Always ask yourself, “What happens when I win?” Nowadays they call it “exit strategy”.

Frank Rich of the New York Times excoriates people who take more than they give back, and Stacy McCain takes him apart for it. Stacy is entertaining, but he misses the point as badly as Rich does because both fail to understand a fundamental feature of market capitalism.

Market capitalists go around to rich people and offer them opportunities to invest. None of the rich people thus solicited put in the entire amount; the capitalist aggregates those contributions and uses them to create the means of production, that is, capital. Capital is then used to create more wealth, a portion of which is given to the rich people as a return on investment.

The people who employ the capital gain wealth, and so do the already-rich who invested. The rich get richer, and this is intolerable to the Left, who see it as a horrid injustice. In this they are joined by the so-called “Populists”, who are really closer to the original vision of the founding Leftists than any modern Socialist or Communist is — Populists are just as avid to take Teh Rich down a peg as any Marxist. What they miss is that this is the feature that makes the system work.

New entrants to market capitalism can gain wealth without taking wealth away from those who already have it; in fact, the already-rich gain from the work of new entrants. This makes new entrants not merely tolerable, but positively welcomed. If the system requires that Teh Rich lose as a result of more people gaining wealth, it generates a defensive reaction. Rich people are no different from anyone else when it comes to defending what they consider their own, and (being rich) they already have access to the power to mount an effective defense, from building walls and hiring guards against direct threats to employing wealth to corrupt the political system. That last is the greatest danger, especially in a democratic society. Politicians are easy to influence using wealth in all its guises, from cash “contributions” to ego-building inclusion in wealthy society, and are often influenced to defend the rich against new entrants who might take their power, ease, and comfort away.

The cry goes up to soak the rich! The rich react defensively, by influencing politicians to set in place regulatory schemes and legal provisions that have the effect of maintaining the status quo against new entrants. Instead of being disadvantaged, the rich end up richer than before; furthermore, they end up closer to the politicians who create the laws and regulations, making their defense against the next challenge easier and more effective. The attempt has the effect of making things worse, not better.

Since market capitalism allows the rich to get richer while at the same time making it possible for new entrants to get rich, it doesn’t engender the defensive reaction that counteracts the original aims. What’s more, it soaks the rich much more effectively than any Leveller-inspired measures can ever do, because it sets them up to soak themselves.

The vast majority of all new ventures fail miserably. A venture capitalist once told me that, in his experience, only one in twenty of the new businesses his group set up gave any substantial return, and fifteen of the twenty were a total loss to the investors — this despite near-fanatic attempts to “vet” the ventures and the people who set them up beforehand. The entrepreneurs got increments of wealth, bought goods and services, and employed people from construction workers to IT professionals to staff their adventures; the rich people who provided the funds to set up the new businesses mostly lost their investments. The Workers ate well and bought new cars, and Teh Rich got soaked beyond the dreams of all but the most doctrinaire “up against the wall!” Marxist; but (and this is a key point)  the rich people thus victimized were disappointed, not destroyed, and thus were available to be cozened again into providing funds for the Next Big Thing.

Everybody envies rich people, including rich people who envy people richer than they are. Some let that envy lap over into covetousness, demanding that the rich give up their wealth to advantage the less well off. Covetousness is just as negative as avarice, and using negativity as the basis of policy always yields a perverse result. Rob the rich / And feed the poor / Until there are no rich no more! The real trouble with that is that it provides neither effective tactics nor an exit strategy. What will you do when the rich employ their wealth to mount an effective defense against being robbed? When there are no rich no more, what will the poor eat?

Instead of treating the rich as enemies to be destroyed, market capitalism treats them as resources to be exploited. In so doing it spreads the wealth at least as effectively as anything a Socialist might envision, while preserving the resources for further exploitation. No need to soak the rich when you can fool them into soaking themselves, then coming back for more.