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In defense of wealth accumulation in the wealth gap debate

Ezra and his good friend Bart (who's also our pastor) have put together a great forum to discuss issues larger than ourselves. It's called weover.me. The first topic was "What to do with our billions." Based on the first essay and the follow-up replies, Ezra and Bart put together two debate teams to discuss this topic. Invariably, it ended up focused on the growing wealth gap in our country. One sided, called Poppycocks defended individual freedom and the current capital structure. The other side called, "Fiddle" fought for change and sought to poke holes at today's current framework, though they didn't really provide any good resolution.

I was on the Poppycock team side. Here was my contribution though I believe my team members did a far more superb job than I.

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For me, this is a debate between government-enforced systems to redistribute wealth and narrow the wealth gap vs individual freedom to accumulate wealth and distribute when and as we choose fit.

It is between government giving the poor handouts vs. the poor laboring and striving for goals while achieving dignity and self-respect along the way.

This is not to say that I don’t believe people shouldn’t give systematically and abundantly to the poor or to charities or to worthy causes. I believe giving is our responsibility: “Work super hard. Give a lot back.”

This is not to say that a change in education whether at home or in schools is not needed.

We owe it to ourselves, to our children, and to society to teach younger ones to give wisely, give often, and to be cognizant of those who are less fortunate.  

This type of education is by far the biggest driver in helping those in need. If you ask enough people why they accumulated wealth in the first place, many will tell you it’s because they wanted to give back and have an impact on the well being of society.  

Buffett said this when he was younger:  “One way or another, we form ideas about what we’re going to do if we turn out to be wealthy… for me it was in my 20s, reading what those other people had done.”

He was referring to   Andrew Carnegie who said: “The man who thus dies rich, dies disgraced.” Another billionaire said: Without sharing wealth, what’s it all for?

Many people (wealthy included) believe this. As some of you probably know, Warren Buffet and Bill Gates have started a pledge campaign, which has raised $150 billion dollars (about two-thirds of all the charitable giving last year - $250 billion).

So, ‘let’s be clear. We’re fortunate that people do have a conscience and many desire to give back.     

The question at hand is should people give back more systematically throughout their lives, and not just at the end? Should corporations be mandated to share the wealth? What can we do to make society more egalitarian so a certain few aren’t living the high life for the majority of their lives?

I want to argue two points: 1) Not everyone gives to charity at their deathbed. 2) Many corporations, led by the decisions of the individuals running them, and not by government, are already giving systematically to charities.

This whole discussion started with Bill Gates, whose wife is 44 years old. How many of you are in your 40s? How many of you would be willing to pledge half your fortune today? Bill Gates is also not on his deathbed. He’s 55.

Mark Zuckerberg just gave $100 million to education. He’s worth anywhere between $7 to $10 billion, so sure that’s only 1% to 3% away of his current net wealth. But the point is he’s already giving in earnest. He also pledged to give half his money away to charity while he’s still young. And he’s not even 30.

Many others give systematically already. Salesforce.com gives 80% off their products to charities and non-profits. Zynga has created Zynga.org to raise money for charity and relief efforts. It raised half a million for aid to Haitian people during the 2010 earthquake. HomeAway, which owns VRBO, started a corporate giving plan last year and now works with local communities and Habitat for Humanity to help those who can’t afford homes.

The point is that individuals do give, and probably more so when they have more wealth.  I highly disagree with the Harvard sociologist Robert Putnam who says that the rich distance themselves from the poor and the poor are cast aside as “less-than-human discards.”

If anything, many who do come to wealth do more to recognize the poor.

And, often they’re able to do this because they’ve been able to focus on staying competitive and productive, specifically at their organizations.

There is a virtue of parsimony here. Adam Smith said: “Parsimony (or saving) leads to an increase of the capital available for the employment of ‘productive’ labor.” The key word here is “productive.”

Our corporations need to spend wisely, just as we do. 

Allowing the government MORE MONEY to make our decisions isn’t the wisest of choicest. We may not agree whether they can do a better job than individuals to distribute money to social causes. Sometimes they do. But not often. Let’s take a look at a couple examples.

In an effort to expand home ownership (another way to equalize the wealth), President Clinton pushed for ways to get lenders to give loans to first-time buyers. President Bush expanded on this because it dovetailed with his “Ownership” Society goals as well. As we all know, what happened after that was the unfortunate mortgage debacle as many people borrowed against their homes and eventually defaulted when the housing bubble burst.

Two years ago the DOE (dept of energy) put its “clean economy job creation” hopes on Solyndra and bet half a billion dollars on it.  As we know, Solyndra recently went bankrupt.

The point being that government is just as likely to fail, and often fail pretty big if we allow them to take our tax dollars to expand equality and create jobs.

If there’s any role that government can play, I believe it’s in allowing individuals to give more to charity. Right now, we can deduct half of our gross income. But for many, their wealth is tied in up in their assets. And, if they’re entrepreneurs, they’ll take a salary of $1, like Mark Zuckerberg. So for the $100 million he gave, he received 50 cents in tax deductions. I also believe the government can provide more incentives to create jobs, which is what would really narrow the wealth gap.

 

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