This is Why an Equal Distribution of Wealth is a Bad Idea

Table of Contents

• Introduction
• Flaws with Forced Wealth Redistribution
  • Removes Incentives to Work and be Productive
  • Requires Authoritarian Government Oversight
  • Historical Failures
  • Ignores Differences in Merit and Effort
• Better Alternatives
  • Progressive Taxation
  • Investing in Education and Skills Training
  • Minimum Social Safety Net
  • Incentivizing Employee Ownership
• Counterarguments
  • Effect on Democracy
  • Do the Ultra-Rich Have "Too Much"?
• Conclusions

Introduction

Wealth inequality has been rising in many nations around the world, reaching staggering levels. Currently, the world's 2,153 billionaires have more wealth than 4.6 billion people combined. In the United States, income inequality is the highest it has been since the Census Bureau started tracking it over 50 years ago.

This growing concentration of wealth in the hands of a tiny fraction of the population has led some activists and political candidates to call for forced redistribution of wealth as a solution. The premise is that wealth should be divided more equally across all citizens in the name of "fairness" rather than allowed to accumulate mostly at the very top.

However, while unequal wealth distribution can absolutely be a concern worth addressing, enforced equal distribution of wealth is not a good solution and can potentially do more harm than good. There are several flaws with this approach, as well as better policy alternatives to consider.

Flaws with Forced Wealth Redistribution

Removes Incentives to Work and be Productive

One major flaw with forcibly redistributing wealth evenly across all citizens is that it saps people's incentives to be productive members of the economy.

For example, if you know that any additional wealth you accumulate past a certain threshold will just be seized and redistributed, why take on ambitious projects, start businesses that could scale up and hire more employees, or work any more than the bare minimum you need to get by? You'd essentially be working for free and having the proceeds of that labor taken from you.

Without proper incentives and reward systems tied to productivity, economic growth and innovation could stagnate. We could miss out on technological breakthroughs and services that improve quality of life across wide swaths of society. A system set up to redistribute wealth evenly may achieve that narrow goal but at the detriment of broader economic dynamism and progress that ultimately lift up more people.

Requires Authoritarian Government Oversight

For a society and economy to enforce truly equal wealth distribution across all citizens long-term requires granting substantial authoritarian power and oversight to the government.

Private property rights essentially have to disappear - instead the state regularly intervenes to assess assets and confiscate any wealth accumulated above the designated equal threshold. This necessitates expansive authority over formerly private economic decisions and transactions. There is no opting out - forced redistribution overrides individuals' choices over assets and earnings they previously would have controlled.

Such a drastic concentration of economic control in government hands, history has shown, also tends to translate into restrictions on other civic freedoms and rights concerning speech, assembly, the press, etc. Without checks and balances, states rarely restrict their authoritarian tendencies to the economic sphere alone.

Historical Failures

Some of history's largest forced experiments in equal wealth distribution ended in disaster and mass poverty. The Soviet Union's and Maoist China's attempts to abolish private property and collectivize farming into commune-style units contributed to the deaths of millions from famine when agricultural output collapsed. Cambodia's Khmer Rouge forced urban evacuations and collectivism combined with totalitarianism led to over a million deaths in the 1970s from starvation, disease and mass killings.

While the utopian vision promoted basic equality among citizens, it came at tremendous human cost when applied unwillingly and drastically from the top down without regard for differences in effort or choices. Freedom and incentives were stamped out along with wealth disparities; the results were inefficient, unproductive economies that impoverished almost all but the very elite government rulers.

Ignores Differences in Merit and Effort

Finally, enforcing wealth equality across the board ignores critical differences in merit and effort between individuals that lead to wealth creation in the first place. Is it fair for someone who studied diligently for years to become an excellent doctor to have their wealth redistributed to those who dropped out and did not work at all? What about small business owners who risked capital and worked 80 hour weeks for years to build a successful company?

Strict wealth equality operates as if all prosperity originates from luck or exploitation rather than any contributions from talent and effort. While disadvantage and discrimination absolutely play a role, they aren't solely determinant of all market outcomes either. As Warren Buffett said of redistributionists: "a market system has not worked satisfactorily recently largely because we forgot the underlying truism: markets work. Collectivist systems don’t"

Some inequality in market economies serves important purposes - to provide incentives, to ensure careers with high social value are desirable, and to allow capital to flow efficiently to its best uses. Equality of wealth, like equality of outcomes, is an unrealistic ideal that becomes destructive whenimposed coercively without regards to context or tradeoffs.

Better Alternatives

While forcibly redistributing wealth equally has too many downsides, there are better policy options that can help address extreme inequality in fair and growth-friendly ways:

Progressive Taxation

Higher tax rates on the wealthiest that fund investment into public goods and services can limit runaway wealth concentration at the top and give more citizens a fair shot. Education, healthcare, housing assistance and more can be made affordable. A CEO being taxed at 50% of income above $1 million is vastly preferable to wholesale expropriation of private property in pursuit of perfect wealth equality.

Investing in Education and Skills Training

Direct investment to improve and equalize access to high quality education and skills training empowers more people to increase their income and wealth according to their effort and talents. It tears down barriers and expands opportunities beyond just those born into advantage.

Minimum Social Safety Net

A strong minimum social safety net catches people when they fall on hard times and guarantees a decent minimum standard of healthcare, housing and other needs. Allowing citizens' living standards to sink below basic thresholds while others indulge in megamansions is undesirable.

Incentivizing Employee Ownership

Changes allowing and incentivizing workers to gain ownership stakes in businesses createavenues for wealth to flow to middle and working classes directly tied to company growth and productivity gains. Employees should share in the profits enabled by their labor.

The common theme with these alternatives is aligning society's interests - taxing extreme wealth levels only at the top, keeping opportunities open and accessible in the middle, and providing a sturdy floor of public goods at the bottom as a minimum standard. This maintains incentives to be productive while curtailing excessive imbalances and unfair barriers to mobility. Perfect wealth equality should not be the target.

Counterarguments

Here I address some common counterarguments in favor of wealth redistribution raised as criticisms of the points in this piece.

Doesn't wealth inequality undermine democracy?

Critics argue extreme wealth inequality subverts democracy - the ultra wealthy use political influence to shape an economic and political system that serves their private interests at the expense of ordinary people. Forced redistribution weakens this distortionary power.

However, directly capping speech or political participation based on wealth levels raises civil liberties concerns. Better approaches are incentive-alignment policies like public campaign financing paired with reasonable limits, so the ultra wealthy do not have unlimited influence yet retain rights. Forced redistribution often goes too far using means that undermine ideals of rights and representation for all citizens regardless of economic class.

Don't the ultra-rich have more than they could ever spend?

Another argument is that billionaires have more wealth than they could practically spend in a thousand lifetimes - why allow individuals to accumulate such fortunes while basic needs go unmet elsewhere? The ultra-wealthy won't actually miss the marginal utility of the billions redistributed.

However, individuals often care more about having the choice and control over resources earned through their work than the utility value of maximized consumption. Property rights ensure citizens have autonomy over their asset use rather than central planners dictating distribution. Infringements require stronger justifications around rights and economic dynamism.

If some wealth accumulation enables innovations like smartphones, vaccines, green technologies etc that raise living standards across society, it may be worth tolerating. Absolute equality comes at cost of other ideals - freedom, opportunity, growth incentives - that must be weighed carefully.

Conclusions

While wealth inequality has certainly reached concerning levels, enforced redistribution aiming for equality of outcomes can undermine both long-run prosperity and other civic rights and ideals central to just societies. There are better policy alternatives to raise living standards from the bottom up without repressing freedoms. Perfect wealth equality should not be the ultimate aim in itself. Rather, maximizing opportunity, social mobility, secured rights, and base level public goods should drive the focus.

Complex challenges rarely have simple one-dimensional solutions. As Nobel Prize winning economist Paul Krugman noted:

"Simple answers to complex problems are often overwhelmingly tempting. But they're usually too good to be true."

When approaching societal issues like inequality, we must think in nuance rather than absolutist platitudes. Equality makes for an appealing buzzword and rallying cry. However, few would enjoy true equality under the rule of a despot. Broadly shared prosperity, secured liberties, equal access to opportunity and justice matter more than perfect statistical equality.

There are always trade-offs - equality vs freedom, equality vs productivity. Navigating these trade-offs prudently while ensuring protections for the vulnerable remains a central challenge of political organization. Robust, thoughtful debate between good-faith actors on all sides is needed to positive solutions.

Policies aiming for equal outcomes often backfire in practice; but sustainable societies also cannot ignore extreme imbalances. Elements of collectivism and individualism, social support and market dynamism must be blended judiciously. Systems tilting too far toward any single ideology ultimately fail. Progress emerges from dynamic balances.

In closing, while wealth inequality should not be ignored in modern market democracies, neither should equality of outcomes be elevated as the premier aim above all other principles. There are better means of fairly advancing broad prosperity that align incentives and opportunities without repressing liberties. Societal organization involves complex, perpetual trade-offs - easy slogans rarely capture the full picture. But through open, thoughtful discourse and policy experimentation, positive progress can emerge.