Wealth trickle down is fantastic

LVMH worker 650

Capitalism is amazing. Competing in the market to look after customers has enhanced the lives of everyone on earth to an incredible degree. It has generated enormous wealth for the whole of society and pays for all the other -isms.

Capitalism is uneven in its rewards. Some people are strivers; through enterprise, intelligence, hard work and risk taking they generate more wealth than most. And in a global economy this can be enormous wealth, look at Bill Gates, Larry Ellison, Jeff Bezos and Mark Zuckerberg. There is nothing wrong with this, in fact it is excellent, the wealth that these people create makes everyone in the world richer. Because it trickles down.

Imagine a world where you and everyone else is a multi millionaire, and also in every village there are several billionaires. Would this be such a bad thing? Because it is exactly what we now have compared with the 1950s. A banker, doctor or lawyer 65 years ago was less well off than someone on the minimum wage today. There is no absolute poverty in Britain. None. Zero. There is only relative poverty that is self inflicted and that relative poverty is still very rich indeed compared to 1950. All this wealth now in our society was generated by capitalism.

Now let’s take this argument a stage further. Imagine if just one person owns 99% of the entire wealth of the planet. But at the same time everyone else is a multi millionaire. Would it matter? Of course not. But the left are continually deriding the 1% or the 5% who created the wealth. This is really stupid.

So how does trickle down work? Easy. Unless someone stuffs their mattress with cash they do something with it. And that something distributes wealth. Here are some examples of trickle down:

  • LVMH is a luxury goods manufacturer. It owns Dior, Donna Karan, Givenchy, Kenzo, Marc Jacobs, Loewe, Loro Piana, Louis Vuitton and many more expensive brands. The money spent with them by rich people means that they employ nearly 90,000 people.
  • Gatwick airport is used mainly by people flying away on overseas vacations. Without them it wouldn’t exist. It generates 21,000 on site jobs and a further 10,000 related jobs. All these people owe their wages to trickle down from rich people.
  • Starbucks is a global chain of coffee shops which charges many times the cost of the ingredients it sells. So rich people can enjoy the ambiance, the experience, the luxury. It employs around 200,000 people.
  • BMW is a manufacturer of upmarket cars. It employs 116,000 people.
  • Now lets look at the hospitality industry in the UK. Eating out. This employs about two and a half million people directly. If the wealthy weren’t spending they would all be out of a job. Isn’t trickle down amazing?

I could go on, but even a fool can see that spending by the rich very effectively redistributes wealth throughout society. Then there is the economic multiplier. Gatwick workers go shopping in supermarkets creating more jobs. The supermarkets buy billions of pounds worth of goods, creating even more jobs. And so on. For every pound of initial spend we end up with several pounds going into peoples’ wages. And remember where this money all came from in the first place; rich people who have generated wealth by looking after customers in the market.

Of course a rich person may not spend all their money. They will probably invest some. And what happens to this money? It is lent to people buying houses, so that they can have homes and also create many jobs in the building industry. It is invested in companies who then employ people creating yet more jobs. And rich people obviously know a lot about money, so they invest far more efficiently. If you distributed 100 billion pounds amongst the richest people in Britain it would benefit the economy and everyone in it many time more than if the government tried to spend the same money. This is just one reason why excessive taxes on the rich are stupid.

Money in itself is virtuous, so the more wealth that rich people create the better. If they buy a yacht, a helicopter or a private jet this is excellent. It just trickles more wealth down. And am I bothered if this person with all these toys lives in my street? Of course not. I celebrate. His success has made everyone richer, including me. We need more very rich people, the more the better and the richer the better.

Some people complain about inherited wealth. This is very stupid for 3 main reasons:

  • Wealthy people pay tax on the same money three times. Once when they earn it, again when they spend it and a third time when they die.
  • Virtually all the world’s millionaires and billionaires are self made. They personally generated their wealth with their  enterprise, intelligence, hard work and risk taking.
  • Once a wealth generator dies their money is dissipated very quickly, unless another wealth generator uses some as a starting pot. The “robber barons” of the 1800s who created America’s wealth were some of the richest people in history. John Jacob Astor, Andrew Carnegie, Marshall Field, Henry Clay Frick, Andrew W. Mellon, John D. Rockefeller, Cornelius Vanderbilt and many more. Where is their enormous wealth now?

Once you understand the immense economic power of trickle down, its efficiency and the magic of the economic multiplier, it is obvious that punishing the rich with high taxes is spectacularly stupid. Which is why countries which don’t do this are so amazingly successful. Hong Kong, Singapore, Switzerland. But we are incapable of learning this simple lesson because of the evils of bitter envy and of socialism.

Here is some further reading. Click on the highlighted text to see the article.

Hong Kong Vs Cuba. Capitalism Vs Socialism.

There is no poverty in Britain.

Socialism 1-2-3-4.

When I was young.

Osborne, this is how to do it better.

How to bring true equality to Great Britain.

The two greatest economists of the last century.

Capitalism is utterly fantastic.

Redistribution of wealth is wrong.

What is government for?

 

 

 

5 Comments


  1. [IMG]http://www.internationalskeptics.com/forums/picture.php?albumid=885&pictureid=10310[/IMG]

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  2. I think exactly the opposite to you Bruce. I don’t believe for a single second that trickle down is good for any society as most of the generated wealth is retained by the rich. Take a look at this:

    http://www.neweconomics.org/blog/entry/the-embarrassing-truth-about-trickle-down

    Or check out this blog post which includes an illuminating graph showing where the wealth ends up:

    http://belperstuff.blogspot.co.uk/2015/08/poverty-and-inequality-just-words.html

    That graph shows that the lowest 8 socio-economic deciles are now comparatively worse off than they were in 1977 whilst the top 20% are considerably better off. Rather than trickle down it is a case of trickle up. Of course it’s all about the individual’s world view. Yours is very different to mine.

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    1. John,

      The left hate the fact that both trickle down and Laffer curve are very easily demonstrated to be true.
      And together they prove the obvious, that socialism doesn’t work.
      Anyone resenting the rich working and succeeding to become richer is suffering from nasty, bitter envy.
      Anyone who thinks that the rich getting richer makes the less rich even more less rich is utterly deluded. Just step onto any high street or into any shopping centre.
      The distribution of wealth will ALWAYS be uneven in any society. Fidel Castro is incredibly rich, whilst his people are incredibly poor. Because Cuba lacks capitalism and trickle down.
      What is vastly more important than how much money other people have is equality of opportunity. Under Labour education for the less wealthy was run down with downgraded teaching and downgrade exams. We slipped down all the international rankings. The Conservatives are fixing it. Then anyone who wants to can become rich.

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  3. When wealth is tied up in trust funds and capital investments that pay out income at low tax rates, then we end up with enormous wealth doing very little work and almost no trickling.

    When private banks create all new money as debt and most of the population are paying interest on money created from nothing, the real effect is to increase the wealth of banks at the cost of productivity (www.positivemoney.org).

    The illusion of perpetual growth has only so far been maintained because of private profit generated from essentially public assets – natural resources. Mining for precious metals, diverting rivers and making dams, extracting oil etc etc. That process will be ending soon once all precious metals have accumulated in waste dumps or have been rendered unusable due to processing.

    Another limiting factor that is starting to bite is that software and automation is now consistently destroying jobs and only a fraction of new jobs are created. Entire classes of work are being automated, and as new AI systems come in this will only get worse. So your world of a few billionaires and everyone else as millionaires won’t exist (well, unless inflation is rampant), instead it will be 1% trillionaires and 90% on benefits.

    And there will need to be benefits, or some kind of “Citizens Income”, because otherwise the system will grind to a halt under the weight of the inequality. So yes, capitalism is great at efficiently exploiting resources – and it should be used for that – but it needs to be balanced and regulated so that we have a society that is optimised for the well-being of the largest number of people, not for the smallest.

    Reply

    1. Mike,
      When wealth is “tied up in trust funds” it is still invested somewhere, creating more wealth for society. The recipient of this generated income spends it and the wealth trickles down. You seem to be suffering from envy here.

      Your intellectual grasp of fractional reserve banking is flawed. You really don’t understand how banks generate their income. It is not as easy as you portray.

      Perpetual growth is not fueled by public assets. It is fueled by the mechanism of the free market becoming ever more efficient. Sigma 6, for instance. Also you fail to grasp the workings of the post industrial economy, Bill Gates and Steve Jobs did not extract physical resources. And now we recycle so much our need for new resources is decreasing very sharply. Growth is potentially infinite because the free market will always become more efficient.

      We have been automating jobs since man created his first tool. When microprocessors first appeared in the 70s the trade unions said that we would all become unemployed. They, and you, fail to grasp that the effect of automation is that more stuff can be made, so people have a higher life quality. You presume that consumption remains static as productivity increases. All the lessons of history say that this is wrong.

      As for “citizen’s income”, this involves the state. Everything that the state does it does badly, so the less state the better. It is the state that creates unemployment by stopping the market from working properly. The law of supply and demand and the free market will provide jobs and relative wealth for everyone, as has been proven throughout history.

      So, all your points are easily refuted and exposed to be built on the shoddiest of intellectual foundations. You really do not understand the very basics of how a free market economy (the only viable sort) works. Remember that capitalism pays for all the other -isms.

      Reply

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