Warren Buffet, the mega-rich investor and darling of capitalists and aspiring rich everywhere, caused a minor uproar (online at least) this week when he published an Op-Ed in The New York Times entitled ‘Stop Coddling The Super Rich’, in which he made the argument for higher taxes for the rich (himself included).
Coming from such a respected capitalist it created a lot of buzz. I suspect this is mainly due to many people agreeing with the argument. This morning however I came across at least one piece of dissent. Michael Arrington of TechCrunch argued that calls by the ‘super-rich’ to tax the ‘rich’ is actually a cynical ploy to protect themselves.
The super rich love to talk about higher taxes on the rich because it’s a competitive barrier protecting them from competition. If the people making a lot of money today have to pay much higher taxes, they probably won’t ever accumulate enough wealth to be “super rich.”
To be honest, I’m not going to debate the ins and outs of that argument. What interests me is generally the concept of ‘wealth’. Arrington suggests the solution to the problem is a ‘wealth’ tax.
Buffett is just fine with big new taxes on the rich because those taxes never touch all the under-taxed wealth he’s accumulated over the decades
When Arrington says ‘wealth’ however, what he really means is money, or stocks. You can tax ‘money’, but you cannot tax ‘wealth’.
Of course, at this stage I am going to bring in the philosopher Alan Watts. Watts argued strongly that our concept of wealth was completely upside down. It starts with the confusion that ‘money’ is anything other than a concept or idea.
In “The Wisdom of Insecurity” he wrote:
What we have forgotten is that thoughts and words are conventions, and that it is fatal to take conventions too seriously. A convention is a social convenience, as for example, money. Money gets rid of the inconveniences of barter. But it is absurd to take money too seriously, to confuse it with real wealth, because it will do you no good to eat it or wear it for clothing. Money is more or less static, for gold, silver, strong paper, or a bank balance can “stay put” for a long time. But real wealth, such as food, is perishable. Thus a community may possess all the gold in the world, but if it does not farm its crops it will starve.
The argument Watts is making here is that ‘money’ is something that allows you to acquire wealth – but it is not wealth itself. Look at the recent volatility in the world economy. People who were ‘wealthy’ one day, were not the next. They didn’t lose anything tangible, they lost ‘money’ – or rather – their money lost value. Watts says money is ‘more or less’ static – you could argue this is not true, its value can fluctuate wildly. But as a concept it is static, whereas the reality it points to, actual material wealth most definitely is impermanent.
Watts addressed this in his 1969 essay “Wealth versus Money”, when he spoke of “the fundamental confusion between money and wealth”:
Remember the Great Depression of the Thirties? One day there was a flourishing consumer economy, with everyone on the up-and-up; and the next, unemployment, poverty, and bread lines. What happened? The physical resources of the country – the brain, brawn, and raw material – were in no way depleted, but there was a sudden absence of money, a so-called financial slump. Complex reasons for this kind of disaster can be elaborated at length by experts on banking and high finance who cannot see the forest for the trees.
But it was just as if someone had come to work on building a house and, on the morning of the Depression, the boss had said, “Sorry, baby, but we can’t build today. No inches.”
“Whaddya mean, no inches? We got wood. We got metal. We even got tape measures.”
“Yeah, but you don’t understand business. We been using too many inches and there’s just no more to go around.”
The problem is this confusion between wealth and money
What wasn’t understood then, and still isn’t really understood today, is that the reality of money is of the same type as the reality of centimeters, grams, hours, or lines of longitude. Money is a way measuring wealth but is not wealth in itself. A chest of gold coins or a fat wallet of bills is of no use whatsoever to a wrecked sailor alone on a raft. He needs real wealth, in the form of a fish rod, a compass, an outboard motor with gas, and a female companion.
On wealth itself:
True wealth is the sum of energy, technical intelligence, and raw materials. Gold itself is wealth only when used for practical purposes as filling teeth. As soon as it is used for money, kept locked in vaults or fortresses, it becomes useless for anything else.
So, when people talk about a ‘wealth-tax’, they don’t really understand wealth at all. This is not just simple semantics, it points to a general confusion we have between money and wealth – between symbols and reality. The end result is that people chase symbols, instead of trying to generate genuine wealth.
Arrington ends with:
We need to let people dream of getting disgustingly rich, and then let them go out there and do it. After that, we celebrate them so that more people get the idea of getting rich, too. It’s what makes Silicon Valley work. And everyone benefits, even the people who don’t end up rich.
If people are driven by the dream of accumulating money, they will be chasing a rainbow. Because as The Great Depression, or indeed The Great Recession has shown us, money is an idea, a concept. It is not real. Of course it is an important idea and a useful one, but because we have mistaken it for reality, we have gotten ourself in a lot of trouble. We no longer make ‘things’, we make ‘money’. But ‘money’ will not feed you or keep you warm. People should be driven by a desire to build great things and to be rewarded by an enriching life. Or to have life enriched because you make those things. Because all the money in the world is worthless if your life is not worth living.
Affluent people […] have seldom shown much imagination in cultivating the arts of pleasure. The business suited exectuive looks more like a minister or an undertaker than a man of wealth and is, furthermore, wearing one of the most uncomfortable forms of clothing ever invented for the male.
The result is a destructive drive to generate profits for profits sake. And before you accuse Watts of being an unrealistic leftie hippy:
It is an over simplification to say that this is the result of business valuing profit rather than product, for no one should be expected to do business without the incentive of profit. The actual trouble is that profit is identified entirely with money, as distinct from the real profit of living with dignity and elegance in beautiful surroundings.
This is in marked contrast to dreaming of ‘getting disgustingly rich’ precisely because it focuses on the things that matter. What use is money if you cannot enjoy anything real?
There is a whole lot more to digest in Watts’ “Money and Wealth” which I may come back to in further posts.