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Is It OK to Be Rich?

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Yes, but.

Of course, it is OK. America is the Land of Opportunity, and the opportunity is the opportunity to be rich. If you work hard and creatively and contribute to society, you can get a real reward. America was never the Land of Equal Results, but of opportunity to rise above the crowd and make a real name for oneself. So of course some people end up rich -- that's the way it's supposed to be. The ability to become rich resonates with the overwhelming majority of the population. Ideally, people earn their wealth and are respected for it. Of course, there are some exceptions, people who achieve wealth because of early advantages they had in life, or because their economic situation turned out to be unusually favorable. But society accepts this. Some people do better than they should, others do worse. But overall society provides people a comfortable life and people appreciate that indeed they have the opportunity to excel. The amount of wealth that goes to the rich supports ambition in society, the drive that moves the economy ahead for all.

But wealth is like alcohol. In moderation, alcohol can be really enjoyable, can improve the quality of life. But in excess it can take over one's life and cause misery for those around. It would be nice to know exactly when this happens, when it becomes a detriment. Unfortunately, there is no exactly. There is only a transition zone. At the low end, everything is fine; at the upper end, it is clearly harmful. The zone itself varies between individuals and over time. To the extent that it is a problem for the individual, it is a personal problem. But to the extent that it is detrimental to others, it becomes a social problem and can be a really serious one.

And so it is with wealth, in excess it can harm both individuals and society. So when does wealth become detrimental? There is, of course, no exact answer to that either. The best answer is that wealth becomes detrimental when it is achieved at the expense of others. But this is clearly unsatisfactory. Inevitably, if someone has more, someone else has less. At a societal level, wealth becomes detrimental when it undermines society as whole, when it is detrimental to large numbers of everyday citizens. Unfortunately, that is getting to be the case in America today. The nation has the resources for everyone to live well, but the resources are not available where they are needed. At a societal level, states and municipalities are inadequately funded, so infrastructure, education, public safety, courts, parks, social services and dozens of other public responsibilities suffer. At an individual level, the low wages levels earned by an increasingly larger proportion of the work force cannot support even a modest life style, while the number of unemployed (including long-term unemployed, often not even counted) remains stubbornly high. The movement of wealth to the very top levels of society is undermining society, though there is no obvious cause or solution.

In traditional society, it was hard to become rich without contributing. In modern society, it is much easier to become rich not by contributing to society, but by draining wealth from society. So, for example, in the traditional society, banks provided loans to companies and individuals, and bankers lived well, though not grandly. The stock market provided capital for the economy; much of the return to shareholders was dividends based on actual company earnings. The modern financial system has warped much of this. Instead of thousands of small banks concentrating interest payments in the hands of thousands of small bankers, huge banks now concentrate interest payments and growing bank charges into the hands of a relatively small number of senior bankers. At the same time, interest flows have expanded greatly with widespread use of credit cards and a much bigger mortgage market. A steady rise in the overall value of the stock market does not reflect a rise in actual value so much as a rise in prices; the resulting capital gains go, of course, to those who already have capital, concentrating more wealth at the upper levels of society. The financial system itself has become so dauntingly complex that it is hard to follow all the ways in which wealth gets concentrated. An ultimate example is the rise of High Frequency Trading in which buying and selling at millisecond intervals allows specially equipped traders to skim money off the stock market without any contribution at all to society. The overall result of changes in the financial system has helped concentrate wealth at the very top levels of society, increasingly diminishing the quality of life for the rest of society.

The situation is worsened by the ability of the rich to skew the system to protect the flow of more wealth to the already wealthy. A complex society requires complex regulation. Ideally, laws and regulations manage the economy for the benefit of society as a whole. But the complexity of these laws and regulations means that there are hundreds, even thousands of opportunities to bend the system in support of vested interests. And support for vested interests is typically accompanied by rationalizations that the support will benefit society as a whole. So funds go to support large banks because their failure would supposedly create such economic chaos that everyone would suffer. Or payments to states for mineral extraction are maintained at historically low levels because mining companies provide jobs. Or tax cuts and other economic benefits provided to businesses and upper income levels will "trickle down" and benefit poorer members of society. Or environmental regulations which would reduce profits are strongly opposed because they may also reduce jobs (and profits).

The tendency of regulations to support the concentration of wealth is reinforced by the ability of the wealthy to use their wealth to promote favorable regulations. So, for example, any proposal to provide favored support to some industry can be expected to have dynamic and focused efforts promoting quick passage, while public opposition will be diffuse and slow. Lobbying groups include thousands of well paid individuals with good connections to legislators - many of them even former legislators, senior regulators or staff themselves. Some public policy groups try to keepvisibility on issues but the sheer volume means that many proposals supporting individual interests get minimal, if any, outside attention.

Electoral politics overshadow even this broad lobbying effort. Candidates who support light regulation of the wealthy get extensive support from the wealthy. This is not simply a crass quid pro quo of buying votes, but a much more complex arrangement in which politicians who support light regulation can expect strong electoral support helping them to get regularly re-elected and build their own political power. In many cases they also support legislation which reinforces their ability to get re-elected. Gerrymandering is one example. Although a few states have independent commissions which draw electoral districts to meet independent criteria, in most states the process is highly political and results are designed to reliably support one party. Another recent example is the sudden growth of restrictive election identification laws. Ostensibly they insure the legitimacy of the elections, but as a practical matter they make it much more difficult for many people at the lower levels of society to vote. This seems clearly to be the intent, particularly since none of these new voter identification laws have been accompanied by parallel efforts to facilitate voters getting essential identification documents.

So back to the original question, is it OK to be rich? This is not a yes or no question. Certainly an overall distribution of wealth benefits society as a whole. The average person should be able to lead a comfortable life. Slackers, poorly skilled laborers and others who contribute less to society should get less. And those who excel with productive, dedicated lives should do better, should become rich. This is the general concept that underlies America as the Land of Opportunity. Unfortunately, the opportunity is fading as an excessive concentration of assets at the top level of society undermines the ability of everyone else to enjoy a comfortable life. The expectation that those who get to be rich deserve it thanks to their contributions to society has been badly compromised. Modern conditions have made it relatively easy for many to achieve significant wealth without any corresponding social contribution, indeed, amassing wealth to the point that it undermines society rather than supporting it. As with alcohol abuse, there is no exact point at which wealth enjoyment becomes wealth abuse, but it seems clear that the nation has passed that point and the situation continues to worsen. So it is OK to be rich, but not to the point that it undermines rather than supports social development. There is a pressing need to develop a new social consensus on what a more reasonable wealth distribution should be, on how the economy should be structured to benefit society as a whole.