Extreme Wealth

Reflection 08/21/24: Looking back, most of this note reads like a rant. It was never my intention to defend "the extremely wealthy" as a group, but rather just to highlight that a lot of misguided thinking happens about them. I guess I felt that I needed to vent and clear up my own thoughts at the time of writing the note.

Extreme wealth is a controversial topic. Some tend to focus on the right to hold wealth or the right not to have it taken away while others tend to focus on the good that could be done by spreading or redistributing that wealth, sometimes disregarding the bad that this redistribution could bring. Recent events and the cumulative absorption of poorly thought-out views from both sides have left a bad taste in my mouth.

Slogans like "Eat the Rich" or comparisons to the Reign of Terror are not helpful in inciting real change or thinking clearly about the issues. Scape-goating the extremely wealthy for all of the world's problems is neither an efficacious way to get them to do more good, nor is it intellectually responsible.

Claims

In this note, I will defend a few claims about the extremely wealthy and contend with some misconceptions and poor reasoning that seem to frequently pop up around the topic. These are the claims I will defend:

1. The existence of the extremely wealthy and the accrual of extreme wealth are only "bad" or "wrong" when they cause more suffering than pleasure. (or if you are not a utilitarian, "The existence of the extremely wealthy and the accrual of extreme wealth are only bad when they have independent moral reasons to be bad." This claim is trivially true but worth saying to put emotions to the side and open the door for clear reasoning.)

2. Many, not ALL, extremely wealthy people are immoral.

3. It is not clear that one must do more bad than good (or neutral) to become extremely wealthy.

4. If we say something like "billionaires are immoral because of all the help that they could give but do not." Then we are committed to saying they are not immoral when they do provide that help. There are such billionaires who give that help. Therefore, it is not always unethical to be extremely wealthy.

5. Even if the extremely wealthy were wrong or if their existence were bad and they deserved punishment for it, they would not deserve insult, violence, or other ill-treatment in addition to that just punishment.

These ideas seem obvious to me but apparently do not seem obvious to many people. I think that helping the worst off is the most important thing we can do (I think the badness of suffering can be worse than the goodness of pleasure can be good), but the question of whether the extremely wealthy help or hinder that cause does not seem to have an obvious answer.

I also think the extremely wealthy have a moral obligation to help as much as possible. I believe it is wrong to hold vast amounts of wealth and not contribute that power to the betterment of those who are suffering to some degree proportional to one's wealth. However, there are billionaires who do this and billionaires who don't.

Clarifications

Let's make one distinction a bit more clear before continuing. That is the distinction between "bad" and "wrong". I will keep it simple here:

• "Bad": Referring to states of affairs: A state of affairs is "bad", relative to some other state of affairs, if it is worse for all morally-relevant beings in that state of affairs than some reference case. (example: spreading a vicious rumor would be "bad" relative to an alternative reality where I did not spread that rumor)

• "Wrong": Referring to acts: An agent's act is "wrong" when that act makes a worse state of affairs for all morally-relevant beings effected and the agent is able to not do that act. (example: I could have helped you when you fell, but instead I walked away.)

Common Sentiments Toward the Extremely Wealthy

First I will offer a few examples of moral individuals (who provide more pleasure and alleviate more suffering from the world than they add) who are extremely wealthy. Then I will turn to the common claims about the extremely wealthy that are misguided or false, all aiming to get a clearer picture of the moral status of the existence of extreme wealth and the extremely wealthy.

Moral Billionaires

Often I see arguments against having extreme wealth take the form of a complaint like the following which isn't actually an argument:

The average income of a full-time U.S. worker in 2018 was $46,800. If this person spent no money, it would take them over 21,000 years to accumulate $1 billion. And if you wanted to make as much as Amazon founder Jeff Bezos, whose net worth is estimated to be more than $130 billion, count on almost 2.8 million years of work. Thats too much money.

This basically boils down to "That's so much money that it just can't possibly be moral to have it." But I wonder what proponents of these arguments think when Warren Buffet gives 30 billion dollars to the Gates Foundation. Then can we say this?

The average income of a full-time U.S. worker in 2018 was $46,800. If this person donated all their money, they would have to work for 641,025.64 years in order to give as much money as Warren Buffet did to the Gates Foundation.

Clearly that is a lot of good whether or not we believe Warren Buffet has done some bad.

For whatever his word is worth:

First, my pledge: More than 99% of my wealth will go to philanthropy during my lifetime or at death. Measured by dollars, this commitment is large. In a comparative sense, though, many individuals give more to others every day.

-- Warren Buffet

The following individuals are examples of moral billionaires.

• Bill and Melinda Gates
  • Have single-handedly saved millions of lives
  • Gates Foundation
  • Lifetime Giving: $33.4 billion
• Warren Buffet
  • Given more than $30 billion to the Gates foundation
  • Plans to give away 99% of his wealth.
  • Lifetime Giving $46.1 billion

For many more candidates you can read this article.

I am not claiming that these billionaires are "as moral as they possibly could be". I do not believe any of us really are. How many of us are giving away 99% of our wealth? In my view, any successful prescriptive ethical theory cannot expect people to be saints. Ask yourself: are you "as moral as you could possibly be?" I believe the more important question (which much more could be said about) is "Are you doing your 'fair share' of good?" All I am claiming is that the above billionaires are.

Extreme Wealth: Good or Bad?

When we react to the extremely wealthy, it seems we can be led into poor thinking by outrage and 'unfairness'. In this section I will examine a few statements and sentiments that will help us think rationally about the moral status of extreme wealth and of the extremely wealthy. I hear versions of these statements or sentiments expressed, explicitly or implicitly, quite frequently:

$(A)$ The existence of extremely wealthy individuals is bad in and of itself.

We should believe $(A)$ is straightforwardly false. Nothing about the existence of extreme wealth is inherently bad. This is obvious. Clearly, we can imagine a world that is better because the extremely wealthy are in it and help those with less. This is not what most have in mind when they express something like $(A)$. Most people who make a claim like this are saying something more like:

$(B)$ Having extremely wealthy individuals is worse than not having extremely wealthy individuals, assuming that the same net wealth exists.

(I have added this last part "assuming that the same net wealth exists" because I think it would be really difficult to say that having less "net wealth" would be better in general.)

I don't think $(B)$ is obviously true or obviously false. It comes with some really large assumptions and empirical questions that need answers before we staunchly defend this claim. It could even be the opposite. For example, some of the wealthiest people in the world have given massive amounts to charity, as discussed above. Would those people have given that money and helped as many people if, say, instead of some percentage of the world being billionaires, there were instead a larger percentage of people that were millionaires while the same number of impoverished people existed? Would the world be a better place if everyone had the exact same amount of wealth? These are open questions that we do not really know the answers to.

Even if $(B)$ is true, which it might be, just "redistributing" the wealth is not an easy problem to solve, nor is it necessarily a good idea. The success of wealth redistribution programs is a subject of ongoing debate and is by no means a closed case. Proponents of redistribution argue that these programs can help reduce poverty, enhance social mobility, and promote a more equitable distribution of resources, leading to more overall good. Critics, on the other hand, argue that wealth redistribution programs can discourage productivity, stifle economic growth, and create disincentives for individuals to work hard or invest , thus leading to less overall good.

There are numerous examples in both camps, some catastrophically bad, some quite good. I am not a historian, but the reader can at least get an idea that the problem is not an easy one to solve from these few examples:

• Bad:
  • China's "Great Leap Forward" , one of the largest famines in human history.
  • Collectivization in the Soviet Union, millions dead, peasant revolts, work camps, etc.
• Good:
  • Bolsa Familia
  • Post WWII Japan Land Reform

Even assuming you redistributed the wealth, there are strong reasons to believe that at some later time, inequality will likely reemerge without stringent regulation.

Additionally, taking from the extremely wealthy is most likely going to be done by, in the US, the United States Government. I have a hard time believing that would be put to more moral use there. One can point to things like the military industrial complex or the fact that governments are not as good as free markets, generally, at finding solutions for problems or producing goods.

Here's another statement I often hear:

$(C)$ Having extremely wealthy individuals is a good distribution of wealth.

This one I think is similar to $(B)$. We don't truly know the answer. However, I think it is probably the case that we are not in a world with the best distribution of wealth. Maybe the worst off get better off in higher numbers by the existence of the extremely wealthy? Maybe they do not? Again, maybe if everyone on Earth had the exact same amount of material wealth that would be a much worse world than we live in now. We just don't know the answers to these questions yet.

$(D)$ Any wealth inequality is bad, by virtue of it not being fair.

I do not think there is a reason to suppose that "fairness" has intrinsic value and therefore I do not see inherent value in equality. If someone else does more good with wealth than I do, then it would be a better state of affairs for them to have more.

The Extremely Wealthy: Right or Wrong?

We've examined some statements an sentiments about the "goodness" or "badness" of the existence of extreme wealth. What about the rightness or wrongness of having or acquiring it?

$(E)$ Extremely wealthy individuals have no moral responsibility to those of less or critically low wealth.

Often made by those with the extreme wealth, this claim is obviously false in my view. Along with the great power that the extremely wealthy have comes a great ability to help others. To have that ability and pass by the opportunity to do good is identical to doing bad.

$(F)$ Extremely wealthy individuals have certainly done something wrong for having become extremely wealthy.

This claim is obviously false. I am certainly not denying that exploitation exists. People are not given fair wages for their work. That does happen. However, it is not necessary for extreme wealth to be attained. It is entirely possible for someone to produce something of high economic value, give their workers fair wages, and still accumulate a massive amount of wealth on top of all of that. The idea that this is impossible stems from the mistaken assumption that the game must be zero-sum. If I make wealth, someone loses wealth. That is just not true.

I think the basis for believing $(F)$ comes from the rough idea that "profit is theft" and the extremely wealthy could only accumulate that much money by having done something wrong because no one else would agree to them having that amount.

Marx argued that workers are entitled to the "full fruits of their labor". A business owner, or capitalist, taking more than that from their workers commits theft, on Marx's view. But, what counts as the "full fruits of labor"? When is a worker being fairly compensated and when are they exploited? There are many economic theories for how to answer this question. I will not argue for the correct one here. I will only argue that Marx's, the one that leads to the idea that "profit is theft", is false.

Marx argued that a worker is fairly compensated when they are compensated for their needs and their labor. Needs are uncontroversial here. A worker needs food, shelter, water, etc. We can grant Marx that with no issue. The problem comes when Marx argues that the value of a commodity is proportional to the labor put into it. This is the Labor Theory of Value $LTV$ (not widely embraced in modern economics).

Marx argues that "Surplus Value" is the value is the value the capitalist is able to extract from the labor-power he buys, above the exchange value he must pay for it. Marx goes on to argue that this "Surplus Value", or profit, is theft.

Here is a summary of the argument by Peter Singer given in his "A Very Short Introduction to Marx":

Suppose that the cost of keeping a worker alive and reproducing for one day is $1, and suppose that a day's work consists of twelve hours. Then the exchange-value of twelve hours' labor will be $1. Fluctuations above this figure will be short-lived, because competition for work from the unemployed will keep driving it down.

Suppose, however, that the development of the forces of production means that a worker's labor-power can be used to add $1 to the value of some raw materials in only 6 hours. Then the worker effectively earns his wages in six hours.

But, the capitalist has bought twelve hours of labor-power for $1, and now can use the remaining six hours to extract surplus value from the worker. This is, Marx claims the secret of how capital is able to use the worker's creative power to increase domination over the worker.

So, Marx claims, the capitalist buys a worker's twelve hours for $1 and makes $2 from it, leaving the worker with only $1. The extra $1 is theft because the value of the commodity is the "socially necessary labor" put into it, according to Marx, but our capitalist does not give the worker $2 in Singer's example, only $1.

The $LTV$ is crucial to Marx's critique of capitalism and especially the claim that "Profit is Theft". Marx's defense of this claim is the most frequently cited defense of it that I see. I do not believe that it holds water. Without the $LTV$, there is no reasonable defense of profit being theft from Marxism. I would be happy to entertain other theories as well as to how profit might be theft, but I have not heard convincing ones to date.

An obvious counterexample to the $LTV$ would be the following. Say I invent the wheel. Let's assume this is the first wheel ever to grace the earth. But, there's a catch. There are only enough wheely-wood trees around to make 11 wheels. I make these 11 wheels for one unit of labor each. All by myself. Here are some scenarios where the value of a wheel is clearly not equal to the 1 unit of labor that I put in:

• The last wheel(s) sold will be of higher value than the first because of marginal utility.

• Everything everyone needs to haul requires a cart with at least two wheels and when I have only one wheel left to sell, its value drops relative to the respective value of two wheels in a set, but the amount of labor put in hasn't changed.

• The first wheel breaks but becomes a "collector's item" like a rare piece of art

Without the $LTV$ on good footing, Marx cannot argue that I exploit my would-be-wheel-makers when I only pay them $1/2$ of a labor unit and pocket the other half myself, because the value of a wheel cannot really coherently be pinned to "the labor that went into it".

The party eager to accuse me of exploiting my workers could then argue that "Whatever the product is worth, regardless of the labor, the worker should be paid the full amount for that product." But this response, like the $LTV$ itself, ignores scarcity and many other important variables that influence what a thing is worth. If I interned at a microchip company and assembled one microchip with tweezers, clearly I should not be paid the value of the microchip. Someone had to organize the company, organize the supply chain, take some financial risk etc.

What if I have the last water bottle on a desert planet? Still worth what labor it was produced for? Is the cost of producing something not a function of the quantity produced? Can't Fruit of the Loom make a T-shirt for cheaper than I can? Does that mean my crappy hand-sewn T-shirt is worth more? The list of holes in the leaky ship of the $LTV$ goes on... There is a litany of issues with the $LTV$ that I will not spell out here, but it will suffice to say that there are good reasons it is not a widely held theory by reputable economists.

In summary for $(F)$, I think it is likely that many wealthy people have done unethical things to become wealthy including but not limited to exploiting their workers, but it cannot just be inferred from their being wealthy that they did so in any sound way, especially not via the Marxist route.

Moving on to perhaps the most perplexing and morally reprehensible sentiment I have heard recently:

$(G)$ Extremely wealthy individuals deserve some violence, slander, forceful taking of their wealth and/or other ill-treatment for the wrong they must have done in acquiring their wealth.

As I said regarding $(F)$, I don't think extremely wealthy people must have done something wrong to become so wealthy, but even if they did, would they deserve these things for it? It is a complex question as to when punishment is just and when it is unjust. To whatever degree punishment for actions is just though, the extremely wealthy should only be punished if we are certain they did something wrong. I have argued that the reality is far from that in many cases.

To whatever degree we assume the extremely wealthy did do something wrong to become wealthy and to whatever degree we assume that they do deserve some punishment, we should administer it in the most moral way possible, not by slandering them, making threats, inciting violence, or any number of unjustified and immature reactions.

A Better System Than Capitalism?

Again, I think the current distribution of wealth, entailing the existence of billionaires, is probably not the best. However, unless we have a good alternative, maybe extreme wealth is just a hitchhiker on the capitalism-train that otherwise is going the direction we want.

In "The Better Angels of Our Nature" Steven Pinker points out that capitalism has very likely contributed to greater world peace by giving countries a vested interest in each other. It has undoubtedly given rise to increased medical knowledge, inventions that make our lives safer and easier every day, and much more. Maybe if there is a better system, capitalism is a ladder humanity has to climb up and then kick away once we have ascended.

Inequality will always exist when there is an unequal distribution of power among human beings and as long there are human beings, there will likely be an unequal distribution of power among them. Even in socialist societies, those in power have had privileges that the lower class never did. In China, before capitalism was allowed any influence, only those high up in the party or tourists rode in cars. In the Soviet Union, only Soviet officials were allowed certain fancy goods and services. Inequality is a broader feature of human societies, not a just a feature of capitalism.

Capitalism is an imperfect system that leads to inequality, the downsides of fast moving markets, volatility and much more, but for now, and with regulation, it is the best we have. Whatever the better system is, just claiming that capitalism is the root of all our problems is unproductive and intellectually irresponsible.

Conclusion

In conclusion, I hope to have shown that many common claims and sentiments about the moral status of extreme wealth are misguided or incorrect and that some of them do have a grain of truth to them. The goal here has been just reasoning more clearly about the issue when so many seem hell-bent on doing the opposite.

I hope that the reader feels that the moral status of extreme wealth and of the extremely wealthy are worth real thought. If we can refrain from just slinging mud, or worse: violence, and put some impartial thought to the issue of extreme wealth, that will have a higher chance of inciting real change where systems are unjust and bad actors are at play.