Wealth Distribution Fails to Invigorate Economy
As Americans we hear all too often from talk radio hosts, comedians and politicians about how the U.S. is lagging behind other countries in terms of economic inequality. Perhaps most famously, Senator Bernie Sanders spoke on this issue during his 2016 presidential campaign, frequently mentioning that the top 1 percent in the U.S. owns almost as much wealth as the bottom 90 percent. This talking point became the main focus of his entire presidential platform and successfully gained him millions of supporters. However, the idea that income inequality is the most significant issue facing the U.S. is illogical and morally bankrupt.
There are two important questions to ask someone who believes income inequality is a major issue in the United States. First, what gives the government the moral authority to determine how wealth ought to be distributed? Such legislation is a violation of private property rights and should be viewed as theft. State socialist societies and social democracies that implement laws enforcing wealth redistribution can only operate through authoritarianism and force. A common response to this is the idea that such use of force is justified, because a majority of the governed people have made a social contract with the state to operate through taxation. But taxation beyond essential government functions like national security and the justice system are inherently authoritarian, and thus this response is merely a defense of rule of the majority. A recent Gallup poll found that two-thirds of Americans agree that economic inequality is a problem that the government should fix. Does this mean that the government has the right to coerce the minority out of their hard-earned money just to satisfy the subjective worldview of the majority? It is this concept of mob rule that makes wealth redistribution immoral.
The second issue of wealth redistribution is the problem of defining economic equality. When is equality within the economic system achieved? Is it when the wage-earner receives 20 percent of the average salary of the CEO? 40 percent? Entirely equal? This question exemplifies the logical shortcomings of wealth redistribution. Unless everyone agrees exactly what constitutes an equal system, economic equality can never be achieved. This can be problematic not just for those striving toward legally implementing socialist policies but also for the government attempting to execute such decisions.Social democrats and state socialists who submit to the idea of wealth redistribution either lack a legitimate goal or unanimously believe in radical equality.
A final point to make is the sheer lack of logic rooted in the concept of wealth redistribution. Contrary to popular belief, redistribution of money does not help the economy. As Jeffrey Dorfman, Professor of Agricultural and Applied Economics at the University of Georgia, rightfully pointed out in a column in Forbes, wealth redistribution only gives people the ability to spend by taking away that same ability from other taxpayers within the system. Many would respond to this by saying that wealthy people are more likely to hoard their money than spend it. But this is ignoring the fact that our economy is more supply-driven than demand-driven, and supply requires long-term investments of the sort that only wealthy individuals can provide.
Wealth redistribution also does little to help the poor and working-class. For instance, Walmart CEO Doug McMillon earned about $19 million in the 2016 fiscal year. Many think that if McMillon’s wealth were evenly distributed among all of Walmart’s employees, it would surely benefit the workers and give them massive pay-raises. However, if the government forced McMillon to redistribute his wealth, every Walmart employee would only receive 9 dollars. This shows that even if redistribution of wealth were morally acceptable, it would do nothing to solve the problem of income inequality. And many of these CEOs, such as Doug McMillon, began their careers unloading trucks for $4 an hour. Millions of workers in this country hold animosity toward the 1 percent, forgetting that many in the 1 percent started out in the same place as the rest of us.