In another forum I heard the claim, in response to an objection to wealth redistribution, that “capitalism” and “free trade” are all about “wealth redistribution. Indeed, this individual claimed, all economics was wealth redistribution. This is based on the myth that in any exchange someone gains and someone else loses.
That turns out not to be the case.
One of the basic principles of economics, taught literally the first day in the microeconomics class I took in college, was that the “value” of any given “something” varies with circumstance.
One example of that is the principle that the more of something you have, the less each unit of that something is worth to you. For example, if I have one apple, that apple has a certain value to me. If I have 100 apples, each individual apple has a lot less value to me than if I only had one. If I have a hundred apples I’m going to be pretty sick of apples by the time I eat that hundredth one. If I have a thousand, I don’t think I could eat them all before they go bad. If I have ten thousand, I know I can’t. The apples beyond the point where eating them becomes a chore rather than a pleasure are worthless to me.
If someone else has one pear or 100 or thousand or 10,000 pears the same principle applies.
Now, if I meet that person with 100 pears I can trade him some of my apples for some of his pears. Those apples I trade away are worth more to him than they are to me and the pears the other person trades away are worth more to me than they are to him. The end result is that we both come away from the trade with more “wealth” (in terms of what each of us value than we started). So long as the trade is voluntary, i.e. “free trade” (not coerced by force) that will always be the case. The trade will only happen if both parties see themselves as coming out ahead. It only goes away when the trade stops being “free.”
Thus, the economics of free trade, of voluntary exchange, is not a zero sum game. It is about as far from a zero sum game as its possible to be. It’s the very antithesis of a zero sum game.
And it can’t be “wealth redistribution” in that both parties of the trade end up with more wealth based on their own values. The only way it even looks like “wealth redistribution” is when you have a third party, outside the trade, looking at it from the POV it values. When that third party decides that the 20 apples I traded were worth less than the 30 pears I got back the claim is made that I “took advantage” of the pear person. However, the pear person wouldn’t have traded those 30 pears unless they wanted the 20 apples more, unless they valued the 20 apples more. From their point of view they may think they took advantage of me–except that I made the trade freely.
It’s possible, of course, for some individuals to amass a great deal of wealth in terms of what they value–more than some other individuals amass. That does not invalidate the principle. So long as the exchanges are voluntary, they only amass that wealth as they see it by providing something that other people value at least as much as they see it. Henry Ford accumulated a great deal of wealth (in terms of money) by selling Ford cars. He did so by making a great many other people personally wealthier (in terms of mobility and the freedom that entails) such that they were willing to give him that money for his cars.
Voluntary exchanges make everybody who engage in them richer. It’s only when force is involved (“you pay or I will do violence to you”) or deliberate deception (only the top layer of this basket is apples, the rest is just dirt but I’ll claim it’s apples) or failure to deliver (“thank you for these pears. Apples? What apples?”) does that principle break down. And therein lies the three things government can do that actually help the economy–protect the individual from use of force, forbid the misrepresentation of goods and services being exchanged (i.e. act against fraud) and enforce freely entered into contracts.
In the end, free trade, voluntary exchange = “everybody wins.”