Redistributing wealth is not as straightforward as redistribution profiteers want us to think.

I posted a thread with 8 tweets 

Louis XII could be the filthy rich who gave up main-street purchase power to commission Leonardo da Vinci to paint Salvator Mundi. 500 years later another filthy rich freezes $450 million of his own purchase capacity, hanging that painting on a wall. Bad or great? 

Why are just the "filthy rich", like Louis XII and the buyer of Leonardo da Vinci’s Salvator Mundi cursed? Why not Leonardo da Vinci, or the current vendor of Salvator Mundi? Could they‘ve not just as well used money they got from filthy rich for something “more worthwhile”?

Does it all boil down to that Louis XII should not have commissioned Leonardo da Vinci’s Salvator Mundi and instead have bought food for the poor? I guess that would then depend on what the food suppliers did with that money, grow more food or drink more gin. Life isn’t easy

We can just pray that something of that main-street-purchasing-power comes into the hands of the few risk-taking entrepreneurs who, with luck, help catapult our world forward. Sadly, with risk weighted capital requirements for banks, regulators have made that less possible.

Yes, life isn’t easy. So let us all beware of all those redistribution profiteers out to make money or gain political power and who tell us “Let us just redistribute the wealth of the filthy rich, and you will all live in Nirvana. Venezuela, Nirvana? My …!!!

If Louis XX commissioned Leonardo da Vinci to paint Salvator Mundi, would it not make a beautiful novel to trace how that money flowed, perhaps to a Bill Gates, generating wealth so that someone could freeze $450 million on a wall, and keep the human development ball rolling? 

 

These ramblings about how the “filthy rich” convert their main-street-purchasing-power into assets and services, some that would never have existed without them started when seeing a totally useless shield in the Louvre in Paris.

Just in case, this is not a point blank defense of the “filthy rich”. It refers strictly to how their purchase power morphs into assets and services. Many “filthy rich” do become so in unjust and corrupt ways, quite often highly detrimental to development.

PS. A tweet: "A tax on wealth? Ok! But please, what assets should the wealthy sell to whom, in order to raise the money to pay it? And what would the buyers otherwise have done with the money they also must raise? And so on, and on, in the circle of the economy’s life."

PS. A tweet: "A conundrum. How to structure a tax on wealth without reducing the wealth that is taxed?"

PS. This of course does not mean that I am not in favor of reducing inequality. For that I strongly believe in the need for an unconditional universal basic income, a Societal Dividend

PS. When it comes to wealth, yachts are often depicted… but rarely do we see any interest in what those yacht-builders did with the money they received.

PS. Let’s hope taxpayers will not be surprised finding out they now have to pick up huge bills for maintaining some Russian oligarchs confiscated super yachts.

PS. Legend holds that when 1974’s Carnation Revolution’s, chief strategist Otelo Saraiva de Carvalho told Sweden’s Olof Palme in Lisbon: “In Portugal we want to get rid of the rich”, Palme replied, “how curious, in Sweden we only aspire to get rid of the poor”

Oxfam, how do you redistribute wealth already created, without risking making the poor poorer?

Felix Salmon, when commenting on Oxfam’s “Reward work, not wealth: To end the inequality crisis, we must build an economy for ordinary working people, not the rich and powerful” writes: 

“The world’s billionaires – the richest 2,000 people on the planet – saw their wealth increase by a staggering $762 billion in just one year. That’s an average of $381 million apiece. If those billionaires had simply been content with staying at their 2016 wealth, and had given their one-year gains to the world’s poorest people instead, then extreme poverty would have been eradicated. Hell, they could have eradicated extreme poverty, at least in theory, by giving up just one seventh of their annual gains.”

That particular paragraph is spoken like a true redistribution profiteer 😞

First: Where do those “one-year gains” originate? If from criminal corruption, if from skewed central banks stimuli, if from exploiting monopoly and similar forces, then a reduction in that wealth increase would be absolutely justified and good… but, if that wealth increase came from true wealth creation, or even from heritage, then a reduction of it could have very negative consequences for all, especially for the poor.

Second: If that wealth has already been created and is consequently represented by assets, how does one liquidate those assets so as not to affect the value of those assets, or in other ways put markets at risk? One of those 2.000 billionaires is probably he who bought Leonardo da Vinci’s “Salvator Mundi” for $450 million. He, de facto, like with a sort of voluntary tax, froze $450 million of purchasing power on a wall, or in a safe box. How on earth does one go about to reconvert that into $450 million of new purchase power that could be handed over to the poor?

The Oxfam report contains many correct statements. I totally agree with that wealth should not be created by criminal and unfair behavior, or derived from crony statist relations; and I also agree with that wealth should not be used to abusively increase the influence of the wealthy in our societies.

But when the report states “To end extreme poverty, we must also end extreme wealth” I disagree. First because whether one likes it or not, wealth, as it is invested in assets, has de facto already been redistributed… like in the previous case to those who received the $450 million paid for the “Salvator Mundi”… to those who sell a luxury yacht… to those who sell handmade shoes in Milan… to governments by buying public debt… to markets by buying shares.

On the report Jeffrey Sachs comments: “Sometimes the super-rich call out Oxfam and others for ‘stoking class warfare’ but the truth is that in many societies, including my own, the United States, many of the super- rich have in effect declared war on the poor.”

That sounds precisely like what Chavez preached and now Maduro does in my Venezuela… and look where that has taken our poor country… with asset values and salaries totally destroyed over some very few years… a whole generation of Venezuelans growing up severely malnourished… and the Bolivarian revolutionaries blaming it all on the war declared on them by The Empire. 

Oxfam, a multinational confederation of NGOs, having issued this report, has now a moral obligation of explaining, once wealth has been created, how it can be redistributed without running the risks of making the poorest poorer. And, if it can’t, it should stop creating false expectations.

PS. Legend holds it that when Otelo Saraiva de Carvalho, chief strategist of the 1974’s Carnation Revolution in Lisbon, told Sweden’s Olof Palme: “In Portugal we want to get rid of the rich”, Palme replied, “how curious, in Sweden we only aspire to get rid of the poor”

PS. Here are some tweets on this thorny issue.

Expropriate it! 

Before going after the “filthy-rich”, it behooves us all to consider how they got their wealth and what they have done with it.

The plutocrats can have obtained their wealth in many forms ranging from highly licit and commendable ways that have even enriched many others, to odiously having used criminal means leaving many impoverished in their wake. But, once that wealth exists, what can the wealthy do with it?

They can invest their wealth in bonds and shares, which mean these assets, if well invested, will be productive.

They can freeze their purchasing power, by a sort of voluntary tax, on walls or in storage rooms, like for instance the $450 million Leonardo da Vinci “Salvator Mundi” (What those who got the $450 million fresh purchase power do with it, is what then becomes relevant to the economy) 

They can spend their wealth on things that no normal human being could spend on, which helps to create jobs than would otherwise not exist.

They can put some cash, on which they earn 0%, under the mattress... a couple of $100 bills?

They can engage in philanthropy, hopefully efficiently in worthy causes, otherwise that's a loss.

They can use their wealth to manipulate and exert undue influence.

That should primarily make us go after that wealth that has been obtained through illicit or immoral means; and that wealth that is used to manipulate and obtain more influence than what its owner should rightly have; and keep an eye out for useless and even bad philanthropy.

I argue all this because, when redistribution profiteers try to increase their franchise value by instigating envy and hate, it behooves the rest of us to make a clear distinction between the good and the bad among the astronomically wealthy; and to much better understand what has already been "redistributed" by the wealthy themselves, so as to avoid unexpected consequences.

What is absolutely certain though is that any redistribution of wealth will yield only a minuscule fraction of the benefits so loudly promised.

PS. There are though many market inefficiencies that allow wealth to be accumulated in legal and moral ways but that should anyhow be combated. This includes monopolies or excessive rent extraction from intellectual property rights.

Is freezing at Christies US$ 450 million in purchasing capacity in Leonardo Da Vinci’s Salvator Mundi something good or something bad?

Clearly Leonardo da Vinci has to personally, from above, be extending his deepest gratitude to Janet Yellen of the Federal Reserve and Mario Draghi of the European Central Bank. Had it not been for their quantitative easing (QEs) and ultra low interest rates, he would never ever have seen his Salvator Mundi valued, so soon, at an incredible US$ 450 million.

Of course the wealth redistribution profiteers will scream bloody murder. The US$ 450 millions is like a voluntary tax that has escaped their franchise. 

The real question though is: Was the freezing of US$ 450 million in purchasing capacity in a painting (or in a storage room), like with a sort of voluntary tax, something good, or something bad. If bad how do you reverse it without other negative unexpected consequences?

But, for the time being, what is much more interesting is what are the vendors to do with US$ 450 millions in cash?