Solving Poverty by Redistribution of Wealth?

Short one today. (Listening to Sowell’s “Basic Economics” on audiobook so economics has been on my mind lately.)

People who want to “redistribute wealth” talk about the poor and people in poverty and we need to redistribute poverty to end that.  There’s only one problem:  it doesn’t work.

In 2016, the Gross World Product was just under $75.5 trillion dollars.   That sounds like a lot of money.  There’s just one problem.  In 2016 the world population* was just under 7.5 billion people.

If you redistributed all the money from all those business transactions to all the people that’s right around $10,000 for the year.  By American standards, that just means that everyone would be in poverty.

Congratulations, you haven’t redistributed wealth, you’ve redistributed poverty.

Now, most redistribution doesn’t call for complete leveling of income but that illustrates the underlying fallacy of redistribution to solve “poverty”:  there is simply no way to redistribute existing wealth that does not leave at least the vast majority of the human race living in poverty.   None.  It can’t be done, not that way.

If one wants to better the lot of mankind and end “poverty” (or, since poverty is actually a moving target, at least raise what we call “poverty” to something like we would call middle class today) it has to be another way.

Fortunately, there is another way.  Economic growth.  The pie is not fixed. (Do you really think the average person in 1750 when the population was less than 10% what it is today was 10 times as wealthy as the average person today?) And the one thing, more than any other, that spurs economic growth is economic freedom.  This unleashes the creative energies of that entire 7.5 billion people in seeking to better their own lives.  Some will fail.  Some will succeed.  Some will succeed wildly.  Others will see the ones succeeding wildly and copy them.  And the ones who failed, if they’re at all smart, will either catch a ride on the coattails of someone succeeding or try something else and keep trying until they succeed.

There will still be “poor”, as they count it.  But if we could look forward we would shake our heads in amazement at the people complaining about what to us is the wealth of Midas. (As I illustrated in a look backward.)

So, please, if you really want to help the poor, go out and start making that metaphorical pie.  Or at the very least, get out of the way of those that are.

*I’m not sure I believe those population numbers.   After all, for many locations there is a distinct incentive to over-report population numbers.  Higher populations mean more political influence or more money to the location.  There is not, however, any incentive to under-report population.  Thus, I suspect the number is high, but the basic principle remains even though the details may be off.

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3 thoughts on “Solving Poverty by Redistribution of Wealth?”

  1. There’s an even bigger problem than the available raw wealth being unevenly distributed. The ability to manage wealth is also unevenly distributed.

    Liked by 1 person

  2. Population:
    I read Robert Heinlein’s account of his trip to the USSR, and one impression he carried back from Moscow was that it didn’t feel like a city with the population claimed. It felt smaller.

    His wife had studied Russian, and struck up conversations with people. One topic was respective families. She calculated that the fertility rate of the population of Moscow was significantly below replacement levels. If we believe the population quoted at the time the iron curtain was installed, we can figure out how much the population would have shrunk in the interim. This number was close to Robert’s gut feeling.

    Robert Heinlein asked a friend of his who was in an intelligence field in the military what he thought Moscow’s population was. He thought for a moment and came up with a number very close to Robert’s and Virginia’s. His was based on logistics: given roads and rivers shown on the satellite and aerial photos, what quantity of supplies could be brought in to feed people? Answer: enough to feed about three quarters of a million.

    I wonder what the numbers are these days.

    Just sayin’

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  3. Redistributing existing wealth doesn’t work — altho ending copyright & patents might temporarily work for ending “monopoly profits” on ideas that can be copied. Replacing patents with prize rewards might be feasible, but seems very unlikely to me to be optimal for progress.

    The desire to end poverty is pretty good. It’s especially good for helping the “deserving poor”, altho it’s hard to know who is and who isn’t, especially for any gov’t program. Universal Basic Income is an attempt to replace too many non-optimal gov’t programs with a single non-optimal program, but a recent trial in Finland, supported by the World Bank, seems to have been non-successful.

    I support the gov’t having a goal of Maximizing Employment — jobs for everyone who is willing to work. And no welfare for any who are not. Low paid National Service 8-5 jobs, where the workers can leave and get better jobs, if they can find them.

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