One of the most common world views I’ve come across in my time as an activist is the notion that wealth is a noun. The concept that wealth is something you can physically take from someone who has is it, and give it to someone who does not. This is typically a Left-wing view of wealth, but I never cease to be surprised as to how many on the Right view wealth this way as well. The trouble is that the way the Left views wealth is wrong. Conservatives must stop this habit of kicking the ball around on the Left’s playing field. Wealth is a process. It is a verb, not a noun.
A stock broker, for example, may have more money in his or her bank account than a shop worker. You can tax the stock broker and give it to the shop worker, but next month the stock broker will be rich again and the shop worker will be poor. How much money you have in your bank account is how rich you are. It’s not how wealthy you are. The stock broker is engaged in a process that reaps more monetary rewards. The stock broker does something that not everyone can do, the stock broker assumes huge amounts of risk, and the stock broker works eighty hour weeks. Being a shop worker is tame in comparison. It requires no training, no risk, and the skill-set required to do the job is not rare. The process the stock broker is engaged in is what it means to be wealthy; not his bank balance.
Those on the Left will say that this system isn’t fair and it’s not a meritocracy. The smartest people you know are often not the richest. That’s certainly true in my life. What is also true is that those most engaged in the wealth creation process are those who are the wealthiest and this has nothing to do with intelligence or conscientiousness. I bet if you asked anyone, “What does society need more? Teachers? Or coffee shops?” They would probably say ‘Teachers.’ Why does a Teacher earn less than someone who owns a coffee shop? Having worked behind a coffee shop counter whilst I was a student, I can easily see why.
A coffee shop owner has to lay out a lot more capital up front and continuously in the form of supplies - some of which are perishable, they will hire and train staff, they will rent premises, they will take great lengths to manage their business so it conforms with regulations, and over the course of a working day the business will engage with a greater reach of customers than a Teacher will. Adults of all ages buy coffee and cakes, but parents only use schools for a finite amount of time. Running a small business, however trivial it may seem, is a hard job. Just because professions seem valuable doesn’t mean they are assuming the most risk, engaging with the broadest range of customers, or working the hardest.
Another case in point – Two people are given fifty thousand pounds each. The first puts his fifty thousand pounds in blue chip stock. The second puts his fifty thousand pounds in a savings account. Neither of them have done any “work,” yet the first individual who put his money in stock instead of savings becomes richer. That is because his fifty thousand pounds is more engaged. The fifty thousand pounds invested is used by the companies to generate more value ergo more wealth is created and the Investor receives dividends. The fifty thousand invested is also more at risk and less accessible to the Investor. An outward appearance of “work” is not a good indicator of how an individual has engaged in the process or how much risk an individual has assumed.
Social mobility is stagnating because the Establishment keeps trying to “redistribute” wealth to those on the bottom rungs of society, whilst simultaneously erecting barriers to entry to the wealth creation process. Access to this process should be as easy as possible and does more to help poorer people than any redistribution could ever do. Left wing economic policies rarely help the poor, if ever, and this is why. There are taxes and policies that impede this process more than others. The Minimum Wage is one of the best examples of this. The Left love it, but it doesn’t work because it’s a barrier to employment. The Left gravitates to excessive regulation, taxation and one-size-fits service models which don’t enable the poorer amongst us access into the wealth creation process.
The Conservatives, however, aren’t stripping back a lot of this nonsense quickly or effectively enough and one of the reasons for that is they too don’t see wealth the right way. Fiscal policies create an economic environment that can hinder or help access to the wealth creation process. If you want an economic environment that helps wealth creation you need low taxes, rule of law, minimal but sound regulations, minimal but sound barriers to entry to many professions, and a transparent, un-onerous tax burden that rewards economic activity rather than economic inactivity with the burden of taxation shifted away from taxing individuals, income and labour.
Do not make the mistake of assuming Socialists are Socialists because they’re less intelligent. The question of wealth is a question of perception, not intelligence. Socialists are wrong because the way they see wealth is wrong. Often, over-intellectualising the question of wealth skews perception, which is why I think so many “professional Intellectuals” are Socialists. This is the challenge for the Conservatives when it comes to engaging with the Left. The challenge for the Conservatives in Government is to make the wealth creation process as uninhibited and as easy to access as possible.
For Conservatives For Liberty, September 2016.