Money doesn't grow on trees

After my last post I remembered that lots of Americans are still falling for the conservative narrative about rich people and job creation. Ever since Bush sold the Iraq War, conservatives have been using the simple strategy of repetition to sell their message. It's disgusting how simple and effective it is. How it works is:

1. Pick something that you want everyone to believe
2. Repeat it.
   
   A lot.
   
   That is, make up some stuff that supports this belief, or find a small amount of shaky evidence that seems to support it, and mention it to as many people as possible, as many times as possible.

Another word for this is propaganda. Propaganda is shockingly effective. It sold the war on Iraq; it sells Chinese people on every message from their government; and it sells Americans on every belief of Rupert Murdoch. Oh, how I wish people would not fall for it, but they do and they always will; being human has many curses. Sadly, only the rich and powerful can use this technique, since it requires tremendous resources to send a single message repeatedly to everybody. True, less powerful organizations can send messages and convince some people, but not as efficiently as the rich and powerful can, and so the rich and powerful message tends to win (as long as it isn't too implausible.)

One message that has been going around for the past few years goes something like "rich people are the job creators, so anything that hurts rich people will destroy jobs." Several other messages circle around it for protection, messages to demonize those who support increased taxes for the wealthy, claims that raising taxes is socialism, claims that raising taxes on the rich doesn't increase government revenue due to the "Laffer curve", and so on (note: the Laffer Curve is a legitimate concept, but it probably peaks somewhere above 70%, whereas some of the richest people have tax rates below 20%). There's too much BS going around for me to address it all, but I'd like to push back against this mindless worship of rich people a bit today.

When it comes to wealth, perhaps people don't understand the obvious: that gambling money is a zero-sum game. If you get ten million dollars, that money came from somewhere! Somebody, somewhere, had to lose ten million dollars in order for you to gain it. Usually it's spread out over lots of people; maybe a million people lost an average of $10 and they lost it without even realizing it. Finances can be extremely complicated and it may be nearly impossible to understand where the money came from, but it did come from somewhere!

A couple days ago, a friend in Colombia (a much poorer person than myself) asked me "is this offer for real?" A website was offering to give anyone a free iPod in exchange for credit card details, if you agreed to sign up for one month of another popular service like Netflix or eMusic (e.g. $8 for one month of Netflix). Then she showed me another website offering a free iPhone 5 (which costs $700 retail).

Now, apologies to my friend, but that's a dumb question. Of course it's a scam! Would you believe it if a website offered to give you a "free $700" just for handing over your credit card details? I think people fall for it because they only think of what they will get out of it, not what someone else will lose. I would love to give all of you a "free" laptop. So why don't I? Because I would lose tens of thousands of dollars, stupid! Even if you could somehow verify that this is for real, and that you'll really get an iPod or iPhone, it would still be foolish to sign up without asking: where does the money for this iPoop come from? Who benefits and who loses? What are the motives of the people involved?

Regardless of whether someone "won" a lot of money, "earned" a lot of money on Wall Street, or "got a free iPhone", you should be asking yourself where the money came from. Some adults need to be taught a lesson that children already know: "money doesn't grow on trees". When I hear that a Wall Street exec--who does not produce any actual physical products or anything useful at all--gets a $5 million salary every year and a $5 million "bonus", I am not angry because he has a lot of money. No, that's fine, how nice for him! Nor am I angry because he got far more in one year than I will ever have in my entire lifetime: I am not an envious person. No, I am angry because other people, much poorer people, lost $10 million at the same time. That money came from somewhere! That's why I'm pissed off! And you should be too!

Many people lost thousands or tens of thousands of dollars (for some, paper losses, for others, real losses) when the stock market crashed in 2008*. The money didn't simply "vanish"--it went to the rich clowns that caused the crisis*.

* Everyone should understand that the stock market's "total value" is not measured in real money, it is an extrapolation from stock sale prices. When the U.S. stock market "lost 21% of its value in a week", that just means prices went down 21%, it doesn't mean that 21% of actual money was lost. Stock market losses don't become real until either you cash out or when a stock's value goes to zero, which is unrecoverable. Thus, actual losses would only be 21% for a person that bought at the beginning of the week and sold at the end of the week; losses for everyone that "stayed in" were not as bad, as long as they waited for some of the price to recover before selling. Nevertheless, large real-life losses did occur and large real-life gains did occur, too, for certain individuals.

Mind you, it's not always obvious that money is a zero-sum game. After all, money is debt, and money can be created from thin air, but it's still effectively a zero-sum game; creating new money eventually devalues the existing money, so it is not a magic way to create wealth, it merely transfers wealth from everyone else evenly.

Outside the money-making game itself, it should be noted that the real world is not a zero-sum game. For example, some new technologies can revolutionize the world and enhance everyone's quality of living: so technological innovation can be a positive-sum game, one that really does improve society. Thus, you might argue that Bill Gates really did earn his fortune by creating technology that improved the world. You'd be wrong though, because many people at Microsoft deserve as much credit as Gates himself but did not walk away with billions of dollars, and because any number of people and companies outside Microsoft would have been ready and willing (if circumstances had been slightly different) to create the same technology or better, at a much lower cost. For heaven's sake, the Linux ecosystem was created by volunteers, for free! Given a little money, the open-source approach to software development could have produced higher quality software than Microsoft did, much more efficiently. (It is often complained that open-source software has lower quality, but I would argue that this is because it was produced for free; if somehow these same volunteers could be paid, they could work full-time and produce high-quality free software very efficiently.) I could make other arguments, too, like: surely Bill Gates is not one million times better than the rest of us, so surely he didn't deserve one million times as much money. Or: to make his fortune several elements of luck had to happen that were outside his control. And you know, it wouldn't surprise me much if, following our deaths, our creator informs us that our souls are actually all identical and that the only difference between us was our bodies, talents and circumstances, so that all our talk of certain people "deserving" this or that was baloney the whole time, in a way.

While new technology often has a "positive sum" effect on the world, other things commonly have a "negative sum" effect. The financial crisis is a perfect example of the negative-sum effect: yes, some Wall Street folks got rich by causing the crisis, but if we could somehow measure their negative effects on society as a dollar amount, this negative dollar amount would be much higher than the amount of money they pocketed. Why? Well, millions of people lost their jobs, and job losses are a negative-sum effect. Someone with a job is producing stuff, probably creating value for society, while someone without a job is producing nothing (but still consuming some resources, albeit less resources than someone with a job would consume). Thus, destroying jobs is a negative-sum game, while creating jobs is a positive-sum game.

But even when someone is involved with a positive-sum game, that doesn't automatically mean they "deserve" their $10 million paycheck, and it doesn't even mean they have a net positive effect on society.

I mean, let's say you made $10 million this year and you helped create 100 jobs salaried at $50K each. First of all, are you daft enough to think you singlehandedly created these 100 jobs all by yourself? Most likely hundreds of people helped with this effort, and most of them still make $50K per year and little or no bonus. Second, the net effect on society of 100 new jobs may be well under $50K per person, much less than half of the money you made--and remember, that money came from somewhere. So even if you created 100 jobs of value (you didn't, but let's pretend you did), you still drained more than that from elsewhere to line your pockets. Eventually you'll spend that money and some of it will 'trickle back down', but the mansions and yachts you bought with the gold-plated toilets are purely a drain on society; they are not even really good for you yourself, since super-rich people are, statistically, not much happier than people that are only "fairly" rich. That is, if you find yourself making 10 times as much money, chances are you are only slightly happier: so if you try to buy happiness with money, the price is obscene. You could have easily made hundreds of people very happy with your $10 million, but instead you chose to buy a f***ing yacht. Idiot!

Third, the skills that you needed and used to create jobs are learnable. There are probably millions of people out there who could replace you and do your job just as well if they had the proper training (and the social connections you are lucky enough to have received--"it's not what you know, it's who you know"). So there is no need for anyone to make $10 million dollars, and the rest of us would be better off (richer) if someone else, someone willing to work for $200,000 or $300,000 per year, would do your job instead. We'd be better off because we wouldn't be silently losing the money that pays your salary: if you make $10 million per year on Wall Street, the rest of us would have more profitable mutual funds if you were gone (since you wouldn't be draining the stock market with all those fancy accounting tricks, or destabilizing the banks by paying your bonus with loans that your company might never repay.) If you make $10 million per year in telecomms, the rest of us would have lower phone/internet bills if you were gone. If you make $10 million per year on TV, we'd have lower cable bills or box-office prices if someone "lesser", but no less talented, replaced you (or better yet, perhaps the money could be spent on better investigative journalism or something... Lord knows ignorance is increasing these days).

Your $10 million had to come from somewhere, and I can guarantee that virtually all of it came from people that are dirt-poor compared to you. To make matters worse, you are probably spending some of that money to lobby Congress for laws favorable to you and your bottom line, and you probably feel little or no obligation to help society with your wealth, apart from some token amount to massage your conscience.

Some (only some) of the 1% create jobs, but surely these jobs could have been created at a lower price, and more importantly these "job creators" are obviously not that good at creating jobs, otherwise America wouldn't still have an unemployment crisis four years after the bust. Obama gave in, he let the rich keep their tax cuts (in exchange for a higher deficit and national debt), yet somehow these job creators have not fixed the economy. Because rich people are just rich people, not magic job fairies. Duh.

Sadly, since my message is not simple and I am not rich and powerful, I cannot simply repeat my simple message on Cable News 10 times a day. Instead, almost no one will read it, and those that do read it will not change their opinion. So the rich and powerful will win again... for now. But eventually, I suspect we will all lose, when the unsustainable policies supported by the rich finally cause a more serious implosion of the world economy.