Wealth Distribution: Robbing Peter to Pay Paul?

Despite massive increases in income inequality, largely the result of public policy skewed in favor of the rich, a slight majority of Americans are now opposed to wealth redistribution. [1] An often-heard argument against it is that it’s really just a form of robbery: hardworking Peter is forced by the government to hand over a portion of his earnings to no-good, lazy Paul.

But think about it: Politicians who oppose wealth redistribution, generally conservatives, love to redistribute wealth and do it all the time—just not to those who could use it. Our wealth has been redistributed to Iraq, Afghanistan, defense contractors, the military, the domestic national security state apparatus, corporate welfare programs, and Wall Street—to the latter in the form of bailouts and other measures designed to prop up the assets of the wealthy, measures that we and our children are being made to pay for in the form of lost services and middle-class tax hikes. It’s easy to think of other examples.

Yet we live in a democracy, and democratic processes still largely decide where tax revenues will be directed. As bitter a pill as that might be to swallow sometimes, we are all forced to pay for things we might not agree with; but that’s democracy, not theft.

A much better analogy—better, at least on the surface—comes by way of a question once posed by a former economics professor of mine. “Would all of you who are currently getting A’s in this course,” he asked, “be willing to take B’s so that those who are getting F’s can receive a grade of D?” Of course, in the example, the A-students are the rich and the F-students are the poor. Further, the rich are supposed to have earned what they have in the same way the good students studied hard to earn their grades.

Now, a little reflection shows that the analogy is nonsense. For one thing, if income was equivalent to grades, it would make a firefighter or an elementary school teacher into failures–at best, they’d get D’s on this scale while a successful pornographer would get an A.

Second, it is not the case that the rich mostly earn their money by the sweat of their brow. In our economic system, one class of people produces all the wealth–the workers–and another, much smaller class accumulates all the wealth the workers produce. This tiny class must pay a certain (though ever-diminishing) amount to workers in the form of wages, of course, but the rest is distributed to shareholders or owners who contributed nothing to its production.

See why the example breaks down? To a very significant extent, the rich, insofar as they are owners, do not earn their wealth: They simply receive what labor produces for them. To follow out the analogy, this would be as if the A-students had their fellow classmates attend their lectures for them, takes notes for them, complete their assignment, and take their exams. The classmates get to do all the work and the A-students get the A-grade–which is rightfully the grade of those who actually did the work. For the same reason, workers ought to be the ones to own the wealth they produce.

But that’s not our system. For now, we are committed to an economic arrangement in which the wealth makers, the workers, do all the productive work of the economy while the capitalists, the wealth takers, sit on boards of directors and decide how large a CEO’s bonus ought to be, which country to ship US jobs to, how much to pay themselves, how little they can get away with paying workers, how to skirt around environmental regulations, and so on.

To ameliorate the injustices of the system, we have wealth distribution mechanisms: Some of the worker-generated wealth that would otherwise have gone to some bloated oligarch instead gets distributed to the “bottom” percentiles of the economy in the form of social programs that benefit working people, social spending that stimulates demand and creates jobs—in good Keynesian fashion—and so on.

That’s hardly a matter of robbing Peter to pay Paul; Peter ought to have paid Paul fairly to begin with. What the government is doing, on behalf of you and me, is trying to distribute the wealth generated by labor in a more just fashion. Viewed in this way, from the perspective of justice, more wealth redistribution would be better. But best would be a system in which those who produce the wealth of the nation and the world are also those who get to decide how that wealth gets distributed. This would go a long way toward realizing the Catholic ideal of Distributism.

Doran G. Hunter

Doran is a National Committee member of the American Solidarity Party.

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