Who makes us rich?

Peter Cresswell's picture
Submitted by Peter Cresswell on Tue, 2007-05-22 22:37

Matt Robson demonstrates that a lifetime in and around politics bestows no wisdom as to where wealth comes from.

"The Left" he argues in a column at Scoop, "is about wealth creation," whereas "The Right" is "primarily interested in protecting their own privileges." How does he argue the case? Because, he insists, "The Left" has pulled down more of the pie than "The Right," those nasty people "fearful of change" who won't let their share of the pie be shared around.

If you identify the figure who's missing in this playground level of analysis, then you'll see just how foolish the reasoning is. Politicians (of either right or left) are not wealth-creators, they are wealth destroyers. What's missing altogether from Robson's vision is The Producer. The Entrepreneur. The actual Wealth Creators: The ones who actually bake the pie that he and his colleagues think they're entitled to fight over.

Robson isn't the only one who thinks this way, and certainly not the only politician, right or left! As Dave Barry quips, "See, when the Government spends money, it creates jobs; whereas when the money is left in the hands of Taxpayers, God only knows what they do with it. Bake it into pies, probably. Anything to avoid creating jobs."

The truth is that it hasn't been politicians or union leaders who have created the wealth too many of them take for granted, or the jobs that all of us need. It hasn't been them who have made us all rich; they just steal the wealth from those who do. No, it's been those who produced that wealth in the first place. People like James Watt, Thomas Edison, Andrew Carnegie, Frank Lloyd Wright, Bill Gates and others like them.

One thousand years ago the whole world was dirt poor; now (at least in those countries which still value wealth creation), the poorest citizen live better than did most kings at the turn of the first millennium. It was neither "The Left" nor "The Right" who were and are responsible for that happy state of affairs: it was producers, traders, inventors and entrepreneurs: people who saw the way the world was, who understood how to make it better, and who set out to do it. In Ayn Rand's memorable phrase, it is the "men of the mind" who are the Atlases who hold up the world, not the pygmies like Robson and his colleagues, whichever side of the aisle they're on.

Frederic Hamber explains the reason: It is our minds, not our muscles that are the real source of wealth and progress:

Contrary to the Marxist premise that wealth is created by laborers and "exploited" by those at the top of the pyramid of ability, it is those at the top, the best and the brightest, who increase the value of the labor of those at the bottom. Under capitalism, even a man who has nothing to trade but physical labor gains a huge advantage by leveraging the fruits of minds more creative than his. The labor of a construction worker, for example, is made more productive and valuable by the inventors of the jackhammer and the steam shovel, and by the farsighted entrepreneurs who market and sell such tools to his employer. The work of an office clerk, as another example, is made more efficient by the men who invented copiers and fax machines. By applying human ingenuity to serve men's needs, the result is that physical labor is made less laborious and more productive.

It was not politicians who invented or produced the steam shovel or the jack hammer or the silicon chip. It wasn't a union leader who identified the harmony of interests enjoyed by free people that allows all of us to benefit from those who did: it was Ayn Rand, and she called it the Pyramid-of-Ability Principle -- a principle recognising and explaining the enormous contribution made by the more able to the less able. As George Reisman puts it,

the law of comparative advantage explains the "contribution of the cleaning lady to [inventors like Thomas] Edison"; by contrast, the Pyramid-of-Ability Principle explains the "contribution of Edison to the cleaning lady." What Edison makes possible for the cleaning lady is much, much more than she could have achieved under her own steam. "The men with the greatest minds and talents confer on others much more value than they ever receive in return, no matter how much wealth they acquire, [while] the least able receive much more value than they create."

They do so by virtue of the harmony of interests of free men, and the enormous productive ability of entrepreneurs and inventors. If you doubt the truth of all that, if you really and truly think Robson is right and that it's politicians of the left who have made us wealthy, then ask yourself this question: who would you rather be stranded with on a desert island: Edward Kennedy, Ralph Nader and Al Gore? Or Thomas Edison, Andrew Carnegie and Bill Gates?

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J. Heaps-Nelson's picture

The Pyramid of Ability and harmony of interests are two of Rand's most important identifications and these principles explain why modern civilization is possible and why capitalism works.


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