No Such Thing as Wealth Redistribution

Once we understand that involuntary transactions destroy wealth (see post here), some important consequences become clear.

First, wealth redistribution is never wealth-neutral.  There is less total wealth after redistribution than there was before.  It does not merely re-slice the pie.  It takes a good chunk of the pie and throws it away, leaving less for everyone.  So, there really is no such thing as wealth redistribution.  There are only voluntary transactions, which create wealth, and involuntary transactions, which destroy wealth.  There is wealth creation and wealth destruction; there is no wealth redistribution, because all wealth redistribution is in fact wealth destruction.

Second, just like wealth creation builds on itself, creating more wealth with each transaction, wealth destruction builds on (or shall I say disintegrates?) itself, too.
Those who earn, work, save and invest to build their wealth will stop doing so, or doing it as much, if it is taken away and given to someone else who did not earn it.  After all, if you can't make yourself better off by your efforts, you might as well save your energy and enjoy some free time. Wealth you would have created is therefore never created. Ideas never get made into new products; businesses never get started; jobs never get created; fields lay fallow. Businesses you would have bought from go out of business. People lose their jobs. Wealth is destroyed with every passing minute of inaction and disinterest. Which means, of course, that everyone else, who would have been made better off with cheaper, more efficient, or more useful products or services, or could provide good or services to advance them, is poorer too.

Thus, the exact worst thing you can do to help those mired in poverty is take wealth from those who earned it and give it to those who didn't.  The wealth destruction engendered by that act makes everyone poorer, and makes them poorer still as time goes on.  Those in poverty will see their poverty worsened, even if initially they have a little more money to spend. Instead, they will never see the increased wealth that flows from a nation in prosperity.  The proof of this conclusion is in the multiple examples of communist countries who redistributed themselves into miserable poverty in the name of fairness.  Their poverty wasn't endemic to their culture or a consequence of poor natural resources, as most of them quickly rebounded to economic vitality and prosperity once the fetters of communism were thrown off.  And many were perfectly prosperous before communism but destitute afterwards (see Venezuela).

Thus, I shudder when some in our country accuse "the rich" of having too much and advocate using taxes to redistribute wealth to "the poor."  We have such a fantastically high standard of living in this country, for just about everyone, that we are the envy of the world, and it is because we have let those who work, invent, invest and trade keep the wealth they create.  Unless they are stealing, the wealth they have created for themselves necessarily has created wealth in others, too.  We should bless and thank and hug the "rich"--whoever they are--because they made possible the incredible wealth we all live in and take for granted.

But, in America, there is no such thing as "the rich" to begin with.  A subject for a later post.