much sense.
Dagney Taggart, Adam Smith, etc...
Libs can’t understand that because they are so humanistically focussed that they believe SOMEONE has to be directing the economy to benefit people, it CAN’T just do it on its own,
and that whole “invisible hand” concept just smacks too much of God for their tastes.
I loved one of Sowell’s observations in a recent “random thoughts” article.
Intellectuals are an historic wrecking ball for society and culture, habitually replacing what works with what sounds good.
You can’t give to others what you don’t have clear title to yourself. Socialists replace individual charity with collective government programs. Individual givers give from their own possessions and incomes, all of which they must have earned and created by their own private efforts. Socialists, because government doesn’t have any wealth of its own, must steal, embezzle or coerce from others to fund their programs.
In the last 80 years, Keynesian Economics has justified the invention of debt-based money, by which money is “borrowed into existence” and used to purchase real economic assets and to fund government programs. This is theft by dilution, and fraud since the borrower has no intention of ever repaying with like value. The government only has clear title to the newly acquired economic assets through money laundering, and thus title to what it conveys to program recipients was acquired via fraud. This system is not sustainable and all countries in the world use it.
God’s system of supporting the truly indigent is via charity. He expects people who have been blessed to share those blessings with others, even as the Commandments protect the property rights of the giver against coveting and theft by others.
Socialists destroy the system of charity by creating expectations of needs which are just repackaged forms of coveting and grievance-mongering. We have a median household income in the US of about $52,000, yet government spends on average about $60,000 per recipient of its welfare programs. Socialism destroys wealth on balance but the system based on charity respects wealth and wealth creation.
And even more pathetic are the sheeperals who derive their own sense of self-righteousness through their advocacy of such a system.
> I loved one of Sowells observations in a recent random thoughts article.
Intellectuals are an historic wrecking ball for society and culture, habitually replacing what works with what sounds good.
Oh that is good. Will have to remember that one when engaging with the “enemy”...lol
Used it last night...
really caused the “wet hen effect”.
Nothing like pointing out that “intellectuals” are a detriment to the welfare of humanity to gpush a humanist off the rails.
I have come to despise the term “giving back.” It is just “giving.” Seldom have those who are the recipients of giving done anything for which they are being repaid. That does not diminish the worthiness of giving, but as Stossel said, nothing was taken from anyone to create the wealth a portion of which is being given to others.
The prime suspect for a tax rate which is above the point of
diminishingnegative returns is the Capital Gains Tax. Whenever that rate has been increased, the revenue from that tax has fallen, and whenever the rate has been decreased, the revenue the tax yielded has gone up. As we speak, investors are positioning themselves to minimize their exposure to the higher Capital Gains tax rate slated for 2013. A decline in the capital gains tax revenue is now baked in the cake.
I have a concrete proposal to demonstrate the existence and location of the maximum revenue point for the capital gains tax. After 2013 Congress should pass a law stipulating that in 2014 all capital gains tax revenue in excess of the 2013 capital gains tax revenue is to be pro rata rebated to the payers of the capital gains tax. What does the government lose? it will get the same net revenue in 14 that it got in 13. What the Democrats have to lose is the fact that this system would produce the effect that the people who were confident that the 13 cap gains tax rate was above the peak of the Laffer Curve would have the ability to make a self-fulfilling prophesy to that effect. As long as that revenue cap/rebate scheme stayed in place, the effective cap gains tax rate, net of rebate, would be much lower, not only than the 2013 rate but IMHO than any rate in the history of the capital gains tax. Because realized capital gains would expand that much, due to the self-fulfilling prophesies of the owners of our capital stock.
All taxes have negative economic effects, and the fact (if, to accept your thesis, fact it be) that the capital gains tax is above the point of negative returns is not the only negative effect it has. It also modifies the allocation of capital in ways which do not benefit, and thus are presumptively detrimental, to the economy. So all tax rates should be made low enough that it is certain that they are below the point of negative returns. If, that is, the object in view actually is love of the people - patriotism.