Redistribution Of Wealth Is Not Sufficient To Fix World Poverty

“We as individuals, we must extend peace and knowledge growth throughout the world, for that is the only way we all prosper.” – Axel Hoogland

Redistribution of wealth is not sufficient to fix poverty because there is not yet enough wealth in the world.

There is $217 trillion dollars of valuable stuff in the world.

$217 trillion/ 7 billion people = $30k/person.

Therefore, if you are one of the people reading this who has more than $30,000 in net worth you should consider redistributing your own wealth before you call for Jeff Bezos or Bill Gates (who IS redistribution his wealth) or others to redistribute their wealth.

We need to understand the difference between production and net worth.
This is the issue people, including Oxfam, have and perpetuate when they say “the richest 7 people could end poverty”. To say that a billionaire who “made” $40 billion in a year in capital stock appreciation could “fix poverty” is ignorant.No one is stopping any person from getting rich and giving all their money away. If you have a great idea to start a company, by all means, start it up and give your money away! Show us how it’s done!

Anyone who holds a significant amount of shares of a company likely created that company from nothing. They accumulated wealth because people use their services because their services or products work so we give them money for them. These people take something, add value, and sell it to us, making themselves rich and our lives easier in the process.
Most people are bad at making money or adding value or thinking creativity. That is why we work for companies that tell us how to add value. That is why companies pay us a part of what value we create, because we wouldn’t know how to do it ourselves.

Most people also have excess money from their jobs, which they then re-invest in the stock market or in government bonds because they don’t know what constructive thing to do with their excess money also.
You shouldn’t be mad at Bezos! He created a company, he did an Initial Public Offering (IPO) of stock. During an IPO people say “I have an idea that I think I can make you money.” People then agree with that person and give him the money they worked to earn, in the hopes that he will make them more money with it, because they can’t think of a way to make that money work themselves.

So, if someone has started from very little, made a move to say “I can add value” and people have both freely given them money (working capital) for stock (part ownership of a company) and then that person DID add value and create a very useful company that millions of people use for it’s efficiency, why would you want to then take that money away from that person who you gave it to in the first place? We should give those people more money! Which is exactly what happens in the stock market. The main purpose of the stock market it to get money from people who don’t know what to do with it to people who have an idea of how to add value.

The only way to raise the poor from poverty is to give them better tools to produce more. I am only as successful as the tools I have access to, knowledge being a tool. If you are a person in the middle of Africa, with no access to the knowledge that has been built up for hundreds of years, you are at a distinct disadvantage, through no fault of your own. This is one reason I like “One Acre Fund”. They are helping people learn to produce more, not just handing out charity. The old “teach a man to fish” axiom. That being said, there are many even more efficient ways to farm than these people are being taught. These other methods are initially capital intensive and lead to fewer workers to produce more goods, creating lower prices.

The other thing to note is that the world GDP is only $17,300 a year. As I mentioned above, the only way for everyone to be on a level playing field is to raise the worldwide GDP. How do we do that? Through investment in technology and innovation. As I said, you are only as good as the tools you have and the value you create. The more knowledge people have, the more tools they can use and the more value they can create. You can see some companies are very good at creating profit per employee like Facebook and Google. Others are not so good. We should continue to work to improve the profit per person which comes down to value created per person. People can only create more value with better tools!

Another thing we should learn about investment of capital comes from Norway and Venezuela. Both countries discovered oil and the oil was at least partially drilled by the state. What they did with the profits after that is instrumental though. Venezuela used the money to subsidize many things and pay for the government to run. This worked, as long as there was always more oil and people willing to pay for it. But once it ran out, bad times.

Norway took a different approach. They also saw the oil as belonging to the people, they could have paid each person some of the oil money (but they didn’t) but they did something (also somewhat socialist) but at least it involved long term thinking. They continued to collect taxes from the people but they used the profits from the oil sales to invest in real estate and businesses around the world! This will provide them income for many years to come. In fact the Norwegian Oil Fund, which holds assets around the world, has $1 Trillion dollars of assets! This is about 1% of the world stock markets! They own 0.5% of Apple, the company! I bet you didn’t know that. It is good that Norway has tied it’s success to the success of others. That way they are less likely to fight with anyone, as a decline in value of anything around the world negatively impacts them also. The Oil Fund holds about $200,000 per Norwegian. I bet Venezuela wishes they had that kind of money saved up, instead of having spent it.

I believe that this is a good way to see world relations. I am personally invested around the world also, via International and Emerging Market index funds.

Of the top 10 holdings in the Emerging markets fund, 7 of the businesses are in China, 1 in Russia, 1 in Brazil and 1 in South Africa. As you can see, it is in my benefit for the rest of the world to do good as I have invested in them also!

If you look in your 401K or other investments I bet you will find you also have holdings in other countries. It’s time to realize we are one world, one economy, we can’t win by hurting others because there are no others, we are all in this together.

Sovereign wealth funds (like the Norwegian oil fund) are basically a step towards Universal Basic Income. They use assets (oil minerals) that should be for everyone, if found on public lands, and invest the proceeds for the good of everyone. I mentioned at the very start of this post that if you split up the whole world’s assets there would be $30k per person. But Norway has $200k per person in this fund, from public land. Now we could ask if they should share that money with the rest of the world? I would argue no at this point, although it would be an interesting debate. But the facts are that would open it up to every country being obligated to giving away all it’s goods. I believe there is value to trade, but I think that this type of discussion should happen in all countries related to their assets. What we need to do is create more assets. Then each person could have more. $30k per person is not sufficient!

The USA does not have a sovereign wealth fund, but some states do. Texas is one. It is also funded by oil revenues and land. They use it to fund their public schools. A good use of basic income money and the point I am trying to make with this whole post, that education is important! It sounds like they need a little more in their fund to completely pay for school though.

“Although the FSP constitutes a majority of the funding received by public schools, public schools receive other funding, such as state and federal grant funds, and that funding is not described in this manual.” – Funding of Texas Public Schools

People need to realize that the world is so interconnected that we don’t win by making others lose. The Sovereign wealth fund of Saudi Arabia invested money in Uber, as well as many other things. Did you know you are making money for Saudi Arabia each time you use an Uber? We need to realize that the pie is not of finite size. Through education and innovation we can make the pie grow and it has to to make enough for everyone.

I can see why foreign governments are skeptical of any help by outsiders, as I wrote in a short story that I didn’t publish, yet. Many countries believe other countries don’t have the best wishes for each other. That has certainly been the case in the past. There has been a lot of exploitation of countries by each other in the past. We, young and old, need to realize that we have the greatest opportunity for collaboration in history! We can connect with literally anyone else on the planet! Learn what hardships and joys they have.We can learn that other people don’t really hate us and we don’t really hate them.

I am personally helping a young man in Haiti attend college there. I converse almost daily with him via Facebook and I am in contact with his school to try to learn what opportunities they have to help make their country better.

In your neighborhood, you want your neighbors house to look good, and you want your neighbor to be successful. You don’t think, I need to take my neighbor’s job because there is only 1 job in town. That is how we need to think about other countries.

It will be difficult. There are people who want to kill us. There are people who are born into societies and brainwashed to believe things that are not true. We need hard men and women to protect us from those people and countries. But as individuals, we must extend peace and knowledge growth throughout the world, for that is the only way we all prosper.

On Giving

“No one ever became poor by giving.” – Anne Frank

In 2014 the Gross World Product (GWP) was between $87 trillion and $75 trillion. GWP is a count of all the money “made” from sales of good in a year in the whole world, legal goods. That comes to $16,000 per person. This means everybody! The old. The sick. The hurt. The children.  This means that if money were divided equally each person would have about $16,000 a year to live off of. How much did you spend last year?

The Motley Fool said that the average American spends $140 a day or $51,000 a year. That’s crazy!  $51,000/$16,000=3.2 (Subtract one for yourself) So that means that the average american is using 3.2 people’s worth of money! Now I’m certainly not saying I’m exempt from this situation. I am fortunate to have a high income. I have been considering how to effectively use this gift I’ve been given. What could we do with that money instead? Give it away!

This study by the National Center For Charitable Statistics shares some facts on giving. The “normal” US family gives between 2% and 6%. Honestly, 6% was better than I was expecting, but that’s for people who make $10 million +. For us “mortals” There’s a correlation between lower wages and higher percentage of income given. Ranging between up to 4% for people making $45k while those making between $100,000 and $2 million are giving around 2.5%. While that is more money total, we should all remember the great words of Uncle Ben “With great power comes great responsibility.”

There are a myriad of reasons the “normal” person doesn’t give. One is we are afraid we won’t have enough. We compare ourselves to our neighbor who undoubtedly has more stuff than we do, but if we compare ourselves to, for example, the Syrian refugees, we seem to have a lot. If you are reading this on a computer you already have electricity and internet which puts you ahead of most people in the world. If you have electricity you likely have running water and a reliable grocery store within 30 minutes of your house. If you have a steady job you are already more privileged than most in the world.

No one told us it was good to give. Some people are just so caught up in the consumer lifestyle in the US from watching crap like Jersey Shore and The Kardasians that they think all you can do is spend money on stupid crap. For these people I will just say, stop watching that crap. Also stop going to the store to buy whatever strikes your fancy. I know the power of advertising as much as anyone. I walked into Walmart yesterday just to “Look at the new Star Wars toys” since I’m a bit of a Star Wars nerd. Now there is nothing inherently wrong with Star Wars or entertainment (besides Disney disregarding 30 years of continuum books to make boatloads of money on new toy deals but that’s an argument for another day). But the sheer volume of new toys for that is staggering! Also I succumbed to buying a handful of new Hot Wheels, naturally Fast and Furious branded. Marketing is tough stuff! That’s why it’s just better to stay away!

Another reason we don’t give more is we don’t think our money will be used effectively when given to a charity. This is a valid concern. Some people I talk to don’t want to donate money abroad because they are unsure if it will actually reach the people they are trying to help. That is a great and valid concern, but we shouldn’t let it paralyze us. There are plenty of sites that independently audit non-profits and give them effectiveness ratings. An alternative would be that you could donate to a charity in your town. Most of us spend time with people in the same boat as us, economically. We feel uncomfortable going to a different part of town where the houses are a bit run down. We should embrace those people. They are our neighbors also. The more we embrace uncomfortable situations the more comfortable we will become in them. We also might just help some of those people out of those situations and that will be good for everyone. For these people I’d reference Matthew 6:21.

“Where your treasure is there also your heart will be.”

If you are donating money to some organization and also volunteering there you will be able to be sure that your money is actually helping others. An added benefit is that you aren’t out spending money if you are volunteering!

How will we see this world improve for everyone? We have to start with ourselves. If we don’t help our neighbor, why would we expect anyone else to help them?

So how does your giving compare to the “average person”?

How does your yearly spend compare to the world per capita income? Could you live on less and still enjoy life? I’d challenge you to think about those questions.

“Be the change you wish to see in the world.” – Ghandi