Your money does not cause my poverty. Refusal to believe this is at the bottom of most bad economic thinking.
P. J. O’Rourke
The whole discussion about “income inequality” that has come to the fore in recent years is based on the pernicious, stubborn fallacy that there is a fixed amount of wealth in a society. If you imagine the American economy as a pie, it would stand to reason that if one person’s slice gets bigger it must necessarily mean that others’ slices are getting smaller. But it doesn’t work that way. Our economy is not a pie.
If our economy was a pie (figuratively speaking), it would be a pie that was growing at a faster rate than the slices’ proportions were shrinking. In other words, even conceding the [unproved] argument that the average American’s slice is shrinking relative to the whole, it doesn’t really matter because the pie is getting bigger and bigger. You might have a smaller percentage of the whole pie, but the actual size of your slice is bigger than it was before.
Enough about pies. Let’s talk about people.
Let’s say that you get a three percent increase to your salary this year. That means a bit more money in your pocket…maybe more dinners out, maybe a nicer car, maybe paying down some debts. Cool. Raises are good. Now imagine that your next-door neighbor got a six percent increase to his salary. Did his bigger raise take anything away from yours?
Obviously not. The only reason your neighbor’s six percent raise might upset you is if you’re jealous of his good fortune. That’s called “envy.” It’s one of the seven deadly sins.
That doesn’t change because we’re dealing with millions (or billions) of dollars. Yes, Bill Gates and Jeff Bezos and Elon Musk are really, really rich. But so what? Their success didn’t hurt you, or me, or anybody else. Indeed, their success is rooted in the fact that they created businesses that made products and services that people like you and me voluntarily spent our money on because we liked them.
Some politicians talk about how “the rich are getting richer, and the poor are getting poorer.” It’s a clever line, sure, but it’s a lie. Yes, the rich are getting richer. The poor are getting richer too, just at a slower rate. Modern capitalism, paired with global trade, has lifted the masses out of poverty. A smaller proportion of the world’s population is hungry today than at any other point in recorded history.
Is the system perfect? No, of course not. And there are still problems with poverty and malnutrition in the world, although these are usually the result of bad political systems or bad personal choices rather than an actual lack of resources or opportunity. But this whole notion that some people being inordinately wealthy somehow hurts the rest of us is just ignorance paired with thinly-veiled envy.