Are Billionaires Good for America?  

monopoly manCapitalism is the primary cause for prosperity in America and the world. Entrepreneurs are the force behind capitalism. America is prosperous because those who create the wealth for everyone are free to reinvest it and create more wealth, or choose others to do so. If that freedom is denied them, the cycle of wealth creation will cease.

The riches of the 400 or so billionaires in America stem from this entrepreneurial process.  Seventy percent received no inherited wealth to speak of, and most of the rest received their wealth from entrepreneurial parents. The entrepreneur does not learn his skill in school.  He does things not by “learning from the experts” but by creating new expertise. What he does defies the learning of the professors.

The key to ongoing prosperity is the entrepreneur’s resolution neither to spend his wealth nor to abandon it, or that it be taken from him. Wealth cannot long survive when separated from its creators for the simple reason they must nurture it. Like a tree, an investment grows by the light of new knowledge and the roots of ownership. Bureaucrats will try, but ultimately cannot capture and redistribute America’s wealth from its billionaires. They can only diminish it.  This is the lesson of Marxist despots and tribal socialists from Cuba to Greece.

What is wealth?

Wealth is not money. Under capitalism in a high tech economy, wealth is a flow of changing ideas rather than a stock of goods. Joseph Schumpeter declared capitalism a “form of change” that “can never be stationary”.

The landscape of capitalism may seem solid and settled and subject to confiscation, but in reality it is a “mindscape” of volatile shifting ideas. Governed by mind but embodied in matter, capitalism must produce an income stream that is expected to continue. This expectation can shift suddenly.  When income streams cease the physical markers of wealth become (sometimes very quickly) mere monuments to past wealth.

The steel mills of Pittsburgh, the railroad grid of new England, the commercial real estate of Detroit, the great printing presses of yesteryear, Kodak’s photography patent of over a decade ago, and soon the casinos of Atlantic City … revert to “mere mounds on the desert floor”. In all these cases things remained the same but thoughts about them changed.  Much of what was so expensive in 1980 was nearly worthless in 2010.

Others can take over buildings and equipment and patents of high technology firms but the real worth of a company lies in its leadership, savvy, and loyalty.  Capturing the worth of a company is far more complex and difficult than purchasing it. Most of America’s leading entrepreneurs are captives of their wealth.  Bill Gates once said “I am tied to the mast of Microsoft” If Gates had tried to cash out substantially in the early decades, the price would have crashed faster than he took out the funds.

How is wealth preserved?

Billionaires can only keep their wealth to the extent they serve it, and thereby serve others rather than themselves.  They keep their wealth only to the extent they invest it in others. The wealth they give up to others becomes embodied in a vast web of enterprises that retain its worth only through constant work and sacrifice.

Real wealth resides in ideas, attitudes, moral codes and mental disciplines rather than identifiable, static things. It is materialist superstition to believe that wealth can be confiscated and redistributed.  This delusion undergirds Marx and all the prophets of violence and envy who believe that by capturing the means of production they can capture the crucial capital of the economy. The same delusion afflicts the bureaucrat who imagines he can tax and regulate without consequence. The cost of capturing technology is mastering the knowledge that drives it. The market respects and responds to the knowledge of the creator entrepreneur, but disdains the would be usurper of wealth.

The wealth of America is not inventory but an organic living entity; a tissue of ideas, expectations, loyalties, moral commitments, and visions. To vivisect it for redistribution is to kill it. As Mitterrand’s technocrats discovered in the 1980s, and Obama’s eco-crats are discovering today, those who usurp complex systems of wealth soon learn they administer over an industrial corpse, a socialized Solyndra.

Are the billionaires “greedy”?

The essence of greed is the desire for unearned wealth. What creative entrepreneurs contribute to human advancement dwarfs any inequality of income they cause.

The easiest way to gain unearned income is simply to take it from others. Real greed is seeing leftist professors denounce the system that gave them their freedom, tenure, long vacations, and other expensive privileges. The beneficiaries of the government transfers of wealth and income smear their betters with the claim of avarice that they themselves deserve. Greed leads as an invisible hand towards evermore government action, socialism, and subsidies.

Today, Paul Krugman, Robert Reich and others want to “save capitalism” by raising tax rates on the rich and forcibly redistributing income. Like all the socialists that have preceded them, they foolishly assume the entrepreneurs will continue to create evermore wealth even as it is taken from them. Socialism in all its forms; from Wall Street subsidy seekers to bureaucratic profiteers “exploit the productive”.

Does America still need its entrepreneurs?

The abuse of America’s entrepreneurs, crony capitalism and creeping socialism leads to closed opportunities at home.  Those who suffer most are the poor.  High tax rates and oppressive regulations do not keep anyone from being rich, but they prevent poor people from becoming rich.

Robert Heinlein writes: “Throughout history, poverty is the normal condition of man.  Advances that permit this norm to be exceeded, here and there, now and then, are the work of an extremely small minority … frequently despised, often condemned, and almost always opposed by “right thinking” people.  Whenever this minority is kept from creating, or driven from society, the people slip back into abject poverty”

All real progress comes from the creative minority.  Government funded research and development (outside of the military) is mostly wasted. If the government continues to smear harass, overtax, or oppressively regulate them, American prosperity will deteriorate.  Wealth will flee to other countries.  Liquid funds can be invested overseas at the speed of light down a fiber-optic line.

While young entrepreneurs once built the fortunes of future decades in America, they now build them overseas … in China, India, and Israel, or fail to build them at all. Other countries are beginning to thrive as the secrets of America’s wealth spread across the global mindscape of capitalism.

We should respect America’s entrepreneurs.  They are not perfect but they take their place in the tapestry that has made America great. They serve America and are her servants. We should also encourage a new generation of entrepreneurs and not stand in their way. America should continue to be the land where the last regularly become the first … by serving others.

(Taken from the 17th Chapter of “Knowledge and Power” by George Gilder … a great read … Helmut Rudajs)

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