From Ideas on Liberty
At the heart of almost all economics is the idea of mutually beneficial exchange. When two people voluntarily engage in an activity, economists assume that both parties are better off. Otherwise, one of them would have refused the deal. It doesn’t mean people don’t make mistakes—sure they do. And sometimes people regret the choices they make. But, in general, people do what they do because they get pleasure or satisfaction or some kind of benefit from their actions.
Not everyone is comfortable with this view of the world. A lot of people see the world as a zero-sum game—any benefit I receive comes at your expense. In this view, corporations take advantage of their workers and their customers and the economic marketplace is a battlefield where the “haves” are always routing the “have-nots,” where the rich get richer and the poor get poorer.
Sometimes this view gets applied to the economic success of America versus the rest of the world. In the ’60s this view condemned American corporate imperialism. We took the raw materials from poor countries and profited. The complaint was that there was no investment. Today, American multinationals do invest in foreign countries. Still, they are condemned.
One proof offered by these critics of how rapacious America is in the rest of the world is the observation that America consumes more than “its share” of world output. We are only 5 percent of the world’s population, yet we consume x percent of the world’s resources. Usually x is given as 25. I recently found a commencement address online by a noted writer that put the number at 75. The implication is that this is somehow unfair. It implies that some sophisticated form of theft is at work.
The usual response by the economist to this kind of remark is that, well, after all, the United States produces a healthy share of the world’s resources. And when you take that into account, it’s not so unfair anymore.
This response, which I’ve given myself many times, misses making the most important point about the issue. The real point is that the world’s resources, however you define resources, are not finite, to be split like a pie into slices. The world is not a zero-sum game where America’s wealth comes at the expense of others.
One way to see this is on an individual level. Bill Gates is a wealthy man. He is only able to take money from millions of people because he provides something in return—software—which the consumers value more than the money. Suppose Bill Gates’s lakeside villa in Seattle burns down and the blaze also consumes a few boats and cars. Gates has less wealth. Does anyone else have more? Sure he might rebuild the house and benefit some builder, but as Bastiat points out, something else that Bill would have spent money on isn’t going to happen, so that’s a wash. The world is poorer if Bill Gates’s house burns down, even though his share of the world’s wealth has gotten slightly (very slightly) smaller.
Let’s make the impact more dramatic. Suppose Bill shrugs. Tired of the government’s lawsuits, he decides to sabotage Microsoft and destroy the company. As a major stockholder, his wealth would fall dramatically. Would the rest of the world be richer?
Now take it to the national level. Let’s say Americans go through a religious or philosophical transformation and suddenly decide to work half as hard, accept lower pay, and spend more time reading, swimming, hanging out with their families, and so on. We would still be 5 percent of the world’s population. We would no longer have command over 25 percent of the world’s resources. But those resources wouldn’t be magically freed up to go to poorer citizens of other nations. The resources created in the past when we worked harder simply wouldn’t exist.
Maybe what people really have in mind when they complain about our disproportionate share of the world’s resources is that we should give more of it away. We have too much. The same complaint is often heard about Bill Gates. He has too much.
This is the only sense in which there is something of a zero-sum game. Things I decide to keep and not give away to you are things you don’t have. Implicit in this strange understanding of the world is again a very static view of wealth creation.
The Product of Luck?
I remember hearing a prominent economist say that wealth was not the product of wisdom or skill but of luck. Therefore, we can tax wealth at 100 percent and redistribute it to those without wealth. I wasn’t sure whether the word “therefore” was a moral statement or a practical one, but taking the practical interpretation, I thought, sure, you can do that. Once. After the first time, even the wealthy who are merely lucky are going to stop trying to accumulate wealth. Similarly, I don’t think American citizens are going to continue to accumulate wealth for the purpose of giving it all away. Sure they give some of it away. For me, charity is a moral imperative. But I know of no religion or moral system that demands you give all of it away. There is a name for that: slavery.
There is one more possible interpretation of the 5 percent/25 percent criticism: it is referring only to physical resources like oil, energy, tin, titanium, and so on. Such resources, the critics would argue, are surely finite, and therefore every barrel of oil left in the ground is a barrel for someone else to have. So America consumes “too much.”
This analysis is also flawed. It assumes that the natural resources of the world are miraculously sitting in some giant pile, waiting to be distributed. In fact, natural resources have to be found and uncovered at great expense. If we didn’t consume them or use them to produce other products, they wouldn’t be freely available to the poor. But there is a bigger flaw. As Julian Simon pointed out (see The Ultimate Resource 2, for example), there is no real sense in which the world’s physical resources are finite. Due to the unlimited creativity of humanity, we are able to discover new sources and use old ones more effectively.
I suspect what motivates those who complain about America’s unfair share is a particular measure of fairness—simple egalitarianism. No one should have more than anyone else. If that is their true goal, the only way to achieve it is through force and the impoverishing of not just the United States but those we trade with around the world.