Let’s assume that you have invested money in gold during a period in which the price of gold was rising rapidly. The proceeds from your decision to invest at a price that turned out to be low and to sell at a price that turns out to be high are surely the result of your good personal investment decision. From the perspective of individual causation, the wealth that you gained here is the result of your smart investment.
But from a broader perspective, however, how was that wealth created? You didn’t dig that gold out of the ground. It was more than likely dug out of the ground by a South African or Brazilian miner working for pennies per day. And you can’t put that gold to direct use. You can’t eat it, for example, or make a home out of it. You may want to use it in decoration of your person, but it will not in itself provide for your basic needs. How is that wealth realized? Well from the individual perspective, the wealth came from your smart investment. But it’s real use to you comes from the value that your society places on that gold and what you can exchange that gold for in your marketplace to satisfy your needs.
So did you create the wealth? Ignoring society, of course, you did. But when you look at this from the larger perspective, it is the society that created that wealth. An industrialist in South Africa or Brazil hired miners and purchased mining equipment to dig the gold out of the ground using capital that he had on hand or borrowed from a bank. That gold was transported to market over rail lines public and private to factories for further processing and from there to distributors and countless others involved in the global marketplace for gold. And once you have acquired the rights to that gold by your initial investment and its appreciation, you can only enjoy the fruits of that investment by participating in a complex economy to provide you with food and shelter and other needs and desires that you may have.
So was that wealth all the result of your effort? You made the smart investment. But without the industrialists and the miners and the workers in the gold processing plant and on and on to the workers who brought you your food and built your shelter, not to mention the participants and regulators of the marketplace where you made your investment, you would have no wealth at all.
So it seems that wealth is a social good. The question is how best to organize our society to distribute that wealth. I think that if we look at this from this broader perspective of how our wealth arises, we have a better chance of making good decisions on public (social) policy questions like taxation and public spending. To imagine that we can do without or would be better off without society is a fantasy.
So considering this, should we have higher rates of taxation on top earners in our society? Well, it depends on who you are. From the perspective of the 1% who now own 40% of the wealth, a lower rate of taxation that allows them to increase or keep that portion of the social product is much preferred. But from the perspective of the 99% who own only 60% of the nation’s wealth, is a low top rate of taxation a good thing? Well for the years from FDR to Carter with top tax rates of 70-90% the bottom 99% controlled 80% of the wealth, an increase of a third over what they control now. So they were better off with a higher top rate of taxation.
Will top earners try to avoid high rates of taxation? Of course they will. But US history over the years from FDR to Carter seems to indicate that the middle classes became relatively better off with higher top rates of taxation. The middle classes have gotten less and less over the last 30 years of low top tax rates. The question that still puzzles me is why those 99% would vote for policies that impoverish them.
I was going to say that if all that we have done in this discussion was to establish that wealth was a social good, I would be well satisfied. But that is not quite all that we have established. We established that from the perspective of the individual wealth was an individual good, but that without society there is no wealth at all.
So we seem to have here a contradiction. Libertarians are very frequently guilty of ignoring the last half of our two contradictory truths. Socialists may sometimes forget the first half. Plato’s student Aristotle called this the problem of the one and the many. Plato learned this from Parmenides, the father of philosophy. Parmenides sang that the way of opinion was the way of contradiction. He advised taking the other path, the way of truth. But, how to achieve that, stuck as we are on that other path? Well, maybe I will just go back to being happy to our having established the other half of the contradiction, that wealth is a social good. For the rest, we will have to wait, as Dogen said, for a rising tide.