Vela Ventures

Wealth Inequality

There much political discussion these days about the vast disparity of wealth.  The supposed issue of wealth inequality is that the wealthy have a disproportionate share of the wealth.  Certainly, Jeff Bezos, Elon Musk, Bill Gates, Bernard Arnault, Mark Zuckerberg, and Warren Buffett each having over $100 Billion in wealth represent the extreme.  But where is this wealth?  It is in the form of the ownership of stocks and companies.  It is not in form of income or cash and probably could not be all converted to cash.  How did they make this wealth?  Through smart (lucky) investments in new companies or products.  At whose expense is this wealth measured?  It is stockholders whose bids and willingness to pay creates this wealth.

There are 2 concerns that come up. 

Did they create this wealth at the expense of someone else?  This wealth was through the creation of something new, not the extraction of wealth from existing sources.  It is not from a zero-sum approach.  This wealth created a large number of jobs that did not previously exist, many very well paying.  It has been a boon to workers.

What are they doing with this wealth? This existing wealth allows them to continue to manage their enterprises and live an extremely comfortable life.  Some are also funding charitable causes.

If income inequality is the real problem, Cuba and North Korea offer examples how to avoid it.  The real problem is the lack of wealth at the lower end.  This is where the emphasis should be.  How do we raise the income of the poor?  Great wealth is a problem only if it is obtained at the expense of other people (beggar thy neighbor).

There is much discussion about raising the minimum wage to $15 per hour.  If this were to happen, there would then be much discussion about raising the minimum wage to $20 per hour using the same reasoning.  Everybody would like to make more money.  Also, arbitrarily raising wages has effect increasing the use of automation.  Some benefit but others lose their jobs.  This is an increasing phenomenon.  Witness the disappearance of toll collectors on the Mass Pike and Boston area parking garages.

In today’s world it is possible to create substantial new wealth by creating something new or doing something better.  Individuals are much better at this than the government.  I do believe that these enterprises need some government regulation and restraint, but they are not intrinsically evil.  The government should set the rules and then leave the enterprises alone. 

My opinion is that today a lot of people are having problems with the 10th commandment,

“You shall not covet your neighbor's house; you shall not covet your neighbor's wife, or his male servant, or his female servant, or his ox, or his donkey, or anything that is your neighbor's.”

One should also take heed of the gospel admonition

 everyone to whom much is given, of him will much be required” (Luke 12:48).

Your comments are welcome


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