In the United States, we hear frequently enough about the top 1%, especially from those who call themselves social democrats or progressives.  The implication is usually that we have to help the bottom 99% by hurting the top 1%, usually through higher taxation.

This ignores several points.  The most important is that, in a free market, one person’s gain does not have to be at the expense of someone else.  Wealth can be created.  In order for the poor to get more, it doesn’t have to be through redistribution.  In fact, redistribution ultimately undermines property rights and wealth creation, which can actually hurt the poor more in the long run.

Another point is that, instead of trying to tax the top 1% or harm these people in some other way, why not just stop subsidizing them first?  There are many ways that government helps subsidize the rich at the expense of the poor.  Regulations are often put in place to keep out competition for those already established, which ends up hurting the little guy more.

There are other protective measures enforced by government to keep out lower wage competition. The central bank creates an environment of easy money and artificially low interest rates that often benefit the big players at the expense of the little guy, especially when it creates asset price inflation.

There are also outright subsidies for companies.  Look at Elon Musk and Tesla where the government heavily subsidizes electric cars.  They are toys for the rich, while Musk gets richer because of the subsidies.  And to top it all off, there are direct bailouts for the rich and connected as we saw in 2008 and 2009.

One last point for now is that it seems silly to criticize the top 1% just because they are the top 1%.  Maybe these people didn’t take any math classes, but there always has to be a top 1%.  If you have 300 million people, there will always be 3 million people who make the most money or have the most money. It is just a question of how they make/ made their money.

In a free market, those who get rich will generally be those who have served the most people or provided the greatest service.  In a free market, it is quite difficult to get rich by using fraud.  It is far easier to make money by providing value to others.

Unfortunately, some of the people who complain about the top 1% are egalitarians because of envy. The problem is that their main concern isn’t to help the poor, but rather for everyone to be more equal. These are the most dangerous people.  Of course, they are also hypocrites too, because they probably live far better than the average person on the planet.

The Top 10% Isn’t That Wealthy

There was a recent article describing what it takes to be in the top 1% and top 10% in the world in terms of net worth.  In other words, this is a study based on wealth and not income.  There are some people who have a relatively high income without having a high net worth. Although the article is harping on wealth inequality, it is still useful.

In order to be considered in the top 1%, you have to have a net worth of at least $871,320.  In order to be considered in the top 10%, you have to have a net worth of at least $93,170.

According to this article, the equity in your primary residence counts towards your net worth in this calculation.  So if you own a house currently worth $300,000, and you have just $200,000 left on the mortgage, then that alone puts you in the top 10% of the world.

This means that quite a large percentage of Americans are qualified as being in the top 10%. This may not be a completely fair comparison with the rest of the world, as some things may be more expensive in the U.S. than the average in other countries.

At the same time, I recently heard someone point out that the U.S. isn’t really that expensive of a place to live in comparison to much of the rest of the world.  It’s just that Americans expect a high standard of living with all of the materialistic things that have become so common.

Let’s say someone moves to Thailand and lives in a 600 square foot house and shops at the market every day for meals.  This person lives on a U.S. pension of some sort.  He might say that his dollars go really far in Thailand.  But here is the problem.  If this person lived in a low cost of living area in the United States and lived in a 600 square foot apartment and never ate out at restaurants, then he would probably find that his dollars go pretty far in the U.S. too.

Regardless, there is no question that Americans have a higher standard of living than the large majority of the rest of the people on the planet.  But the redistributionists living in the U.S. do not talk about giving up their lifestyle to help poor people in places such as Africa and Latin America.  They aren’t sending 90% of their money off to some family living in a hut on the side of a dirt road in India.

I think Americans should be grateful for what they have.  It really is a blessing to be able to live in an area with opportunity.  At the same time, we could be so much better off than we are in terms of living standards if only we would see a dramatic reduction in the size and scope of government.

The answer to higher living standards is not more redistribution and more forced equality. The answer is secure property rights and free markets.  We don’t want to make the top 1% or top 10% poorer.  We want to make everyone richer and more prosperous.