One of the main argument that my professors of economics have in favor of redistribution of wealth is that rich people tend to save more money, don’t invest it and don’t create jobs/wealth. Their money just stay in banks or on the stock market, they earn each year interests and dividends, or earn money thanks to speculation, but that doesn’t create jobs etc.
In “That Which is Seen, and That Which is Not Seen”, Bastiat says that if the gov invest 1€, it means that he has to take 1€ from someone’s pocket, money that won’t be invested nor spent on consumption. But if we tax only very rich people, if we tax only money they don’t invest nor spend, then… wouldn’t the increase in consumption “force” them to invest their money ?
In the ideal world, saving money is providing custom to a bank. The bank can then act as mediator and loan that money to a worthy debtor. You mentioned investments as well, this is the same principal except it provides capital directly to a business.
In any event, what people do with their own money is their choice. This obsession with “consumption” and “aggregate demand” is Keynesian fluff. Having the government steal from people isn’t going to create jobs. It doesn’t when they use the sneaky and insidious inflation tax or when they actually forcibly expropriate wealth.
Where do banks get money to loan to people? From people that save. An interest rate should be an indicator of how much money the bank has in it’s reserve. The more money, the lower the interest rate, the easier is to get a loan for a car, house, boat, whatever. If there is little money in the vault, the bank raises the interest rate which discourages borrowing and encourages saving.
So, if the rich person puts his money in savings it greatly benefits the guy across town that would like to purchase an automobile. Additionally, his savings help him see through a hard time should he lose his job or some such.
I’ve just finished reading “Economics in one lesson”, I understand now
“Saving, in short, in the modern world, is only another form of spending”, because the money that is saved is then lent by banks to business or securities, which create real wealth.
Assume that rich people put their savings into safe in their house, not to a bank. What would be the answer then?
If the government takes those money from them, and gives it to other people, who then spend the money, then these people would certainly gain from it. That is what is seen. What is not seen is that this would lead to increase of prices, decrease of purchasing power of money, and some people, in consequence, would lose. It would be, indeed, redistribution of wealth, but I’m afraid it isn’t exactly that kind of redistribution which your professors have in mind. Moreover, we can assume that the rich were saving for some purpose. One day, they would spend the money. But now they cannot.
Again, this is in an ideal world. Things start getting murky when you have centrally administered fiat currency that is mostly digitized as fractional reserves out of thin air.
