Comforting the Comfortable Part Two, or Sullivan’s Follies Redux

In the last post, I followed John Cole in snorting derisively at Andrew Sullivan and James Joyner for demanding that we honor the rich and super rich rather than merely tolerating them.  In that post I concentrated on the pure wrongness of the concept of taxation that the two offending writers presented.  Here I want to undermine their larger claim, that we owe homage to the best off among us because it is only through the energy and talents of those individuals that (a) they gained their wealth and (b) the rest of us receive all the boons of modern living.

The shorter of what follows is simple:  Joyner and Sullivan are suffering from Stockholm Syndrome.  They need help.

For the reality is that the rich are not Galtian autonomous superheroes. They exist, as we all do, in a context in which a huge range of circumstances conspire to permit them to do whatever specific acts they did to get stinking rich.

Sullivan and Joyner miss this entirely. The tenor of their posts seem to evoke the hero of industry — they thrill to Kipling’s portrayal of folks like Captain’s Courageous’ railway magnate Harvey Cheyne the elder.  So, just to take a first cut, I thought I’d do something radical…like look at some data.

To get a handle on whether this vision is accurate, I took the path of least resistance, a tour through the Forbes 400 list of the wealthiest Americans.

And it turns out you can knock out almost a third of the list from the superhero game right from the start:   They, including six out of the top ten richest Americans inherited either all their wealth or the foundations of their fortune.  They are self-made sons and daughters.

The rest, about 280 out of 400, made their money across a range of activities from New York real estate to Facebook. That might seem to suggest that Sullivan and Joyner might be onto something, that the preponderance of the American super-rich are exceptionally hard working creative types building wealth out of sweat, brains, and a determination that should earn our admiration, and apologies for the temerity to ask for Uncle Sam’s cut.

And they’re even kind of right — but only if you suffer from severe mental presbyopia.  Steve Jobs, Bill Gates, Charlie Munger — these are people who did great things after investing enormous amounts of time and energy and who knows what else.  They are admirable, and admired — even by stone lefties like myself, noting as I type the three Apple devices at my fingertips.  These people have been central to developments that make daily lives of millions better, and for that they are, and ought to be celebrated.

But we aren’t talking about kudos here, but rather the notion of being “self-made” — and the degree to which we need to grovel when seeking to move the tax rate on the wealthiest from its historic low to its historic near-low.  And when you dig a little deeper into the list, it gets a little funky to say that even so famously visionary a figure as Jobs, for example, got to the billionaire’s club simply on the strength of his presumptive Galtian worthiness.

For example, what of the 40 gazillionaires whose fortunes derive from technology?  How much of that wealth, and all the tools and systems that they’ve been involved in that make our lives richer, derive from critical government expenditures.  The semiconductor industry was famously nurtured by the American defense establishment — especially in the development of ballistic missiles and space exploration.  How about the internet (and the fortunes of Brin, Page and Zuckerman)?  There was this little thing called ARPANET, another DOD expenditure, that had something to do with it — and if you ever happen to do anything on the World Wide Web (like read this tome) then you have the governments of the European sponsors of CERN and the US taxpayer support for SLAC to thank.

And so on.

Go a little further into the list, and you’ll find that 94 of the 400 derive their wealth from a category called “investments” — a tally which includes stock picker/conglomerateurs like Buffett and Munger along with hedge fund types, bankers, stock jobbers (actually, mutual fund merchants, but I like the old term).

That’s a wide range of actually quite different functions, but for this post there are two points:  one is a that a great deal of this wealth is simply not that impressive in the hero stakes.  A lot of the folks on this list may  have performed an essential feat of capital allocation…or they could have harvested a surplus that could otherwise have gone more efficiently into capital formation.  The evidence of the last decade suggests that plenty of the latter fueled many individual fortunes…

…But even more than the argument that some of the super rich in the financial sector basically ripped off the economy and the average American, the key point here is that our financial system, just as much as our technological economy, depends deeply on a strong governmental infrastructure.  Bank insurance schemes, (FDIC etc.); loan facilities (the Fed); extensive research into every corner of the economy (half of the executive departments); market regulation (SEC, many others — known to be highly imperfect, but essential to the system nonetheless) and so on — modern capitalism requires an enormous infrastructure to create markets in which the participants can participate.  I know that this is a little subtle — but the collapse of the banking system in Sept. 2008 and its rescue over the next weeks and months provide an at-the-extreme example of the central role government, supported by taxation, plays in the system through which one quarter of the 400 richest Americans gained their fortunes.  And that role keeps on going even in more placid times.

Self made, perhaps, many of them, but only within a system made workable by, in essence, the willingness of 300 million Americans to pay their taxes and empower their government to guarantee the system.

This has gone on long enough.  You can go on down the list and look for other examples yourself: the medicine-based fortunes, entangled at every turn in a system of government support from direct health care payments to enormous taxpayer investments in drug discovery and basic research; the sports wealthy, whose wallets have been fattened on many occasions by a wide variety of taxpayer-delivered goodies, from roads built around stadia to bonds sold, with taxpayers on the hook, to subsidize “private” business.  Media?  See internet, taxpayer funded, above.  You get the picture.

At long last, then:  all this is to not to deny  that the rich, many of them, haven’t done impressive things that have in many cases dramatically improved one aspect or another of human experience.

It is to say that they have already been very richly rewarded for their accomplishments, that even the most original of them have reached their happy state within a framework of public goods, owned in common, and paid-for-by-others  — and to note that a substantial proportion of them have less reason than others to claim particular personal credit for their fortunate situation.

And that in that context, being obscenely wealthy ought to be its own reward; taxation the fortunate result of success and the down payment made on future prosperity.  It is the price owed, not confiscated, to support a system, a government and a society that however imperfectly did and does so much to create the opportunities in which many of these folks got so rich.

Pace Sullivan and Joyner, the rest of us need reward them not by giving them wet sloppy kisses just for being the exceptional specimens they are (or aren’t), but simply by buying what they’re selling — when and if we want to — and watching them get richer.

And paying a buttload more tax.  Right now.  Lots.

Image:  “Jesus and the Money Changers” from a parish church in Villach, Austria

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4 Comments on “Comforting the Comfortable Part Two, or Sullivan’s Follies Redux”

  1. Kaleberg Says:

    You should also note that most of the extremely wealthy became wealthy through the operation of government chartered collectives. The big divide isn’t between collectivists and individualists, but rather between democratic collectives and authoritarian collectives, such as limited liability corporations. Collectivism is extremely important in wealth creation. No individual can do it alone. The issue is whether that wealth goes to one party, or is shared more broadly.

    Another consideration is that we measure wealth by the quantity of private property one holds, but private property isn’t magic, it is a government function. In fact, one way to tell if something is a government is to see if it implements some form of private property. Just about every billionaire on the list owns government printed money, government protected real estate and shares in government chartered corporations. Since they use so many government services, they’d really rather not have to pay for them, but that used to be part of the deal.

    P.S. The next time someone starts babbling about his money not being the governments, ask him to show you some that isn’t stamped United States of America all over it and isn’t signed by all manner of government bureaucrats.

    P.P.S. Read Berle & Means for a very good analysis of U.S. collectives. It was written in 1930 or 1931, but it is available in newer editions.

  2. jeff Says:

    Didn’t the Google founders get their start working under NSF grants as well?

  3. BugMeNot Says:

    When you get down to it, all the ultra-wealthy, **including the ones who inherited their dough**, because so wealthy because of the basic infrastructure and economics of our society. They made it because of *us*, one way or another.

    And now a bunch of them are whining their asses off at being expected to contribute back to the society that made them?

    Let the lot of them go Galt. Puh-leeeeese! We don’t need these whining babies.

  4. mkj Says:

    I think patent and copyright laws should also be mentioned here where society collectively decides to let the person who invents something or has an original idea make money out of it.

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