“The rich get richer and the poor get poorer” is a standard critique of a market economy.
Of course, an examination of the evidence over the last two centuries in the United States and Western Europe tells a very different story. Yes, we get more millionaires. We also get millions lifted out of abject poverty. In the developing world, the same story has played out. In China and elsewhere, as their dalliance with central planning proved a bust and they allowed more room for markets, it was the common person who benefited most.
But suppose Bernie Sanders’ nightmare comes true. We go through a 20-year period of economic growth where all, literally all, of the benefits of growth end up in the hands of the dreaded “1 percent.” All of us who earn under $500,000 a year see no increase in our salaries or increase in the value of our portfolios, while those above the threshold enjoy a doubling of their income and wealth.
Although we poor beggars in the bottom 99 percent might seethe with envy, we suspect our children and grandchildren will reap some of the gain of the top 1 percent for a very simple reason: The rich, like most of us, are vain. Building 70-room mansions and stocking up on first-growth Bordeaux wine gets boring after a while. When conspicuous consumption ceases to amuse, what do the rich do? They build monuments to themselves.
The very rich want to see their names on activities that promote, or at least appear to promote, the well-being of others. Andrew Carnegie built libraries. The Rockefellers renovated Williamsburg. Closer to home, the Miller family in Columbus paid for top-notch architects for the city’s public schools. The Balls of Muncie founded a university and a hospital. The Lilly family foundation has bankrolled numerous community foundations in the state.
Some will argue that it is unfair for the very rich to have such a disproportionate say in the charitable and cultural endeavors of society. They say such excess wealth should be channeled to the state and distributed to good works by the democratic process.
Really? Set aside the reality that the incentive to accumulate wealth would be undermined if the state gets to control one’s hard-earned wealth. Does anyone really believe the circuses in Washington and Indianapolis would have used the Carnegie and Lilly fortunes to better ends?•
Bohanon is a professor of economics at Ball State University. Styring is an economist and independent researcher. Both also blog at INforefront.com. Send comments to email@example.com.