24 April 2014

How to get to the Top (without actually having to work for it)

[Part 5 of 10, Free Market VS Capitalism essay series.  Part 1 here]


Pro-capitalists generally take it as a given that anything someone has they must have earned, and therefor must deserve.
Of the 20 wealthiest people in the world, 1/2 of them inherited their snowballs.  At best, they get credit for keeping it rolling, for not finding a way to stop it, but they got it already large, already moving.
More to the point, nobody actually creates a truly massive snowball of wealth by their own productivity.
Nobody has ever gotten to the top 0.01% via hourly wages.  One would have to average $25,000 per hour for an entire full-time working lifetime in order to actually earn a billion dollars.
Nobody gets 0.01% rich on salary either - not even CEO or sports legend level salary. 
For the most part CEOs of successful companies are still just in the relatively lowly 1%, maybe the top half a percent.


The most reliable way to get even just to the 0.1% is setting up conditions so that you make money without having to work for it: rent, investment dividends, royalties - or, of course, just having employees.
Acquiring a disproportionate amount of world resources tends to involve one or more of the following - lending out existing capital so that other people give you a percentage of their own labor productivity, or producing something with low marginal cost (something cheap to reproduce) that can be widely distributed - music, movies, sports, software.
I'll come back to the second later.
Pro-capitalists generally justify investment returns on the grounds that the person paying the interest is benefiting from the use of capital that they didn't have to save up on their own.
But that argument is circular.
If some people weren't hoarding all the wealth to begin with, there would be more left over to go around, and people wouldn't need to borrow so much in the first place.
Imagine if a rich man moves into a tiny country and buys the entire nation's mining land. 
His miner's extract ore, it is delivered to his smelters and forges, and he builds all sorts of metal tools.
Then he opens tool rental places.  Anyone who wants to build anything has to rent all their tools from him.
He claims he deserves all the rental fees he gets, because he put down the capital investment in the mines and factories that create the tools.  But before he showed up, the metal ore was still there, the mines were a public good, and competition between lots of little tool makers kept prices competitive.  The fact that he rents the tools instead of selling keeps supply limited and his income high.
In short, if he weren't hoarding resources in the first place, people wouldn't be dependent on his capital.
Perhaps the best example of this is in land, which will be the topic of the next installment.

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