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!