Straight thoughts 5

October 17, 1999

One of the concerns of the political left and some well meaning socially involved people is the increasing gap between the poor and the rich.
In today's fast changing information age some people are making fortunes while others are begging on the streets. But is the gap itself a problem? The wealth owned by the rich was probably created by sharing opportunities and work, through which many people supported their families. But should the rich earn personally so much? Is it 'moral'?

Each one of us is morally liable for how we use our money, especially the rich. However, individual wealth should not be a collective moral concern. Why?
Because once wealth is created, it generally multiplies and cannot be destroyed. (This is not a principle I read in any economic book, but it might have been discovered before – let me know).

If the rich spends his wealth on houses and boats, trips and food, his wealth is re-distributed creating more jobs and opportunities for someone else.
If the rich keeps his wealth in the bank, the bank invests it in companies creating more wealth and opportunities for others.
If he gives it away or he dies, then someone else will spend it or save it.

Let's suppose that one of these rich magnates was particularly evil and decided to destroy his wealth so that no-one else could enjoy it. He could destroy his own property, but not the wealth that has already been produced when he first earned the money to acquire his property. Nor he can stop the production of wealth generated by the money he spent to acquire that same property.
He could even burn all of its cash, but then everyone else in the country would become a little bit richer.

Each rich person may be a saint or a villain, but the wealth he created is benefiting all. If we want to increase the opportunities and the standard of living of the poor, we should sustain incentives to create wealth for everyone.
The gap is not the enemy. To complain about it is a by-product of envy.