I meant this to sound argumentative (consider it a little marketing ploy), but I wanted to discuss how money in a free market flows from one place to another, and how the “evils” of the market actually produce the very type of economic redistribution of wealth socialist parties are asking for, without destroying the abilty to accumulate wealth.
So, the 99%/1% argument in particular is one that gets me. One of the natural market flows is for the wealth of the rich to flow out of their hands and back into the market, and I wanted to talk about how everything (except one) that a rich man does makes the rest of society better off. The only thing a rich man can do that doesn’t improve the economy is put his money in a bank or under a mattress. And I mean to truly save it up for a rainy day, not investing it for a profit that’s a different function.
So, the first thing I’d talk about is ridiculous (by middle class and upper-middle class standards) purchases. Think about a 100 ft yacht or a $13millon mansion or a collection of sports cars, etc. In this case each of these type of purchases involves creating wealth to produce them. You and I may not feel that a 100ft yacht is a very good investment, but in terms of raw materials that go into any of them there’s very little but the craftsmanship that is required for these products is highly labor intensive. Every laborer is paid a large amount of money on a regular basis to produce these products and that money flows out into the economy. The money spent on the initial purchase of most of these goods will rarely be recouped in sale, especially on consumables. But all of the money spent in the initial purchase flows back out into the economy and into the wallets of workers and some small percentage (6-8% on average) flows into the pockets of the business owners who create those products.
The second way wealth from the rich flows out is in investment. This is my favorite one, because win or lose, the capital (factories and equipment, computers and furniture) they purchase, is money in the pockets of workers who produced them. The business they run sells goods and services that are provided via labor they pay for through they money they invest. If the rich investor is lucky, they make a profit. If they are unlucky, they lose their money. But regardless, money flowed out into the economy. That wealth, especially when they lose it, transfers to those who have less.
Now when they lose money in investments, the capital they invested in gets sold off. Some (like useless factories) may in fact get destroyed. But much of it can be sold off for a percentage of the initial costs. Some other investor gets to startup a new business, or expand it in some new way.
If they make money in investments, the capital returns to them as profit. Jobs and capital are malinvestments, they are good investments. The workers don’t have to find new jobs. They keep the ones they have, they become managers, they move up. The capital gets used for it’s intended purpose. The profits REWARD the risk of the investor, and can be reinvested into a winning organization so it can grow and provide more jobs, invest in more capital, and simultaneously provide cheaper and better goods in the market. Remember those profits? Yep, you guessed it they end up in one of these 3 places again.
So, to the rest, what other ways in a free market does capital get transferred?
In particular, in what ways does it prevent a poor person from losing what little wealth he has, or more importantly from ending up buried under debt himself?
Cause it seems to me that the complaints of the 99% are from the interference in government with these natural and proper transfers of wealth.
