Back in the day, as they say, Europe developed a system of noble families and inherited wealth. The seventeenth Duke of Lancaster inherited his estates from the sixteenth Duke, who inherited his from the fifteenth, and so forth back into the bowels of history. The nobility was rightly viewed as a "class" that commoners had no hope of cracking into. But go through the Forbes 400 today, and perhaps the most remarkable thing you'll find is the scarcity of inherited wealth. Overwhelmingly these people have made the wealth in the current generation. Of the top ten (Gates, Buffett, Ellison, Bezos, C. Koch, D. Koch, Zuckerberg, Bloomberg, Jim Walton, Page), seven literally made all of their money from scratch, and only one (Walton) is mainly living off the inheritance. And what the heck has happened to the scions of the great wealth of just a couple of generations ago? Where are the Vanderbilts, the Whitneys, the Carnegies, the Morgans, the Fords?
Clearly America is in the midst of creating a round of new fortunes, the direct consequence of large numbers of highly successful new businesses. So question: Is this a huge problem that must be fixed by the government? Or should it instead be seen as a big opportunity for the rest of us?
Why opportunity, you ask? It's an opportunity because wealth isn't any fun unless you spend it. What are these guys going to do with their billions -- make a gigantic pile of dollar bills and sit in the middle of it throwing the money up in the air and shouting "whee"? Wrong. They want stuff! And services! And if you can figure out the kind of stuff and services they want, you can sell it to them and share in the abundance. Lord knows this is exactly the game plan of big law firms, who can do very well for themselves (thank you) by getting some of the new billionaires as clients. Then there are the purveyors of an infinite variety of luxury goods, and the people who build the $100 million condos, and the wealth managers, and on and on. And thus the wealth gradually gets circulated around the society through voluntary transactions.
Or alternatively, you can get angry and jealous and demand that the government take the money away from the newly wealthy right now and create and expand lots of redistributionist programs. Bernie Sanders! (And Clinton and O'Malley aren't far behind.)
Of course, in Greenwich Village, the prevailing attitude is the anger and jealousy. In the latest issue of one of our local papers, Westview News, the lead article goes by the title "Bernie Sanders Can Be Elected President. Amazing!" The author is Arthur Schwartz, perhaps best known for his stint as general counsel of ACORN just before that organization collapsed in scandal. Schwartz is entranced by the Sanders agenda:
Bernie Sanders’ remarkable campaign continues to shed the most light on issues and offer the country the most hope. . . . He says: break up the big banks. He says “cancel all student debt.” He says to give all new parents twelve weeks of paid leave, and he wants a single payer health care system, not one enriching insurance companies.
It's classic Greenwich Village progressivism. You might think that Greenwich Village, barely over a mile from Wall Street, would be the home of many of those evil bankers. And indeed it is the home of more than a few of them, but they are a minority. And this is a minority that is mostly delusional in thinking that the "evil bankers" that Sanders, Schwartz, et al., are talking about must be somebody other than themselves. But anyway, most of the people in the Village are not in the top one percent of the income distribution, but rather in percents 2, 3 and 4. Those are the percents where are found the journalists, the writers, the academics, the teachers, the therapists, the "healing professions." This is the perfect audience for the play to anger and jealousy.
George Will in today's Washington Post argues that Bernie Sanders just doesn't understand economic equality. While Sanders rails about income inequality, Will argues, the programs that he stands for actually bring about regressive redistribution and the worsening of inequality:
First, the entitlement state exists primarily to transfer wealth regressively, from the working-age population to the retired elderly who, after a lifetime of accumulation, are the wealthiest age cohort. Second, big, regulatory government inherently exacerbates inequality because it inevitably serves the strong — those sufficiently educated, affluent, articulate and confident to influence the administrative state’s myriad redistributive actions.
And sure enough, when you look at the Sanders program, it turns out to be mostly about enhancing regressive redistribution, that is, redistribution from the relatively poor to the relatively rich. Single payer healthcare? We already have free healthcare for the poor (Medicaid) so this must be entirely about government payment on behalf of the non-poor and rich. Free college tuition? That will go largely to the top half of the income distribution. Enhance social security? That will only worsen the current regressiveness of transfers from the poor/young to the rich/old.
So how can we understand the mentality of those who rail against the rich and against income inequality while in fact advocating a program of regressive redistribution and that will only worsen the lot of the actual poor? I'm not sure it's possible to understand this completely, but it at least starts to make sense if you see it as the program of percents 2, 3 and 4 to take out their anger on percent one -- while, of course, taking care of themselves.
Well, percents 2, 3 and 4, you should be careful what you wish for. In the coming worldwide redistribution, you will suddenly all find yourselves deep into worldwide percent number one.