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Economics
The Fallacy of Redistribution
The history of the 20th century is full of examples of countries that set out to redistribute wealth and ended up redistributing poverty.
The recently discovered tape on which Barack Obama said back in 1998 that he believes in redistribution is not really news. He said the same thing to Joe the Plumber four years ago. But the surfacing of this tape may serve a useful purpose if it gets people to thinking about what the consequences of redistribution are.
Those who talk glibly about redistribution often act as if people are just inert objects that can be placed here and there, like pieces on a chess board, to carry out some grand design. But if human beings have their own responses to government policies, then we cannot blithely assume that government policies will have the effect intended.
The history of the 20th century is full of examples of countries that set out to redistribute wealth and ended up redistributing poverty. The communist nations were a classic example, but by no means the only example.
In theory, confiscating the wealth of the more successful people ought to make the rest of the society more prosperous. But when the Soviet Union confiscated the wealth of successful farmers, food became scarce. As many people died of starvation under Stalin in the 1930s as died in Hitler’s Holocaust in the 1940s.
How can that be? It is not complicated. You can only confiscate the wealth that exists at a given moment. You cannot confiscate future wealth — and that future wealth is less likely to be produced when people see that it is going to be confiscated. Farmers in the Soviet Union cut back on how much time and effort they invested in growing their crops, when they realized that the government was going to take a big part of the harvest. They slaughtered and ate young farm animals that they would normally keep tending and feeding while raising them to maturity.
People in industry are not inert objects either. Moreover, unlike farmers, industrialists are not tied to the land in a particular country.
Russian aviation pioneer Igor Sikorsky could take his expertise to America and produce his planes and helicopters thousands of miles away from his native land. Financiers are even less tied down, especially today, when vast sums of money can be dispatched electronically to any part of the world.
If confiscatory policies can produce counterproductive repercussions in a dictatorship, they are even harder to carry out in a democracy. A dictatorship can suddenly swoop down and grab whatever it wants. But a democracy must first have public discussions and debates. Those who are targeted for confiscation can see the handwriting on the wall, and act accordingly.
Among the most valuable assets in any nation are the knowledge, skills and productive experience that economists call “human capital.” When successful people with much human capital leave the country, either voluntarily or because of hostile governments or hostile mobs whipped up by demagogues exploiting envy, lasting damage can be done to the economy they leave behind.
Fidel Castro’s confiscatory policies drove successful Cubans to flee to Florida, often leaving much of their physical wealth behind. But poverty-stricken refugees rose to prosperity again in Florida, while the wealth they left behind in Cuba did not prevent the people there from being poverty stricken under Castro. The lasting wealth the refugees took with them was their human capital.
We have all heard the old saying that giving a man a fish feeds him only for a day, while teaching him to fish feeds him for a lifetime. Redistributionists give him a fish and leave him dependent on the government for more fish in the future.
If the redistributionists were serious, what they would want to distribute is the ability to fish, or to be productive in other ways. Knowledge is one of the few things that can be distributed to people without reducing the amount held by others.
That would better serve the interests of the poor, but it would not serve the interests of politicians who want to exercise power, and to get the votes of people who are dependent on them.
Barack Obama can endlessly proclaim his slogan of “Forward,” but what he is proposing is going backwards to policies that have failed repeatedly in countries around the world.
Yet, to many people who cannot be bothered to stop and think, redistribution sounds good.
COPYRIGHT 2012 CREATORS.COM
About the Author
Thomas Sowell is a senior fellow at the Hoover Institution, Stanford University, Stanford, CA 94305. His website is www.tsowell.com. To find out more about Thomas Sowell and read features by other Creators Syndicate columnists and cartoonists, visit the Creators Syndicate Web page at www.creators.com.
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Aristocat| 9.20.12 @ 6:09AM
This is brilliant: "Fidel Castro's confiscatory policies drove successful Cubans to flee to Florida, often leaving much of their physical wealth behind. But poverty-stricken refugees rose to prosperity again in Florida, while the wealth they left behind in Cuba did not prevent the people there from being poverty stricken under Castro."
And the same thing will happen here if Obama is re-elected.
Alan Obama Fan Brooks | 9.20.12 @ 8:20PM
but wealth is massively redistributed to the octogenarian Sowell!
topcat52| 9.22.12 @ 4:53PM
What?
Darin| 9.20.12 @ 6:43AM
Margaret Thatcher had the problem with redistribution (aka socialism) pegged. "The problem with socialism is that eventually you run out of other people's money." All redistribution does is lower everyone to the same level of misery.
Curtis Rasmussen| 9.20.12 @ 1:11PM
Last night was back-to-school night in my town. Parents could visit the classes and teachers that will influence my child over the next 9 months.
In the history class, I listened to the teacher, teary eyed, go off on a rant about how the American Indian was the true American, and their stolen land should be given back. Unfortunately, people today have nothing to do with crimes perpetrated 100+ years ago, except for having the 'bad luck' of being born here, yet everyone will suffer when their property is confiscated, either directly or thru taxation.
This lefty whack job teacher, and potentially others are programming our kids to accept the victim route, reparations included, instead of teaching them about individual responsibility.
Time to make an appointment with the principal.
Albert Constantine Jr.| 9.20.12 @ 8:24PM
Mr. Rasmussen, I would respectfully ask the next time that you encounter such a presentation from that teacher regarding the victim status and moral superiority of the Indian culture that you consider scalping her, and donating the prize to a local Native American arts and crafts program.
Parker| 9.20.12 @ 10:38PM
Just get your children out of there. good grief.
TLP| 9.20.12 @ 6:58AM
As always, a perfect article.
The problem with these people, and FOR us people, is that this is all they have. This is their Religion. These are not people of Accomplishment. They are people of Envy, who Covet their Neighbor's Possessions, and know that they will never acquire them on their own, so they TAKE THEM.
To each, who don't wanna get off their Ass, til noon. From each, until they decide that Singapore is Lovely this time of Year. And all of the rest of the year, as well.
It's The Law of Diminishing Returns.
What we've seen, under this THING, and his Political and Media Allies, is the Incorporation of the Social Security System's Model, as this Administration's Economc Policy.
When it started out, almost nobody lived to be 65. So, everybody was Paying In, with just a coupla Old Ladies Taking Out. Those numbers have been going in Reverse for Decades, now. And we are now at the point of Unsustanability. In fact, it is now being Intentionally Destroyed, as The One has had All Payments To The Fund SHUT DOWN, for the last Year. The only stream of Income to Social Security - FICA - is the only Tax that he wants to Cut.
Interesting, no?
Unions like to Spread the Wealth. Right up until the Well Runs Dry. And then they blame the Well.
TLP| 9.20.12 @ 7:31AM
We used to have so many Car Companies, and so many Airlines. That made for lots of Jobs. But then the Unions got their Nose under the tent, and Organized Crime got a Stranglehold on the Unions.
America doesn't make things, anymore. Don't take my word for it. Look at the Labels on EVERYTHING.
Long story short: "It's the Well's Fault".
Past is Prologue.
What do we hear from The One They've Been Waiting For, everytime he opens that mouth of his, that a lotta people claim he used to open in The Gay Bars and Bath Houses of Chicago. (Hat Tip WND)
"It's the Rich. The Rich don't pay enough. The Rich don't pay their fair share. People people better cough it up. Wouldn't want a Bus Load of Pant Loads from SEIU, showing up at your House, and Crapping on your Car."
This Country used to be The Mother Load, when it came to The Industrial Revolution. We used to Export Products, the way Purp Exports Bullsh*t every day.
Not anymore.
Once again, a Road to Hell has been built, paved by People who's Lust For Power can only be quenched by Crushing everyone else in to the ground, and who claim that their Intenions are Good.
Just don't blame them.
Blame the Well. (You)
Pecos Pete| 9.20.12 @ 8:02AM
Tim: Excellent! May be your best comment ever.
TLP| 9.20.12 @ 9:26AM
I'm glad you liked it, cause I'm cutting and pasting it to another story, as I have to go to work.
Thanks for the Attaboy, and see you at Tomorrow's Contest.
Von Mises Jr| 9.20.12 @ 7:17AM
This is another excellent article by the Great Dr. Thomas Sowell. But the problem is most pernicious when you understand that it is not just the most talented, innovative and financially capable that flees, they take the opportunities with them.
As companies hold trillions on their Balance Sheets as cash or equivalents, or use the cash to buy back stock; no jobs are created for the next level of people who used to be gainfully employed. It is like jamming a screw driver in the spokes of a bicycle wheel. Crash!
The first level effect is loss of GDP and tax revenue. The second level is rampant unemployment and anemic consumer demand. Level three is a Depression, and that is what America will get if it re-elects Obama for more of the same.
Appleby| 9.20.12 @ 7:34AM
The lesson was clearly displayed in the Watts Riots, and later on in the Rodney King Memorial Loot-Ins: when you have stolen everything portable and burned the place to the ground, all you can do is stand in the ruins and squall because you have no stores and no goods...screaming your demands that "somebody" come in and "give" you back what you cannot provide for yourself...and eventually you realize, if you have any brains left to you, that people will not produce goods for the purpose of being looted, and they will not build stores whose fate is to be burned to the ground.
Larry Niven's book "Lucifer's Hammer", which is about a giant asteroid crashing into the Pacific Ocean, contains a very trenchant scene in which the Usual Suspects are raping and looting LA at the moment the gigantic tidal waves and firestorms are about to sweep them away. They are raping and looting because that is all they know how to do...and verily, as the Bible says, they obtain their reward.
Denver Todd| 9.20.12 @ 9:57AM
Maybe Romney should mention the S word and say that it is a failed policy of the past that Obama holds on to.
Alice Moore| 9.20.12 @ 10:00AM
Are the polls really tied? Are there really undecideds? Mencken was a Pollyanna if it is so.
OregonBuzz| 9.20.12 @ 10:12AM
"Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, and its inherent virtue is the equal sharing of misery."
-- Winston Churchill
Riff Raff| 9.20.12 @ 11:08AM
"Those who talk glibly about redistribution often act as if people are just inert objects that can be placed here and there, like pieces on a chess board, to carry out some grand design. "
This is exactly how Marxists see human beings, with themselves as the "players" at the chessboard, while the "lower humanity" (that's the rest of us for those of you in Rio Linda) are the aforementioned chess pieces. That Marxists see human beings this way explains how it is so easy for Marxists to murder people by the millions. People are mere pawns, to be used to gain advantage for Marxists, then sacrificed where needed, again to gain advantage for Marxists. In Marxist ideology there is no God, therefore no divine retribution for sinners. Marxists will die in their sins and in their view no one will punish them for their grand corruptions and genocides. Life to them is a one-shot deal and they will use every trick to gain every advantage to acquire power for themselves to satiate their own egos.
Seeing other people as sub-human playing pieces in a game is what allowed Marxists to rack up 100 million murders in the 20th Century, and they are not done yet. By any objective standard, Marxism is a crime against humanity.
Kwan| 9.20.12 @ 12:03PM
The Prophet Obama and the Commiecrats are trying to convince us that our economic system based on free enterprise/capitalism is a failure because it produces an unequal distribution of wealth. Everyone is free to go out and make whatever amount of wealth they are capable of, but this is unacceptable the Prophet Obama and the Commiecrats tell us. Everything must be equalized says the Prophet Obama, for if citizen "A" has 25 cents more wealth than citizen "B" it creates a distortion in the space-time continuum. The survival of the United States as a free and prosperous nation will depend on the rejection of this Marxist nonsense that will convert our country into a third-world backwater.
cicero| 9.20.12 @ 4:41PM
The amazing thing about communist revolutions, whether they be violent or poitical, is that the leaders of the revolution always end up with all of the money. Mao was fabulously wealthy while the Chinese people were dirt poor. Stalin was fabulously wealthy while th Russian people were destitute. Cuba was and is the same. They always end up with the wealth that is in the country vested in the political aristocracy. The foot soldiers always end up under the bus, or worse. I suppose this is why our government schools refuse to teach history, and prefer a fairy tale version of what happened in the past.
JD| 9.20.12 @ 5:19PM
"If the redistributionists were serious, what they would want to distribute is the ability to fish, or to be productive in other ways. Knowledge is one of the few things that can be distributed to people without reducing the amount held by others."
They claim to. Promoting "education" is a strong plank of the Left. Granted, what they promote in practice is spending more money, strengthening teachers' unions, and teaching kids to be good liberals, none of which teach anyone to fish, but... they try.
John Navratil| 9.20.12 @ 6:15PM
JD,
It is a fatal conflict of interest to ask the government to educate its citizenry. It should seem evident to anyone, now.
JD| 9.20.12 @ 6:24PM
Indeed, state-run education is even more dangerous than state-run media, because children are in their formative years. However, that ship has sailed, which is why the children do not complain about the media.
Thom| 9.20.12 @ 6:54PM
All people that support redistribution schemes are also propelled by envy and jealousy and seek to elevate themselves by tearing down others. Redistribution virtue is then “misery likes company” in practice.
Significant damage was done to the “republic” concept in the 1860s; a fatal wound was delivered with the 16th and 17th amendments. It has been a steady downhill slide since into “democracy” and there are volumes written from antiquity about the failings of “democracy”.
I have no problems with being harsh when principle is at state followed by calamity on a large scale; sloth is not a virtue and it should not be fed like a “pet” dog. Living off someone else’s tax money absent “work” in return or repayment should automatically disqualify someone from voting until said situation is corrected. The whole concept of democratic rule becomes farce when a majority enslaves a minority’s labor for their benefit. A considerable war was fought, amendments were passed to remove slavery as an institution from this “republic” yet today nearly half the country are slaves to the sloth class to an ever increasing degree.
A real hard drop is right ahead and the consequences of that won’t discriminate very much but the sloth class is going to learn a very hard economic lesson eventually. Something is only worth what somone is willing to pay your for it. That includes our misery.
JmsA| 9.20.12 @ 11:53PM
"Socialist ideology, like so many others, has two main dangers. One stems from confused and incomplete readings of foreign texts, and the other from the arrogance and hidden rage of those who, in order to climb up in the world, pretend to be frantic defenders of the helpless so as to have shoulders on which to stand." J. Marti
ReaganConservative| 9.22.12 @ 6:42AM
Excellent article Mr Sowell. Precise, succinct, articulate, factual, and intelligent, ie; the Truth.
Try telling, making a liberal socialist marxist understand the truth of it all, is like trying to make a stone soak up water.
It's amazing how liberal socialist marxist indoctrination propaganda can make people or supposed normal intelligence, into willing complicit accomplices of their own destruction and demise.
Thus ours is not to appease and capitulate to them, but to defeat them.. Just as our attitude was towards the fascist Nazi's, the Imperial Japanese army, and the Marxist Stalinist Communists of the Soviet Union.