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Income redistribution to go global?

Global markets see early signs of worldwide income redistribution that could plunge the world into economic Marxism.
Global markets see early signs of worldwide income redistribution that could plunge the world into economic Marxism.
Photo by Spencer Platt/Getty Images

Pope Francis caused somewhat of an uproar among conservatives and libertarians recently when he suggested he supports income redistribution and opposes capitalism.

In the intervening weeks since making these unfortunate statements, the Vatican has been forced to clarify the Pope's words, emphasizing that he did not mean to suggest he opposes free enterprise or supports the Marxist notion of income redistribution.

But, frankly, no Pope, and no minister of the Gospel is an expert on economics unless they specifically studied the subject as part of a degree program. Or at least most aren't. Ministers, especially liberal Protestant clergy and Catholics who embrace "liberation theology," are given to making rather asinine comments that show more of their political bias than their adherence to the Christian Gospel.

Income redistribution, unfortunately, has received new life after the total demise of its adherents in the Communist world. With the demise of the Soviet Union and its grip on Eastern Europe, Marxism was exposed as a fraud -- a Utopian ideal that is not based on the real world and is thus doomed for failure at the outset.

Today, however, the notion that what I earn is not mine but belongs to government, which then takes it and doles it out the way they see fit, is seeing a renaissance. Barack Obama, the Democratic Party, the Republican elitist leadership, the new mayor of New York, the president of France, and so forth, are all to some degree proponents of Marxist income redistribution.

And at least one major market guru with his finger on the pulse of the world sees reason for some alarm as the tendency of world governments to redistribute income spreads.

Jim O'Neal, former assets management chairman for Goldman-Sachs, told CNBC that he has observed what he calls the early stages of global redistribution:

I wonder if we could be in the very early stages of a redistribution of wealth from capital back to mass income through government policies, whether it be from taxes or things being done to boost minimum wages," O'Neill told CNBC's "Squawk on the Street" on Wednesday. "But obviously this is something else just as human beings, nevermind investors, that we all have to watch closely."

O'Neal believes that part of the impetus for the movement toward income redistribution is the fact that in many places across the globe, such as Chile, the elitists get richer and the rest of society gets no benefit at all from the market boom.

Although the income gap between the rich and the poor is broadening, the remedies proposed by politicians rarely help. For example, presently in the United States the income gap is widening. But all of this has happened after dozens of government programs were implemented during FDR's New Deal and LBJ's Great Society that were aimed at redistribution of income. And more interestingly, all of this happened in spite of the stimulus program implemented by Barack Obama.

Those programs of income redistribution still exist today and yet they did not prevent the current growing income gap between rich and poor.

The problem with adherents to the notion of income redistribution is that their views are based on a false premise. That premise is that there is only a limited amount of money in the world, which they often illustrate in the form of a pie. Thus, the more of that money in the pie goes to the rich, the less money is available to everyone else.

Their remedy, thus, is to allot smaller pieces of the pie to the rich, leaving larger pieces for everyone else. This is classic Marxist economics.

But that premise is wrong. 100 percent wrong.

The remedy is not to force the rich to accept smaller pieces of the money pie but to either bake a much bigger pie, or bake lots of pies wherein individuals create their own wealth. The more government can get out of the way, and clear the way for individuals to engage in free enterprise, the more wealth is created simply because more people are involved in the process.

This is the model that made the United States the greatest economic power on earth by the early 20th century. By the 1920s we were the richest nation on earth, long before there were any New Deal programs implemented by FDR or Great Society programs implemented by LBJ.

How did this happen without government control? It is really quite simple. The people who built America into that great economic power believed that the individual is the master of his or her own fate, that GM's cars were not necessarily the best or produced in the most efficient manner, and thus the field was wide open for people like Henry Ford to get into the game, and mass produce cars that were more available and more affordable.

Entrepreneurship was encouraged and rewarded. And soon Ford had the upper hand over GM because he could make cars faster and sell them at a price most Americans could afford.

Further, other business magnates had the foresight to recognize that the nation would need an extensive infrastructure of roads for these cars. As the roads were put into place, more cars were sold and placed on the roads. Ordinary citizens from every walk of life eventually had a car. Not just the rich.

This is the way wealth was spread around. The oppressive hand of government redistribution didn't come around and take it from Ford in order to give it to skid row dwellers. Rather, Ford created multithousands of jobs -- good paying jobs that gave citizens a decent living. This very thing was happening in other industries too, from steel to oil to construction and everything in between.

Ford's assembly line model was eventually adopted by GM and all of the other car companies in order to compete and to avoid going bankrupt. The keys were personal initiative, risk taking, competition, and a positive can-do spirit.

And note what did not happen. Government did not see a limited sized pie where wealth was limited. Government did not see that pie as divided up into pieces where the rich got the biggest pieces and the poor got the crumbs. Government saw no need of taking wealth from the Henry Fords of the country in order to give to the poor.

Rather, Ford had baked an entirely new pie that created its own system of wealth. The oil business created its own new pie. So did steel. So did construction. Or if you prefer the other metaphor, these forward-thinking individuals baked a much larger pie.

And this is precisely what is wrong with Marxist wealth redistribution. It is the pessimistic view that money is forever limited. Free enterprise on the other hand is optimistic in that it believes human beings can bake more pies when the original one becomes too small to sustain society.

Therefore, Pope Francis is wrong. Barack Obama is wrong. The New York mayor is wrong. The French president is wrong. All Marxists are wrong.

And this is not to mention that when somebody takes my money against my will, that is pure theft. And theft is a crime for which somebody needs to go to jail. Even when government does it, it is criminal. And the perpetrators need to be in jail.

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