Do The Poor Suffer Under Capitalism?

The rich get richer and the poor get poorer. So the saying goes. Opponents of Capitalism like to claim that the poor suffer because the rich are constantly increasing their wealth and using it to oppress the poor. They see the successful as a parasite somehow living off the suffering of the unsuccessful.

The fallacy here is that wealth and success are zero-sum - one man's gain is another's loss. That there is a pie to be divvied up and one man's larger portion is another's smaller portion. Under this false premise the above would make sense - the rich have more (it doesn't matter how they got it), so the rest have less. How unjust!

The truth is that there isn't one big pie being divvied up. There is a separate pie for each individual, each sized according to how productive he is. Every man's consumption is a direct result of his production. One man's effort and consumption in no way negatively affects another's.

There are two common sub-fallacies to the notion of zero-sum wealth. The first is that if one looks around at any given time, there is a finite amount of stuff to behold. Yes, at any instant there is a finite amount of wealth which is somehow divided up between owners. But what must be taken into consideration is that every piece of property was created. Everything that is somehow valuable to anybody was created in some way - the value was unlocked in some way. An item was either manufactured by someone, discovered by someone, or the use of which was invented by someone. The potential wealth of any man is practically unlimited, any creation, invention, or production that he may make does not diminish to potential of any other person.

The second sub-fallacy to zero-sum wealth is that because there are limited natural resources, and those are all owned, then those without resources have no way to generate wealth. The problem with this is that it's wrong on two accounts. First there is no limit to natural resources, unless you consider that limit to be the entire mass of the universe. The ultimate resource is human labor. (See The Ultimate Resource 2 by Julian Simon) Which leads into the second problem which is that those without resources have no way to generate wealth. With human labor as the ultimate resource, and each man the owner of his own labor, each man has the potential to gain anything he wants - depending on his productivity.

Those who view the disparity between rich and poor as an indication of tragedy usually want to rectify the situation. But the only means to achieve egalitarianism in a world where each man has equal rights but unequal ability is to trample those rights. The only tool available is force. And no amount of force will make men more able, force can only make men less able. The only means of making "the poor" successful under capitalism is to destroy the rich. But because wealth is created and consumed individually, this won't make anyone better off for long. You can kill or rob a successful man and live off of the fruits of his labor for a while, but you will have killed the tree, and once those initial fruits are gone, there are no more where those came from unless you find a new victim to rob. This is a pyramid scheme that can only end in death for all.

The truth is that the wealthier those around you are, the better off you are. This is very important. The more wealth your neighbors have, the more they can buy. The economies of scale drive prices down, increasing your standard of living, and decreasing your cost of capital so you can increase your productivity and further increase your standard of living. One man possessing enormous wealth does in no way negatively affect any other people, unless he uses that wealth as a means to initiate force.

The saying should be: the rich get richer and the poor get richer. Everyone gets richer under capitalism where they are free to do so.

Copyright 2001 by Jeff Landauer and Joseph Rowlands