BILLIONAIRES SHOULD NOT EXIST
Last week, climate activists calling themselves scientistrebellion vandalized the luxury yacht of Walmart heiress Nancy Walton Laurie, by spray painting the hull for the second time in two months, after which they took a picture of themselves proudly holding up a sign declaring that, “BILLIONAIRES SHOULD NOT EXIST” with the vandalized yacht in the background. These activists were apparently parroting Bernie Sanders who expressed the same sentiment in his recent book, It’s OK to be Angry About Capitalism. Those activists apparently need a lesson in free market economics. I am afraid it is too late for Bernie.
The great sin of Ms. Laurie was to inherit a lot of Walmart stock from her dad, Bud Walton, and her uncle, Sam Walton. The leftist website Jacobin asserts that Bernie does not go far enough and that not only should all the Walton wealth be redistributed but the businesses of all these billionaires should be put under collective ownership. Looks like the scientistrebellion activists aren’t the only ones that need an education in free market economics (as opposed to the Marxist economics they were brainwashed to believe in academia).
These new Jacobins (the intellectual descendants of those French Jacobins that brought us the Reign of Terror) are trying to make a case for the redistribution of wealth, but they ignore the factors necessary for the creation of wealth. There would be no Walmart if the company had been under collective leadership instead of the leadership of Sam Walton. Walmart sells hundreds of billions of dollars of reasonably priced goods to many millions of Americans of modest incomes while employing a million and half people. Your local cooperative couldn’t create anything like that.
While mulling over these headlines in my head, I happened to watch a YouTube video produced by the Hoover Institution featuring Hoover fellows H. R. McMaster, Niall Ferguson and John Cochrane in a panel discussion of various questions submitted by Hoover members. A letter from one Hoover member asked the panel, “I worry about productivity, wealth generated per capita. What are the basic elements that support sustained and increasing productivity, and the elements that lead to decreasing productivity?” To which Professor Cochrane answered, “Productivity is THE most important thing.” Long term growth of the economy can only come from increases in productivity and increases in productivity come from new ideas, new processes, new companies, in other words from innovation. Change created by these new ideas, new methods, new discoveries can be disruptive, but in the long run economic growth benefits everyone.
This is what our 21st century Jacobins don’t understand. Marx divided the economy between greedy capitalists and exploited workers. But he did not include innovation in his calculations, what Joseph Schumpeter called “creative destruction.” Innovation makes things better, whether its better ideas, better products, better systems, better materials, whatever. But although innovation is better for most people, it is not better for everybody. Some jobs will be lost (like human associates to self-checkout machines at Walmart). Some industries will become obsolete (like the infamous buggy whip manufacturers). But overall, things will be better.
Without innovation and change 90% of Americans would still be working on the farm, as they were in 1790. Without innovation there is no growth of productive capacity except through population growth. Jobs wouldn’t change. New capital equipment would be just like the old capital equipment. To increase steel production 10% you would need 10% more workers. Unions love it. The same work rules, the same production systems. More union dues. But GDP per capita would be unchanged.
All the things that you enjoy in the 21st century are the product of innovation. Longer life and better health, not to mention flat panel televisions, smartphones and the Internet. Most people are not capable of being innovators. That is not a problem. We don’t need everybody to be innovators. But we have to face this hard truth; the hard working stiff working on the factory production line isn’t the person making your life better. It is the innovator that is going to give you power steering and automatic transmissions as well as heads-up displays and lane-change warnings.
I am not trying to say that ordinary workers have no value in society. Each worker is like a part in an automobile. Each part is essential to the functioning of the vehicle. But the parts do not determine the direction of the vehicle, that is determined by the driver.
There is an old saying, “invent a better mousetrap and the world will beat a path to your door.” And our mouse trap innovator will become rich as people pay him for his better mousetrap. The Jacobins would insist that our inventor share his wealth. But if he, or she, knew that they would get no benefit from their invention (other than a handshake and a hearty “thank you”) then perhaps the better mousetrap would never exist.
The truth is that those billionaires that Bernie and the Jacobins hate, have done a lot more for me (and you) than those yachting vandals, superglued disrupters of tennis matches or (the lowest of the low) defacers of beautiful works of art. So I will take my smartphone and other high-tech products that were delivered overnight for free and ride off in my Tesla and thank all those billionaires that have allowed me to do so.
The Biden Administration proudly proclaims on the Whitehouse website that “Bidenomics” will grow the economy from the bottom up and the middle out. While this may be a great campaign slogan (and it also fits on a bumper sticker), the truth is that the bottom and middle have little to do with economic growth. Economic growth requires increases in productivity and increases in productivity require innovation.
People that can increase productivity through innovation become wealthy, some even become billionaires. But many billionaires did not start out as billionaires. Apple founder Steve Jobs was adopted by a working class family. Amazon founder Jeff Bezos’ mother was a high school student who was divorced and living with her parents by the time she was nineteen. JPMorgan Chase Chairman, Jamie Dimon’s father was a Greek immigrant who started work as a busboy. Bridgewater Associates founder Ray Dalio’s dad was a saxophonist. The list goes on and on. The University of Chicago’s Booth School of Business found that in 2011 only 32% of the 400 richest people in the US came from inherited wealth compared to 60% in 1982. And 69% of those top 400 in 2011 got wealthy by starting their own business compared to only 40% in 1982. Most of our billionaires are self-made men and women now that inherited wealth is much less a factor than even 30 years before.
These billionaires were all innovators that became wealthy by providing products and services that people really wanted. And they built huge businesses and employed many thousands of people which helped grow the American economy. President Biden should be praising them not vilifying them. And President Biden should be trying to promote innovation and the wealth it creates because this is beneficial to all Americans.
Instead he sneers at so-called trickle-down policies. He promotes trade unions that routinely attempt to block any innovative change that might weaken their grip on workers. He hires anti-business regulators that hate profit so much they creative regulatory barriers to innovation. His industrial policy gives subsidies to industries that he likes and tries to shut down businesses that he doesn’t like – no matter what ordinary consumers might think. At its best, Bidenomics will give us European style slow economic growth. At its worst, if Bernie and the Jacobins get their way it will give us socialist stagnation and impoverishment like Venezuela or the old Soviet Union.
You should be grateful that billionaires exist. You would be a lot poorer if they didn’t.