Why spreading the wealth does not work

As long as everyone has food on their tables, clothes on their backs, and a roof over their heads, the thinking goes, it does not matter if some have far more than others.

Indeed, it is often claimed that Smith saw economic inequality as a manifestly good thing. Such a reading is not entirely unwarranted.

Like many of his self-proclaimed followers in the 20th century, Smith did suggest that the great wealth of the few generally benefits the rest of society, at least in material terms and over the long run. The concerns that he voiced are, as I recently wrote in an article for the American Political Science Review , interestingly different from those that dominate contemporary discourse.

When people worry about inequality today, they generally worry that it inhibits economic growth, prevents social mobility, impairs democracy, or runs afoul of some standard of fairness. These are the problems that Obama identified in his speech, and the ones that have been highlighted by academics ranging from Thomas Piketty to Joseph Stiglitz to Robert Putnam.

First, morality. Smith saw the widespread admiration of the rich as morally problematic because he did not believe that the rich in fact tend to be terribly admirable people. Taxes have been slashed, particularly for corporations and wealthy investors, with the promise that increased investment would create more jobs. Free trade has been promoted as a means of making the world's economic resources accessible to more investors. The government's responsibility to ensure the economic rights of its people has been largely reduced to providing economic incentives for the wealthy to create employment opportunities for the poor.

It hasn't worked. The private economy employs potential workers only in relation to their ability to produce things of economic value. Rather than employ the less economically valuable in the U. Wages and salaries of even the more productive U. The meager benefits that trickled down from economic growth trickled down to entrepreneurs and workers in other nations. Economists should not have been surprised at these consequences. To rely on the economy to ensure economic rights, is to deny the existence of such rights.

No society can surely be flourishing and happy, of which the greater part of the members are poor and miserable. For example, he considered public education to be a basic right of the poor and responsibility of government, without regard to any benefit to the economy. That being said, Buffett also says the United States ought to use the wealth generated by that "golden goose" to take care of those who are otherwise good people but don't have skills that the market economy values.

They take care of him," Buffett told Quick. But we shouldn't screw up the market system. What he said: Socialism is not a viable solution, said Dimon in his annual letter to shareholders published in April. This would be as much a disaster for our country as it has been in the other places it's been tried," he added. It has helped lift billions of people out of poverty, and it has helped enhance the wealth, health and education of people around the world. Capitalism enables competition, innovation and choice," Dimon wrote.

That being said, like Buffett, Dimon also said the governments of capitalistic economies ought to support those who are struggle. It's essential to have a strong social safety net — and all countries should be striving for continuous improvement in regulations as well as social and welfare conditions," Dimon wrote.

How America's capitalist system is 'broken,' according to billionaire financier Ray Dalio. Billionaire Ray Dalio: U. Billionaire Marc Benioff: Capitalism has 'led to horrifying inequality' and must be fixed.

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