Example of Misdistribution with Calculations

As I’ve stated before, I believe that unbridled capitalism (pure capitalism, trickle-down capitalism, laissez-faire capitalism), with low taxes for the wealthiest people, is a system that grossly overcompensates a very few, while underpaying the many and denying basic life necessities and securities for a growing number of people. Let me offer an illustration that goes into more detail on the numbers from my most recent post. 

Suppose an individual with a net wealth of $200 billion earns an average return of 4.5% on their wealth. (This 4.5% figure is much less than a $200 billionaire really realizes, but the number will work for the purpose of this illustration.)

We multiply $200,000,000,000 by .045 to obtain the yearly increase in the investor’s wealth. The result is $9,000,000,000. Again, an individual with this principal earns much more that 4.5%, but calculated at this modest rate, their wealth increases by 9 billion dollars in 1 year.

Now, let us divide $9,000,000,000 by 365 to get the daily increase in wealth. This comes to $24,657,534 rounded to the nearest dollar. This result reveals the reason I chose 4.5% for this illustration. One can immediately see that this multi-billionaire’s wealth is increasing at a rate of over 1 million dollars per hour. Dividing the result by 24 gives $1,027,397.26 per hour. 

Let us divide this hourly result by $15 per hour to get the number of hours one would have to work to earn, through work, what the multi-billionaire earns in one hour without having to work for it because their money is earning it for them. 

This new result, 68,493, is the number of hours one would have to work to equal the number of dollars the investor’s money has earned in 1 hour. This is 68,493 hours of work, compared to 1 hour of nonwork. Divide this by 40 to get the number of 40-hour weeks the worker would have to work and we get 1,712 weeks. Divide this by 50 to get the number of years, working 50 weeks a year, and we get 34.25 years. 

So, a worker making $15 an hour would have to work 34 years to earn what the investor makes in one hour. (The worker would have to work 821 years to earn what the investor makes in a 24 hour day.)

I do not use this illustration to turn us against the wealthy, as people; I use it simply to show that the system that produces this situation is not the best when trying to build an economy for all. Work is extremely undervalued in this system and many, if not most, workers are underpaid. 

I believe that we must somehow place a reasonable tax on this extreme imbalance caused by pure capitalism. Note that in no way am I abandoning capitalism as a component of the economic structure. I am only saying that it must be tamed in order to provide a good economy for all participants. A reasonable tax on this increase in wealth is not, in any way, a punishment for being wealthy. It is also not “stealing” from the wealthy. It is simply correcting a system that overcompensates already accumulated wealth. The tax allows us to put more money back into the hands of those who work for a living. Through the taxing process, the government can quickly put the money back into circulation and it goes round again, providing income again, for many people.

To me, it is much more correct to say that this ultra-capitalist approach (trickle-down) “steals” from the workers than it is to say that taxing the extremely easy overaccumulation of wealth for a very few is “stealing” from those with the wealth.

While there are varying levels of wealth and income throughout the society, even in this trickle-down system, it appears to me that the longer the trickle-down approach is practiced, the more the economy resembles a lords and serfs, medieval-style, economy. Some will be the more favored servants, with higher positions and incomes, and a bit of wealth themselves, but more and more of us will become the modern equivalent of the peasant serfs and become the largest segment of society. And with this situation, “we, the people” will no longer be the government; they, the lords, will be.

After that last sentence, I feel the need to add that this is not intended against any individuals, personally, for being the overcompensated. Nor is it to place blame on anyone. Nor is it to presume to know anyone’s intentions. It is only an indictment of the system that produces these extreme inequities. And, it is a preliminary to expressing my desire to return to a Progressive, New Deal kind of approach.