What if you give all the poker players the same amount of money at the start of the game.
Would they all have the same total at the end?
You can provide one chicken to everyone on the planet. Roughly speaking, one-third would
have it as the night’s meal. Others would keep it to get an egg daily. A negligible
percentage would make it mate with a rooster to have more chickens. In a few years, this
group would have more eggs and chickens. And they would sell them to the rest of everyone.
This group chose not to get impulsive. This group sacrificed the short-term benefit for
a long-term gain.
The truth of the matter is that some people could sacrifice the ‘here and now’ for
long-term well-being. Others would say ‘Oh, Five grand - I’m gonna buy me a Gucci bag!’.
Wealth inequality is not a distribution issue entirely. Individual choices and temperament
can’t be neglected. A one-time reset does not change anything. Wealth distribution may
sound like choosing altruism over greed, but there is a lot more to it. This utopian fantasy
attracts a lot of people so let’s dig deep into it.
Before we entertain the hypothetical question of wealth distribution, a few questions must
be answered. You can share your replies in the comment section below.
One. What do you mean by wealth? Do you mean money? All the infrastructure? Invested capital?
Savings? warehouses? land ownership, stocks? A combination of these or something else?
Two. Do you want the wealth distribution event as a one-time thing, or do you want it to
happen regularly? For example, every ten years.
Three. You’d have to sell everyone’s assets for the re-distribution to happen. But how
would you sell them if there are no buyers?. If there are buyers, they would become rich
from purchasing these assets, which contradicts the goal of making everyone financially equal.
Think about if you take all the money Apple has and distribute it to people who want to
buy an iPhone. The money will go back to Apple.
Four, who would manage this whole event? If the answer is the government, how much do
you trust your government? Do you think the government would become highly corrupt, given
they would have sole power over everyone’s finances?
Five. For wealth distribution, you would have to take money from a lot of people. Do you
think of it as stealing? You can complain about how few people became wealthy through
inheritance, scams, using capital as leverage, abusing the system, corruption, and so on.
BUT, there is a disproportionately huge number of people who have earned wealth through their
talents, solving a problem, hard work, and perseverance, among other factors. Why would
you take anyone’s possessions including their past earnings and future investments?
Is it ethical, moral, or even legal to take someone’s money that you did not work for?
Last question. How would you redistribute the wealth without halting the production
lines? People think that Jess Bezos, Elon Musk, or some other billionaire have their
wealth in the form of money or gold put somewhere in a vault. And they can just raid, distribute
and go shopping. This is an absurd understanding of money and economics. Much of the world’s
wealth is illiquid, meaning it can't be easily converted into cash.
Wealth is created by hard work to produce goods and services, which are valued by others.
Money is a unit of measurement for this productivity. This number can be changed depending on what
people value and devalue. Wealth is not static. And the idea of anyone having X amount of
the world’s total wealth is a fallacy, to begin with.
Let’s say, somehow, you were able to seize the world’s wealth, and distributed it equally
among everyone. As a result, most people would become poorer all of a sudden. They would
lose their cars, houses, savings, retirement, clothes, gadgets, and so on. In return, they
would get a fixed amount. This amount can be calculated by total wealth divided by the
total number of people in the world. You are welcome to do this math in the comment section.
At the very base of our economic system is the idea of SCARCITY. There is a limited number
of things in this world. Either everyone CAN’T have all the things… OR everyone can have
them for those things to lose value.
So on the very next day wealth distribution happens, people would have an enormous increment
in purchasing power. They would go on a spending spree. They would buy things they could not
afford earlier. Store shelves would be cleared off in a few days. BUT, you have taken money
from the people who were refilling these stores. So businesses would have insufficient capital
to operate. This would keep the stores empty. There would be more buyers compared to the
products available. A surge in DEMAND with a tremendous drop in SUPPLY. This would result
in rampant INFLATION. Prices would skyrocket. And you would see your newly found wealth
lose its worth.
As you have redistributed the wealth that was earlier a source of capital for industries,
warehouses, millions of employees, food, medical, and so on, you would see these sectors go
down among many others. The world would come to a halt. Economies around the world would
suffer severe disruption including food production. This would result in mass starvation and deaths.
Societies will end up in anarchy and violence. This would make the world degraded into situations
like “every man for himself” or “survival of the fittest”. The world would see an
economic collapse and absolute chaos.
Addicts would buy what they buy. Some would buy and flaunt things they have always wanted
to purchase. Some would go on to take revenge for which they didn’t have resources earlier.
Babies would have the same amount of money as teenagers, young adults as well as aged
people.
Farmers won’t sow. Workers in your favorite food outlet would go on an unspecified leave.
People who choose to work dangerous jobs would refuse to do so. People who opt for jobs that
are comparatively less desired by others would leave. They don’t have to work for the minimum
wage as they are on an equal footing with you. As there would be no oil-producing companies,
there would be no other industries that require energy. You would have no cars as they were
sold for re-distribution.
A disproportionately high percentage of people would see no point in contributing to the
economy, expecting another wealth distribution event. Incentivizing the lazy and laid back
would have serious consequences. There would be no incentive for those who work hard, take
risks, and invest. You will see a major decline in entrepreneurship and businesses based on
innovative ideas. If indolence is rewarded, why would anyone work?
As many people would become lazy, we would see a sharp rise in population.
Greed is not going to disappear. The desire to get more than others would still exist.
Hence an increase in the crime rate. In short, everyone would be equally poor, except for
the guys with guns.
And here is an interesting viewpoint. Since we are distributing it evenly among everyone,
most of the wealth would go to the most populated countries starting from China.
In short, countries that have a higher than average income would see depression, mass
starvation, and an economic collapse. Countries that have a lower than average income would
see crazy inflation that would destroy their economies.
As soon as people begin to buy anything or trade, inequality would start to breed in.
For example, you would find a farmer to produce food for your survival, who would ask for
the money you have. The farmer would need equipment that he would have to find from
somewhere in exchange for money and this cycle goes on and on.
Over time, big spenders would lose all their money. Those who make money by offering products
and services would take that money and grow rich. Eventually, we would drift towards the
place where we were before the distribution happened.
To a small degree, money would shift hands. Few would be able to get out of the shackles
of poverty. But most people would follow the same fate as lottery winners. Some spoiled
wealthy kids would become poor and some smart poor kids would be wealthy. But that would
not be the case for everyone. But, it would still be unevenly distributed and we would
still have poor and wealthy people. And poor would again have disadvantages while the rich
would use the accumulated capital to get even richer. This is explained by ‘Matthew Effect’: “For
to every one who has more will be given… but from him who has not, even what he has
will be taken away.”
It could take decades to restore the economy to the same level of affluence that was observed
before the re-distribution. Eventually, people would wake up from this utopian dream. And
in a while would probably complain about wealth inequality again.
If there is a law enforcing lottery winners to distribute their prizes equally, would
anyone signup in the first place?
Wealth acquisition and accumulation is one of many human motivations. This motivation
makes them exercise their physical and intellectual capabilities. Take away wealth and you destroy
everything!
History shows the world has witnessed most wars as a result of one group having something
the other group wanted. Be it hunting areas, cattle, water, land, or any other resource
the other tribe thought of as valuable. Kings, queens, or any other titles, have always been
on the agenda for taking over anything precious. The proposition to redistribute wealth is
similar. Although this particular idea emphasizes the notion of FAIRNESS to gain what it wants,
rather than FORCE. Friedrich Nietzche called it "Slave Morality". Similarly, even if you
re-distribute the wealth, those who feel they should have more than others would break wars
to get what they want. This is all deeply rooted in human psychology.
The notion of wealth distribution requires humans to convert into another specie with
a different thought process, emotions, and patterns. This is going to sound blunt to
many people but the world we live in is not a place where complete equality could exist.
There are plenty of reasons for that, including but not limited to vast individual differences,
temperament, and choices that manifest in our actions.
If you look deeper into human psychology, you would come across the idea that humans
are not made for complete security and utopia. We do need a specific amount of security but
at the same time, we also like to explore what’s unknown to us, which is anything
but secure. People who preach wealth distribution acts like being on high moral grounds, offering
permanent security and economic prosperity like you would ‘live happily ever after’
like the end of some Disney movie. First of all, this never happened to any society where
such principles were practiced. Secondly, even if it could go smoothly, humans would
still create some kind of a mess and look for some chaos or try to go into the unknown
because that's who we are. This is beautifully explained by Fyodor Dostoevsky, in ‘Notes
from Underground' with his cake theory.
Wealth distribution was tried throughout history under different names with different suffixes,
and remained a colossal failure economically and politically, as well as morally. You can
call it communism or whatever. But whenever ‘Equality of Results’ was forced on people
in the name of revolution, the affluent people were killed. Kulaks in Ukraine was an example.
If you want to see a recent example, take Zimbabwe’s Land Reforms, which resulted
in economic turmoil, taking the country from a progressing economy to a failed state with
hyperinflation and starvation. Apologists keep on coming up with made-up excuses for
how this was not the case. Zimbabwe was left with no currency of its own.
Another issue wealth distribution would create is the decline of ‘Individual Responsibility'.
People would expect more wealth distribution events instead of remembering that ‘You
Put The Food On Your Table’.
A sort of arrogance would also be instilled in people’s minds, making them unwilling
to work for another person. Why should I work for you would be a trending question?
If everyone has the same amount of wealth, it actually won’t matter anymore. Things
that everyone is capable of buying are not worth mentioning. For example, in an advanced
western country, no one mentions having running water or a toilet because all of them have
it. You are only rich when others are not. In simpler words, being rich is a relative
thing. When everyone is rich, nobody is rich anymore. Humans will always find ways to distinguish
themselves from their fellow beings. They will find new standards of rich and poor.
The wealth would revert unequally according to the Pareto Principle, named after economist
Vilfredo Pareto, which specifies that 80% of results come from 20% of the causes. It
asserts an unequal relationship between inputs and outputs. For example, 20% of criminals
commit 80% of crimes, 20% of employees are responsible for 80% of the results, 20% of
the population owns 80% of the wealth, and so on. Pareto principle, also known as the
80/20 Rule, is a distribution of natural form. Totalitarianism is the only way to keep the
distribution anything but natural. In the end, Pareto reasserts itself.
Modern societies do have redistribution mechanisms in the form of welfare systems for people
who require immediate assistance. We also have charities that allow people to share
wealth voluntarily. We should continue to provide more tools to everyone so they could
create more wealth. And also make people financially literate so they could make better money decisions
to manage and grow their wealth. If this continues to happen, eventually we will see solutions
offering comfortable living standards to everyone so the disparity takes its course in a way
that surplus wealth does not unfavorably affect others.
Let’s celebrate how the world has grown its wealth in the last few centuries. Let’s
acknowledge how we are continuing to lower poverty rates around the world. Let’s cherish
what we have and remember: if you are on the same boat as everyone else, enjoy sailing!
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