How to end poverty: Stop “redistributing” wealth

How to end poverty: Stop “redistributing” wealth

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The world-wide anti-inequality movement, led by the socialist economist Thomas Piketty,  would have us believe that differences in income and wealth cause disease and death. A recent study attributes 40,000 annual deaths in Canada to income inequality. Following  Piketty, the study’s authors conclude that to prevent such deaths, the government must narrow the income gap by forcibly  redistributing” wealth from the higher-income earners to those who earn less.

But is it true that differences in income cause disease and death? And is income equalization through wealth ”redistribution” going to prevent them?

Statistical studies show that people in lower income groups have higher mortality rates, but such studies don’t, and cannot, show a causal connection between income inequality and mortality. Despite the inequality narrative, there is no evidence that someone else’s higher income will cause disease or death to those with lower incomes.

If not income inequality, what causes higher rates of disease and mortality among low-income earners? According to one physician, “in his [poor] inner-city neighborhood … the rates of diabetes, heart disease, STDs, infant and overall mortality rates [are] many times greater than in the rest of the city.” These diseases and the related deaths are due to the poor diet, exercise and other lifestyle choices individuals make.

The income equalizers’ real argument is that income inequality is the source of poverty that forces low-income earners to make the poor choices that lead to disease and mortality. They claim that those with low incomes cannot afford healthy food or exercise or that they don’t have time to exercise or to educate themselves about proper nutrition. If only the government “redistributed” more wealth to them, the poor would make better lifestyle choices, get educated, and be healthier and live longer lives.

While it may narrow income inequality, forcible wealth “redistribution” does not reduce poverty or mortality; it perpetuates both.

Contrary to the inequality narrative, people are not poor because someone else is rich.  Wealth is not a fixed pie; it is created and expanded through productive effort. Poverty is caused by the lack of freedom to produce and to keep the fruits of production, and by people’s choices when they are free to choose.

Some choose to work harder than others, to get an education, to save and invest money, to start a business. This happens everywhere and in all income groups. Witness the thirst for education and entrepreneurship in the developing countries, where private schools flourish in the slums and micro-finance enables small businesses. Witness also the continual upward mobility from the lower to the higher income groups and reduction in poverty everywhere, particularly in the last 40 plus years.

Through their work, these productive workers create wealth that allows themselves and others they trade with (as customers, employees, suppliers, and employers) to prosper and thus improve their health and life span. As producers, they also contribute to the creation of products that improve health and lower mortality, such as foods, medicines, healthcare and educational products and services.

Forcible wealth “redistribution” schemes do not reduce poverty nor prevent disease and death. They have the opposite effect: while narrowing the income and wealth gap temporarily, they make everyone poorer by taking the most wealth away from the most productive. Not only does this disincentivize the producers; it prevents the creation of wealth and innovative new products that good health and long life require.  

We don’t need the failed socialist experiments from the Soviet Union to today’s Venezuela as proofs. Even in the semi-free countries, accepting wealth “redistribution” in principle has led to ever-expanding government spending that has curtailed productivity and prosperity and is drowning governments – and us – in debt.

The argument that narrowing the income gap between the wealthy and the poor through “redistribution” will improve everyone’s health and mortality defies facts and logic. Health outcomes can be improved by reducing poverty. But poverty cannot be reduced, in the long term, by “redistribution” of wealth. It can only be done by leaving people free to produce and keep the wealth they create.

The wisdom of Benjamin Franklin still holds true: “I am for doing good to the poor, but…I think the best way of doing good to the poor, is not making them easy in poverty, but leading or driving them out of it. I observed…that the more public provisions were made for the poor, the less they provided for themselves, and of course became poorer. And, on the contrary, the less was done for them, the more they did for themselves, and became richer.”

Photo by Nathan Dumlao on Unsplash

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7 Responses

  1. Lack of income fosters disease in many cases, including middle Africa and what you call ‘inner city’ in some cities here. The Question is what causes lack of income.

    Solutions include:
    – getting gummint out of the way of people earning (laws impeding or plain against operating a business, laws that reduce motivation giving people a chance for a job or rental of accommodation, bureaucratic impediments to mobility to reach better locations, ….)
    – education (Marva Collins showed the way with poor children)
    – coaching (Medicine Hat offered housing to homeless persons IFF they accepted help, which could range from assistance with job applications through skills training to psychological help, the Salvation Army in Seattle is good at connecting capable people with housing based on merit but difficulty connecting themselves)
    – where charity is provided, incentives (a charity in Charlottesville slowly increased rent to formerly homeless people as they developed income, whereas here it is often a cutoff to all or nothing so people avoid more income)
    – coaching on values for oneself and thinking skills, which are the cause of addictions that result in poverty and homelessness (read Dr. Micheal Hurd on that). Short of that, you note lifestyle choices which impair health thus ability
    – dealing with psychiatric cases, which BC has started to do again by re-opening facilities providing treatment (Objective psychologists and psychiatrists have advised on the need for medicines or not)

    1. Thank you, Keith – good suggestions, the most important which is education. When schools fail to teach children to think for themselves (and feed them particular ideologies and world views instead), today’s culture of entitlement and noveau helplessness is the consequence. But education reform will take time. At least there are signs that the online schooling during the pandemic has made parents more aware what their children are being fed in many schools.

  2. You note two errors of knowledge that lead in part to the redistribution fallacy.
    – treating coincidence as causation
    – fixed pie economics, which is classic Marxism along with ‘drive-to-the-bottom ethics

    There’s also the negative mindset behind Marxism – which is what underlies today’s ‘socialist’, it denies effectiveness of the human mind for life.

    And politically a motivation to control, which comes from collectivist mentalities – poor people are just cannon fodder for activists.

    1. Thank you, Keith. Yes, that is a good point about the Marxists not acknowledging the capacity of the human mind to solve problems and to figure out how to create material values. That follows naturally when you don’t acknowledge individuals as anything but mere elements in the big collective whole …

  3. An amazing case of do-gooder attempt to ‘help’ people several years ago was a person who saw a market for shining shoes in Washington DC.

    No, cannot do that if you have black skin.

    (Long ago a law was passed, with the strange notion that shoving people out of shining shoes would magically open up other jobs for them. Perhaps would give some a mental kick to do better for themselves, but that does not justify initiation of force.

    I don’t think it was a protectionist grab, unlike:
    – black-skinned conductors shoved off US trains early in the 20th century.
    – females blocked from airline pilot jobs in the US, on the claim that individuals who test flew hastily assembled airplanes then ferried them across the stormy North Atlantic during WW II were temperamentally unsuited for flying passengers in the controlled and supported domestic environment.)
    Unions were the prime suspects in those cases, enabled by government force.

    Government indeed does work against poor people’s lives. The question is why voters put up with it.

  4. Does not redistribution of wealth also mean investment in social programs that aid in helping poor people gain perspective and skills that allow for upward mobility? Does not wealth redistribution buy more time and space for poor people to redirect their attention to building skills rather than surviving? Is this an attempt justify the TRICKLING down of wealth? Is it true that a business owner individually EARNS everything he/she makes? Libertarianism just completely ignores the complex web of social life. Individualism is paradoxical because individualism is inherently collectivist. Thought itself cannot be what it is without others. I see more inconsistencies here than with Marxism.

  5. Social programs (such as taxpayer-funded education and training programs) and other welfare programs may help their recipients learn skills and improve their ability to earn higher wages. But the problem with such government programs is that they are based on the use of force. The government takes, with a threat of penalty–it does not ask for voluntary payments–from those who have produced wealth and gives it to those who have not. It is a violation of the right to property – and a big disincentive for production.

    Besides wealth, production creates opportunities for employment, and thereby for learning skills and for upward mobility. Without producers, the business owners, everybody, including the poor, would be worse off.

    Do the business owners truly earn the money they make? Absolutely they do (as long as they truly create value for their customers and are not government cronies). They come up with a productive business idea, make a plan for implementing it, raise the money needed to create business (facilities, equipment, employees, marketing, etc.). Without the owner(s), the business would not exist.

    Of course the business owners do not operate their businesses single-handedly. They trade with others: with suppliers, employees, customers – for mutual consent and for mutual benefit. If the business owners don’t trade fairly, they will lose their trading partners, and the business will fail.

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Jaana Woiceshyn teaches business ethics and competitive strategy at the Haskayne School of Business, University of Calgary, Canada.

She has lectured and conducted seminars on business ethics to undergraduate, MBA and Executive MBA students, and to various corporate audiences for over 20 years both in Canada and abroad. Before earning her Ph.D. from the Wharton School of Business, University of Pennsylvania, she helped turn around a small business in Finland and worked for a consulting firm in Canada.

Jaana’s research on technological change and innovation, value creation by business, executive decision-making, and business ethics has been published in various academic and professional journals and books. “How to Be Profitable and Moral” is her first solo-authored book.

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