The role of investors and investment

2012-05-29 05:38

One of the standard talking points of the political “right” is that scattering the wealth of very wealthy people prevents them from “creating jobs”.

It is totally possible that this was true sometime last century. It’s not true now. Now, creating new businesses and jobs is primarily contingent on the ability of customers to buy your product; it is the “working class” who need to have money for new jobs to be created.

Consider the question of the costs of developing a new piece of hardware. Maybe long ago this required you to be able to fund building a factory. Now? Some guy who is curious and has an idea can just toss some design notes over to a factory and get it built.

There’s still some innovation happening that needs large budgets, but there are plenty of way to get this done that don’t require one specific rich guy with a vision. Kickstarter has provided a way for mid-sized projects to get funded that doesn’t require anyone with significant money to be involved to fund a “small” project — say, a million bucks.

Which is to say: We no longer particularly need captains of industry, if we ever did. People may, if they wish, continue to debate whether at some point in the past taxing rich people would prevent innovation, growth, and job creation. It is clearly not the case now. The policy questions remain arbitrarily complicated, and there are plenty of ways in which people could sincerely dispute how taxes should be allocated; I merely observe that technology has radically altered a key component of the landscape.

Peter Seebach

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Comment

  1. I saw a graph recently showing a correlation between wealth disparity and employment dating throughout the 20th century. One could argue that the Great Depression was the result of an upper class hoarding the nation’s wealth, such that the middle/lower class couldn’t purchase cars or start businesses. Similarly, one could argue that the post-WWII boom was the result of wealth redistribution (via the GI bill and war bonds) allowing more people to purchase goods and start businesses.

    In either case, this is a really old trend, at least back to the rise of the middle class which ended the Middle Ages.

    Dave Leppik · 2012-05-30 11:45 · #

  2. So, how flat is the optimal wealth distribution?

    Insane disparity as we have now is bad, but I suspect an economy where all incomes were precisely equal wouldn’t work terribly well, either. Where’s the sweet spot, and how do we optimize for it?

    — HNA · 2012-06-03 19:33 · #

 
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