Three Cheers for (the Right Kind of) Rich People

June 12, 2024 by Dan Mitchell

My view on rich people is very simple.

I applaud them if they earn their money honestly (through voluntary exchange in a free market economy). And I want more people to become rich in the same way.

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Especially since the rest of us get richer when they get richer.

But if they get rich by looting the public (via interventionist policies such as bailouts, subsidies, protectionism, or industrial policy), then they deserve disdain.

The good news is that most super-rich people in the United States are in the first category.

But that’s not true everywhere. In nations with dirigiste policies, such as Russia, you’re more likely to find rich people from the second category.

Some of our friends on the left, however, fail to distinguish between good rich people and bad rich people. For some of them, all rich people are the enemy.

Today’s column will provide a different perspective.

Michael Strain of the American Enterprise Institute recently wrote that billionaires should be celebrated.

…we should want more billionaires, not fewer. Billionaire innovators create enormous value for society. In a 2004 paper, the Nobel laureate economist William D. Nordhaus found “that only a minuscule fraction” – about 2.2% – “of the social returns from technological advances” accrued to innovators themselves. The rest of the benefits (which is to say, almost all of them) went to consumers. …Amazon founder Jeff Bezos is worth $170 billion.

Extrapolating from Nordhaus’s findings, one could conclude that Bezos has created over $8 trillion – more than one-third of the United States’ annual GDP – in value for society. For example, Amazon has reduced the price of many consumer goods and freed up an enormous amount of time for millions of Americans… Bezos, meanwhile, has received only a tiny slice of those social benefits. …the same logic can be applied to billionaires from any professional background.

For example, Wall Street titans create value by efficiently allocating capital throughout the economy. Over time, this lowers costs and spurs productivity and innovation, all of which benefit millions of households and businesses. …Take a look at the top ten billionaires…

They are largely self-made innovators who have changed the way we live… None of them are “policy failures.” Rather than wishing they did not exist, we should be thrilled that they do. The value they have created for millions of people around the world dwarfs their net worth.

On the other side of the Atlantic Ocean, James Quarmby expressed similar sentiments in a column for the Telegraph.

Here are some excerpts.

In most of the world wealth is celebrated; people aspire to be wealthy and admire those who accumulate it. …This notion, and the concomitant aspiration for wealth, has built the most successful and dynamic economy the modern world has ever seen. …but here in the UK and the rest of Europe, …we are witnessing increased suspicion and hostility towards the wealthy. …

The super-rich are often portrayed in the media as responsible for all manner of social evils… Overall, the top 1pc of taxpayers pay nearly 29pc of all income tax, and the top 10pc pay a full 60pc – that’s funding a lot of doctors, nurses and other front-line services and, without them, the rest of us would pay even more. So perhaps it’s time for phrases such as the “filthy rich” to disappear. Instead of vilifying the wealthy, we should celebrate them.

So why do folks on the left have such hostility to successful people?

 

In part, the answer is naked envy. They resent that others have been so successful and want to tear them down.

In part, the answer is economic illiteracy, especially the zero-sum belief that rich people mean less income for everyone else.

The bottom line is that a society that rewards entrepreneurship and success will be much better off than a society that penalizes those traits.