by John M Repp
Published on Sunday, December 02, 2012 by Common Dreams, edited by the author in 2021.
Republicans and the corporate media are always saying that taxing the rich is “redistribution of wealth”. As if the capitalist economy is not itself a great redistribution engine! In its normal workings, capitalism redistributes the money and labor of poor and working people to the rich.
As John Ruskin wrote in Unto the Last in 1862, rich and poor are relative words like north and south. Gandhi read Ruskin’s book and he said that it changed his life. Most people think of wealth as an absolute and too many also think that everyone could become wealthy with the right application of knowledge and effort.
If that were true, why aren’t we all wealthy? The wealthy have an answer: the poor are ignorant and lazy. The rich tell us they have nothing to do with the poverty of their brethren.
The truth is there are many transactions or relationships in capitalist society that make and keep the rich wealthy and the poor in poverty. The whole goal of the self-interested actor in the marketplace is buying low and selling high, hoping to profit. That is redistribution, is it not?
Working for wages that pay the worker less than the value his work creates for the owner is the key transaction in capitalism. Usually, the owner will not even hire a worker unless they believe they can make a profit. Profit is not just covering the costs of running the business. It is what is over and above those costs. It is compensation for ownership, and it is redistribution.
A person renting from a landlord, whether an apartment, house, or piece of land is another redistribution. Most landlords want to make a profit over and above their costs.
Banks loan money to borrowers and collect interest. That is redistribution. A bank loan is a turning into cash the borrower’s promise to pay.
The corporations of the military-industrial complex redistribute wealth from the US taxpayer to those private corporations at profit rates much higher than average. Viewing the Department of Defense website, a citizen can read about these contracts and follow the path of billions of dollars, redistributed from your paycheck and taxes to the war profiteers.
Or consider the IPO, the initial public offering of stocks. If the business plan is tested and looks good, a company may put on the market 100,000 shares. Public demand the first day sets the price for a share. The new company will hold back hundreds of thousands of shares for the original investors. Those shares then take on the value the market gives to the publicly offered shares, and— voilà! —the original investors instantly become billionaires. That is the “magic” of the market and a redistribution on steroids.
Currently, the big Wall Street banks and hedge funds have found another way to literally mine money from the world’s markets. They trade on currency, commodity, stock, bond, and derivative markets the world over. We have seen pictures of a trader’s desk with six computer screens. They scour the world for a tiny “spread” and when they find it, they make a huge trade, “leveraging” the transaction to make a “killing.”
Does this all add up to something significant? Yes! The Rand Corporation, no left-wing outfit, has calculated that in the United States from 1975 to 2018 there has been an actual redistribution of 50 trillion dollars from the working and middle classes to the top 1%. On an individual level, this means the average college-educated middle class person’s current salary is just one-half what it would have been had the 1% not grabbed so much of the growth of the economy since 1975. In other words, that person’s salary would be double what they are taking home now!
So, John Ruskin was right when he said the wealthy work to keep their neighbor poor. And to protect their wealth, the wealthy engage in politics, using their vast media resources and the politicians their money helps elect to attack the idea of the wealthy paying a higher percent of their income to the government in taxes. The wealthy also stand behind the so-called “science” of economics to justify the redistribution in their favor as good and natural regardless of the consequences to society or the natural world. Yes, the wealthy like redistribution – if the money goes into their pockets.