Are rich people idle “rentiers,” as economist Thomas Piketty calls them, who inherit wealth and add no social value? In supporting Sen. Bernie Sanders’ plan for higher estate taxes, former Labor Secretary Robert Reich claimed that “America is creating a new aristocracy of the non-working super rich.” And in plugging Sen. Elizabeth Warren’s wealth tax, Paul Krugman said “we seem to be heading toward a society dominated by vast, often inherited fortunes.”
In fact, today’s economy is dominated by entrepreneurial innovation, which is generating rapid turnover in the ranks of the wealthy. And even among the declining share of the rich who inherited their wealth, many are impressive company builders or philanthropists in their own right.
In the U.S. economy, wealth is dynamic, which is clear from the Forbes annual list of the 400 richest Americans. Fully 43% of the people on the list in 2018 were not on it 10 years ago. The newcomers are entrepreneurs driving economic growth. There is Jensen Huang, co-founder of graphics chip maker Nvidia NVDA, +1.14% and Shahid Khan, who built automotive parts maker Flex-N-Gate. There are Brian Acton and Jay Koum, co-founders of WhatsApp, which provides free phone service globally for more than 1 billion users.
Reinhold Schmieding is on the 400 list. He founded Arthrex, a surgical tools company that has developed thousands of products. There is Robert Pera, founder of wireless equipment maker Ubiquiti Networks, and Judy Faulkner, who founded medical records software firm Epic Systems. Thai Lee is one of the many immigrant entrepreneurs on the Forbes list. She built business IT provider SHI International.
These billionaires are the farthest thing from rentiers. They are inventing new products and driving down prices of services that we all use. They are making our lives better.
In a 2013 study, Steven Kaplan and Joshua Rauh explored the backgrounds of Forbes 400 members over the years to see whether wealth was self-made or inherited. They found that the share who were self-made rose from 40% in 1982 to 69% by 2011. The study found that fully 20% of people on the Forbes list grew up poor, as billionaire Oprah Winfrey did. In 2018, Forbes produced a similar tally on the rise of self-made billionaires. The magazine found that “the number of Forbes 400 members who have forged their own path, using entrepreneurial capitalism as a means to attain a vast fortune, has increased dramatically.”
Wealth is more dynamic in America than in Europe. A Peterson Institute study found that 29% of America’s billionaires inherited their fortunes compared to more than half of Europe’s. The study looked at the Forbes global billionaire lists since 1996 and found that “among advanced countries, the share of self-made billionaires has been expanding most rapidly in the United States.”
Beyond the top-end Forbes 400, data on other well-off Americans show similar patterns. A report by BMO Private Bank found that 67% of Americans with $1 million or more in investible assets were self-made, while a survey by U.S. Trust found that 70% of high net-worth respondents reported growing up in middle- or lower-income households.
It is also true that many inheritors of wealth do not fit Sen. Sanders’ description of “the non-working super rich.” The Forbes list includes many billionaires who’ve worked hard to grow the businesses they inherited. For example, Helen Johnson-Leipold is an heir to the S.C. Johnson fortune, but she spent 35 years in business rising to become head of Johnson Outdoors.
Leftists seem to have a cartoonish idea of wealth, like it is a static pile of gold in Scrooge McDuck’s vault. But wealth is simply savings, which is channeled into investments throughout the economy. Many billionaires pump their wealth into angel investment and venture capital, which together feed more than $100 billion a year to promising growth companies. Jeff Bezos, for example, uses his Amazon wealth to invest in biotechnology, aerospace, health care, renewable energy, media, and many other activities. And Peter Thiel, after co-founding PayPal has used his growing wealth to provide early capital to an endless series of technology firms including Facebook FB, -3.32% Airbnb, SpaceX, Spotify SPOT, -1.92% Palantir and Lyft LYFT, +0.00%
In America’s technology industries, wealth is fused with entrepreneurial experience in angels and VCs to mentor and grow new generations of start-ups. In a virtuous cycle, waves of innovations generate wealth that is plowed back into creating new and better products and services.
Unlike Scrooge McDuck, the wealthy donate large amounts to charitable endeavors. The top 1% of earners makes one-third of the nation’s charitable donations, while the top 1.4% of wealth owners provides 86% of all charitable donations made at death. Many of the wealthy are actively engaged in social and educational pursuits aimed at lifting up the less fortunate.
Sanders, Warren, and Piketty in his book “Capital in the Twenty-First Century” propose hiking taxes on the wealthy. But that would steal opportunities the wealthy are creating for other people through their investments and philanthropy.
Forbes says its list shows, “The American Dream … is alive and well.” That will remain true if we keep “capital in the twenty-first century” in private hands funding our dreams and not the dreams of misguided U.S. senators.
Chris Edwards is director of tax policy studies at the Cato Institute and editor of www.DownsizingGovernment.org.
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Remember…….it’s always easier to snivel and whine hoping that eventually someone will throw you a bone than it is to work for it. The clowns in the above jpeg have it down to a science…..I wonder how many qualify for the Romney 47% statistic.
Oh, I thought the picture was today’s installment of The Freak Show.
Lets also stop crony capitalism and corporate welfare,end rifts of laws and regulations that stop folks from creating a business or shut them down/end the armies of lobbyists who push for nonsense like the ethonal in gas ect/if you must have a tax system how about say a 2% tax,whter you make a dollar a year or a billion/no write offs for ANYTHING!I could go on but feel got me point across pushing for a true free market economy.
The Globalist Billionaire get big or get run over model failed. Me and my neighbors produce food but the governments do everything possible to prevent us from selling it to other people. All ya’ll liberal Urbanites could starve if ya’ll don’t get on the Politician’s asses about this.
A little torn on this issue. I get the point, but some of these billionaires are pure evil.
Go blow the skinhead. You know, that one you speak of so glowingly. Pay Pal? Facebook? SpaceX?
All hail the mega millionaires in bed w/ clowns in action? Destruction.
Meanwhile, Joe Six-Pack struggles to keep his head above water, trying to provide for his family.
The judgment of billionaires and their contributions to society ought to be zeroed in on where and who they
distribute their wealth and power to (influence), and the hidden effects of their products and services on society.
Some have created beneficial products and services, with no ill intent, and deserve the success and riches. But,
There are white hats and black hats, and Chris fails to distinguish between the two in his praise.
Doing god’s work.
Glad you included Lloyd the Jew this time.
OK Chris, you open borders faggot. Chris neglects to tell us his paycheck at the once Charles Koch Foundation relies on us believing this bullshit. Chris also neglects to tell us that that thick warm jism all over his face is oligarch jism. Get a real job, punk before you start preaching to anybody on the wonders of the oligarchy.
High Five Star and Flash!! Preach it.
I will happily continue to bash every penny anyone earns as a result of their use of the violence of government to achieve their ends. Name me a billionaire that didn’t get that way via the Federal Reserve’s easy money policies, massive government contracts, protectionist regulations, subsidies, bailouts, handouts, etc. and I will be happy to praise him/her at every turn.
Kylie is definitely making our lives better with lipstick that gives young women the dick-sucking lips look.
They develop a lot of new products and that’s good but most are godless secular people who hate Christianity and are members of secret societies hell-bent on bringing in the New World order under the Antichrist. Most try really hard to ” fit ” in and be accepted by the wealthy elites families which usually means throwing us traditional white Americans under the bus.
Dear Mr. Edwards.
After you are done blowing a billionaire, do you swallow or spit it out?
When a billionaire tells you to “go fuck yourself”, do you actually try to do so?
Thanks,
A curious po’ person
Build a trap that gives a better blow-job and the world will beat a path to your door.
Monica’s wurking on it.
Are they really innovating though? Microsoft Word is slower and more buggy than any time I’ve ever seen. Windows is an absolute joke. Amazon’s marketplace is literally a scouting ground for margin scalping. They can and will run around anyone with a successful product and completely wipe out their profit, with zero recourse available. Facebook traps you in their apps so you can’t easily block the ads. Apple forces you to spend 3 times as much for basic accessories. Uber conspires to hide the true per mile cost of operating a vehicle which basically forces all their drivers to lose money. Airbnb has a crapton of listings that are for “the whole house” but then you look at the listing and the owner is literally in the house.