Disparities of Wealth

by Jacob G. Hornberger
Oct. 20, 2011

On the matter of great disparities of income and wealth in a society, the manner in which people become wealthy is of great importance.

In a society based largely on socialism and crony capitalism, which is the system under which the United States operates today, lots of people get wealthy by using the government to plunder and loot their fellow citizens.

In a system based on libertarian principles, people get wealthy by producing goods and services that other people are willing to pay for. The difference between these two ways of acquiring income and wealth is the difference between night and day.

Let’s assume that you have $10,000 in savings and that I have $0 in savings. I accost you with a gun and force you to go to your ATM and withdraw half your savings and give them to me. That means that we both are now worth $5,000. We’re now equal in terms of wealth.

Robbery and theft are obviously one way to equalize wealth and also to become wealthy. But fundamental moral and religious principles hold that stealing is wrong. The fact that stealing might equalize wealth in a society or make some people wealthier is irrelevant. Wrong is wrong, regardless of the result.

Why should it be any different in principle when government force is being used to do the equalizing or to make some people wealthier? What government does with its socialist programs is forcibly take money from those who own it and give it to other people. What it’s doing is no different than what the private thief does. The fact that people are being equalized is irrelevant. Wrong is wrong. The money belongs to those who earned it.

Thus, those who acquire their wealth through government plunder stand in no different position than those who receive the fruits of a private robbery. The reason they are wealthy is because the government has forcibly taken money from people who rightfully own it and given it to people who don’t rightfully own it.

That’s the position that those Wall Street firms that received government bailouts are in. They enriched themselves by feeding at the government trough, a trough that was filled with monies forcibly extracted from taxpayers.

The situation is the same with respect to firms that rely on government for regulations, tariffs, tax policy, monopolies, and other measures that protect them from the competition of others. They are enriching themselves as a result of artificial measures imposed by government.

Now, consider the other way to acquire wealth — by producing goods and services that consumers are willing to buy. When these firms acquire wealth, they stand in a completely different position, morally and religiously speaking, than their counterparts that rely on government largess or privilege. Their wealth is a direct result of having satisfied consumers by selling them something that they obviously value more than the money they paid to acquire the object.

A good example: Steve Jobs and Apple. They became extremely rich not by using government force to plunder and loot taxpayers but instead by producing products that people were willing to pay for. In order to get wealthy, they had to satisfy consumers by offering them a product that they valued more than the money they parted with to acquire it.

The principle is the same, say, with rock stars. Some have higher incomes than others, which is a reflection of consumer tastes. If a star is attracting 10,000 people to his concerts, his annual income will be lots higher than one who is attracting only 1,000 to his concerts.

Thus, even in an economic system that is largely based on socialist programs and crony capitalism — where the state doesn’t own all the means of production — there are people who are getting wealthy in the marketplace by producing goods and services that consumers find valuable.

An important thing to note about the unhampered market economy is that the consumers are sovereign. By their buying habits, consumers decide whose income will be high and whose will be low. And as many computer companies and rock stars will attest, consumers can be fickle and ruthless. If someone else comes up with a better product or a more popular voice, consumers will quickly move elsewhere, even if it means a drastically reduced income for the people who used to satisfy them.

Of course, such is not the case with socialism and crony capitalism. Under those systems, what matters is that the provider of the services pleases the politicians and bureaucrats who have the authority to write the checks. The consumer is relatively irrelevant and unimportant.

What we need in America is to dismantle the system of socialism and crony capitalism that has characterized our nation for so many decades and replace it with economic liberty, a way of life in which people acquire wealth morally by producing goods and services that other people are willing to pay for.
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Jacob Hornberger is founder and president of The Future of Freedom Foundation.