George Reisman - For Society To Thrive, The Rich Must Be Left Alone

"The enemies of economic inequality conceive of wealth and income strictly in terms of consumers' goods. As they see matters, a wealthier, higher-income individual simply has more goods and services that he personally can enjoy than does the average person. This view is reflected in the typical depiction of capitalists as fat men, whose plates are overflowing with superfluous food, while struggling wage earners starve. The alleged solution is to take from the surplus of the capitalists and make good the deficiency of the wage earners.

The truth, which real economists, from Adam Smith to Mises, have elaborated, is that in a market economy, the wealth of the rich—of the capitalists—is overwhelmingly invested in means of production, that is, in factories, machinery and equipment, farms, mines, stores, and the like. This wealth, this capital, produces the goods which the average person buys, and as more of it is accumulated and raises the productivity of labor higher and higher, brings about a progressively larger and ever more improved supply of goods for the average person to buy.

The capital of business firms is also the foundation of the demand for labor. The wealthier and more numerous are business firms, the greater is the demand for labor and the higher are wage rates. As illustration, just consider where it is more desirable to work: in an economy with few or no business firms or only small, impoverished business firms, or in an economy with large numbers of wealthy business firms. It is obvious whose competition for one's services will be more beneficial.

Thus, in a market economy, people have a two-sided benefit from the capital owned by others. The capital of others is the source of the supply of the goods they buy and the source of the demand for the labor they sell. And the greater is that capital, the greater is this two-sided benefit to everyone. To the extent that the supply of goods produced is greater, prices are lower. And to the extent that the demand for labor is greater, wages are higher. Lower prices and higher wages: that is the effect of capital accumulation."

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