Leeches

What is wealth? And how does its distribution shape the flow of money in society? These are important questions that need to be answered in order to understand what's going on in our world and our lives.

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It's surprising to me that many people with whom I have discussions about politics, economy and society, have an ill understanding of what wealth is. Although I suspect that readers who visit my blog don't need it, I'll give a quick rundown just to be sure. Wealth is not money. Wealth is not income. Income and money can be transformed into wealth, but they are not wealth. Wealth is something most people do not have, or have very little of. Wealth is material possessions, assets. Wealth is stuff you own, and comes in different forms. For ordinary people the most common form of wealth is their house. That is if they own that house and if they've paid off its associated debt, the mortgage. If you bought a $300,000 home and paid off $100,000, you now own one third of your house; the rest belongs to the owners of the debt. Debt, in other words, is also wealth. At least for the people who own those debts. The rest of us owe interest payments to those owners. And if you rent your house, your monthly payments go to the owner of that house.

Now, if we look at all the stuff and all the debts that are owned in our societies, ordinary people own but a very small fraction of all there is to own, again with houses being the most common form of wealth owned by average citizens. Plus maybe some stocks and bonds tied to their pension-plans. But that's a tiny fraction; the rest is owned by corporations and the very rich, for the most part. Everything in the world is owned, everything represents wealth; land, buildings, shops, houses, factories, machinery, debt, farms, offices, we could go on but the point is that everything is owned by someone, some entity, corporation or institution: the wealthy people.

Now here's the deal: to live we all need access to that wealth. We all need to go to the shop to buy food and clothes. We all need to go to work, to the factory, the office or the restaurant, where we interact with the buildings, machines, computers, plates and glasses that are owned by someone else. We constantly interact with and buy stuff that's owned by someone else. And every time we do, we pay a price that goes into the pockets of those who own that stuff. When you go to the shop to buy new pants, only a small fraction of that money goes to the workers and the manager of that shop, most of it goes to the owner of the shop and to the owner of the building he or she rents to run the shop. Sometimes it's said that to make money, you need money to start with. That's not correct: you need wealth to start with, you need to own something others have to pay for in order to be allowed to interact with it, to have access to it.

So if you have a job that pays, let's say $50,000 per year, most of it ends up in the pockets of the ones who own the shops, restaurants, gyms, pools and cinemas you frequent. Almost all of it, because with $50,000 per year you can hardly save up enough money for a down-payment on a house. The rich however, the ones doing the owning, make money, your money, just by waking up each day. Multi-millionaires "earn" hundreds of thousands of dollars simply by owning wealth. And those dollars they invest in even more wealth. In an ideal situation they'll invest it in new wealth; that's the capitalist ideal, when the rich create new businesses, expand on existing businesses, creating more jobs and more wealth for everyone. I hope you can see the fallacy in that theory now; new jobs do not equal new wealth, at least not wealth for more people. And that's in the ideal situation; when the economy is slow, when ordinary people don't have enough money to spend more on nice things, the rich are reluctant to create that so called new wealth.

Instead they just buy more of the already existing wealth. And that's the houses that are currently owned by ordinary people. You know, the only form of wealth for us common folks. That means house prices rise, even a smaller fraction of us will be able to afford a house of our own, and those who do manage, will have to lend more, will have a bigger debt that's also owned by the rich. The gap between rich and poor will grow even more and faster. And the depressing truth is that this is all inherent to our sociopolitical and economic system. Even without the sociopath egoists at the top, this mechanism would still play out. Income is not wealth; income is the wealth you created with your labor minus the portion of that wealth that goes into the pocket of the owner of the workplace, which is called "profits". In this capitalist system, your life is dedicated to increasing the wealth of the already insanely wealthy.

All this points to one, and only one true solution, which is that ownership of the wealth needs to be democratized. Every other solution, like a universal basic income or raising taxes on the rich, is only temporary and ultimately aimed at keeping the system intact. But if we keep this system intact, the second best solution is to tax wealth, and not income, as the rich will use income to buy more wealth that generates more income. I hope this post has shown that wealth created more wealth, and so long as that wealth is owned privately, it'll grow the wealth of private individuals. Taxation of wealth is the only way to close this floodgate of trickle-up-wealth. The rich often accuse the poor of being leeches every time they receive so form of government assistance. The poor, in their estimation, leech off of their tax-dollars. I hope that this post has shown you who the real leeches are. Watch the below linked documentary for a really deep dive into inequality and how wealth becomes power.

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