“No one ever makes a billion dollars. You take a billion dollars.”
That was the punchline of democratic socialist Rep. Alexandria Ocasio-Cortez in a Martin Luther King Jr. Day public interview with writer Ta-Nehisi Coates. The audience erupted into enthusiastic applause. This is a sad but vivid example of the woeful economic ignorance rampant in our society today.
Mr. Coates had asked AOC why he would be a bad guy if he became a billionaire by selling widgets. She replied that he really didn’t make them (shades of Barack Obama in 2012). Instead, she asserted, the billionaire sits “on a couch while thousands of people were paid modern-day slave wages.… You made that money off the backs of black and brown people [and] single mothers … who are literally dying because they can’t afford to live. And so no one ever makes a billion dollars. You take a billion dollars.”
There are many errors in AOC’s remarks, but let’s address a few.
First, let’s debunk the myth of the exploitative business owner lazily sitting around while others do all the work. Entrepreneurs are the wealth creators of society. They figure out how to combine the economic factors of production (land, labor, and capital) in new ways to create and provide new goods and services for others. Such endeavors require vision, stamina, energy, and hard work. If it were as easy as sitting on a couch, everyone would be a rich entrepreneur. Instead, entrepreneurial excellence is somewhat analogous to playing professional baseball, football, or basketball: Only a minority of people have enough talent to play professional sports competitively, and only a few of those are superstars. Not every human has what it takes to be an entrepreneur, and a Bill Gates or Jeff Bezos will be as rare as LeBron James or James Harden. Why do we admire star athletes but scorn star entrepreneurs (some of whom, AOC should acknowledge, are “black and brown people”)?
Second, AOC does not understand wealth creation. She seems to believe that billionaires extracted their billions by some dastardly process, leaving piles of victims in their wake. This is the old zero-sum view of the world that darkened human thought in the 16th century – the notion that one person’s gain is another’s loss. That is a fallacy.
In free markets based on private property, people only buy or sell if they anticipate they will be better off by doing so. We exchange what we value less for what we value more; otherwise, the trade wouldn’t happen. Thus, both parties to any voluntary transaction gain value. The billions earned by corporations are mirror images of the billions of dollars of value they have created and supplied to others.
The profits/benefits of consumer and producer are roughly comparable. But the economic value of the producer is simply more concentrated—that is, on one side you may have a corporation of 5,000 people having created billions of dollars of value for tens of millions of consumers. The total value exchanged between the corporation and its many customers is in the same ballpark, but on a per-capita basis, those billions are concentrated among a relatively small number of people on the producer side and diffused among a much larger number of people on the consumer side. But both sides are richer, not one side at the expense of the other, as AOC mistakenly believes.
It is morally perverse and economically stupid to demonize, persecute, and seek to eliminate billionaires, as Sen. Bernie Sanders desires. (See his wealth tax, among other obnoxious proposals. By the way, you can now get your very own “Billionaires Should Not Exist” bumper stickers by donating to the Sanders campaign.)
The continual denunciation of billionaires by demagogues is dangerous. Sanders has avoided saying we should hate billionaires, but in an interview with The Nation, he approvingly cited FDR’s explicit “hatred” for “economic royalists,” calling billionaires today’s royalists.
One of the consequences of the anti-capitalist fulminations of AOC, Sanders, et al. is that there are equally ignorant and self-righteous people out there who want to put words into action in some pretty vicious and violent ways. For example, Project Veritas recently recorded Sanders campaign staffer Martin Weissgerber making such revolting statements as “Guillotine the rich;” “What will help is when we send all the Republicans to re-education camps;” and “The Soviet Union was not horrible … [but was] the most progressive place to date in the world.” (Yes, he actually said those things.) Maybe you want to live in a society even more “progressive” than the USSR, but for the average American, this is an existential threat to our basic rights and our way of life.
We need more economic enlightenment in this country, and we need it now—not just because there is an election this fall, but because millions of Americans are in the grip of an extreme ideology that can only be described as warped and destructive.
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- The Paradox of Prosperity - September 23, 2020
- Jimmy Lai, The Billionaire Freedom Fighter - August 21, 2020
- The Problem with Inheritance Taxes - August 12, 2020
- Why Has Three Percent Economic Growth Been So Elusive? - June 24, 2020
- Gasoline Prices in the Era of COVID-19 - April 17, 2020
- Clarifying the Record: Carter Economy Not Better Than Trump Economy - February 11, 2020
- AOC’s Ravings Against Billionaires - January 24, 2020
- Budget Deficit Capitulation: Our Spending Problem - January 23, 2020