What Occupy Wall Street Gets Wrong
Wealth creation is not a zero sum game.
If you want to know what motivates the people involved in Occupy Wall Street, you can get a good idea from Think Progress, a left-leaning website. It offers a map of the continental United States labeled, "If U.S. land were divided like U.S. wealth."
In this representation, 1 percent of the people hold title to most of the West and Great Plains area. Nine percent have a swath about the same size stretching from Minnesota south to Oklahoma and east to Maine. The other 90 percent of the population get only a narrow slice along the southern rim.
It's a stark, dramatic representation of the problem as OWS sees it. It's also a perfect illustration of the movement's economic misunderstandings.
Land, after all, is more or less fixed in supply. I can't obtain more of it unless someone gives up theirs. If the top 10 percent owned most of the land and barred everyone else from it, the rest would be pretty squeezed.
But wealth and income are not like land. To start with, they are not limited in supply—they can multiply many times over without end, and they have done just that. And, unlike with patches of soil, everyone can get more without anyone consigned to less.
There is not much more land in America than there was 50 years ago. But there is far more wealth. Since 1960, the total output of the U.S. economy, accounting for inflation, has more than quadrupled. Total physical assets have done likewise.
The conviction among OWS activists is that the rich have improved their lot by taking money from the not so rich—that wealth has been cruelly redistributed upward. What they overlook is that the real gains come from the creation of new wealth.
(Article continues below video.)
Steve Jobs did exceptionally well for himself, but he made the broad mass of consumers, here and abroad, better off in the process. Same for Sam Walton. What Oprah Winfrey created made her rich, but without her, those creations wouldn't have existed to entertain and gratify her audience.
Ten years ago, the richest person on Earth couldn't buy a device that does what the iPhone does. Today, anyone can get one free upon signing a two-year carrier contract. Entry-level cars are vastly better in amenities and reliability than your father's Cadillac decades ago.
Lifesaving and life-changing medicines and therapies once unknown are now commonplace. Food costs a fraction of what it once did. TV viewers used to have three channels to choose from. Now they have hundreds.
The wealthy are far better off than they used to be. But their improvement has not come at the expense of those down the economic ladder. Economists Bruce D. Meyer of the University of Chicago and James X. Sullivan of the University of Notre Dame find that over the past three decades, both the poor and the middle class have made substantial material progress.
"Median income and consumption both rose by more than 50 percent in real terms between 1980 and 2009," they reported last month in a paper for the conservative American Enterprise Institute in Washington. Those in the bottom tenth of the income ladder enjoyed comparable gains.
Not that everything is copacetic. The Great Recession has wrought havoc on the middle class and the poor—eliminating jobs, reducing income, and slashing the value of homes.
But if it's any consolation, the rich have seen their take shrink as well. Between 2007 and 2009, notes Steven Kaplan of the University of Chicago Booth School of Business, the share of all income going to the richest 1 percent of Americans fell by a full quarter.
The miserable reality today is not that the many are doing worse because our capitalist system is set up to fleece them for the benefit of the few. They are doing worse because the economy went through a cataclysm from which it has yet to recover.
When the economy crashes, it's those with the least education, fewest options, and slimmest resources who suffer most. That's true, by the way, in non-capitalist societies as well as capitalist ones. In either, people who have done nothing wrong often suffer.
At moments like this, it's not surprising that many Americans would resent the wealthy and feel the urge to punish them. But the OWS demand for action against them is the equivalent of honking your horn when you're stuck in a traffic jam. It makes a lot of noise, without getting you anywhere.
COPYRIGHT 2011 CREATORS.COM
