The war on wealth

If you follow the news coming from the United States, you know that there is a dedicated war on wealth and the people who own that wealth. There was a time not too long ago that the battle cry for the financial and economic system was that everyone should have an equal opportunity at being wealthier if not “wealthy.”

However, that has changed over time to be that everyone should have an equal outcome from his or her efforts. That ultimately is a bizarre and dangerous situation. The reason that it is dangerous is that the nuclear weapon of this war is the government.

In the early 1990s when the Philippines was still experiencing a massive shortage of power, there were individuals that believed the problem would never be solved. They imported literally tens of millions of pesos worth of generators of all sizes and types believing that there would be a huge and profitable market for their equipment.

While these entrepreneurs were buying home and commercial generators, the administration of President Fidel V. Ramos was doing whatever it could to mitigate the problem, including buying larger power generating barges.

Fast forward one year later and the power problem is still serious. However, generators are flying out the door and our entrepreneurs are making money with both hands. Since these businesses are profiting from consumer demand, should some—or even most—of their profits be taken back by the government as they benefited from increased consumer demand?

Fast forward one year later and the power problem has been solved with enough electricity for all. Generators fill the warehouses and the entrepreneurs have suffered massive financial loses. Should the government bailout these businesses?

Wealth and income disparity is a social and economic problem. However, the idea of “taking from the rich and giving to the poor” is also a grave concern. Does a nation truly want to both pull people up while also, likewise, pulling people down?

There is the call both in the Philippines and in the US to raise the minimum wage to a level that is considered a “living wage.” That seems to be a noble thought. Perhaps it might be an interesting idea to pay all legislators the same minimum living wage. That would certainly narrow the income disparity between representatives and senators and construction workers.

The focus though seems more to be on “wealth disparity.” In the year 2000, Bill Gates, Larry Ellison and Paul Allen were the richest people in the world. Each was a pioneer in the computer world. Bill Gates is still one of the richest people on Earth, thanks to his ownership of the corporation he started.

It is being proposed that there be a “wealth tax” to have the government confiscate a portion of accumulated wealth over a certain amount. The magic number being offered is $50 million. So, if this becomes law, a sensible person would limit his or her net worth to $49,999,999.

In 2000 Bill Gates’s net worth was $60 million. Suppose the government had said, “Bill, you are becoming too rich because your company is too profitable. Cut the price of Windows.” There would have not been any great incentive to innovate and move beyond “Windows 2000.”

Cornelius Vanderbilt, born in 1794, established a ferry service when he was 16, which he built into a nationwide steamboat business. By the 1940s, Henry Ford was the world’s richest, selling millions of vehicles during his lifetime. In 1957, J. Paul Getty was the richest living American having opened the Middle East oil resources.

Do we want the government to decide who is too rich?

E-mail me at mangun@gmail.com. Visit my web site at www.mangunonmarkets.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.

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