In his July 24, 2013 speech, the American President Barack
Obama made repeated reference to what may be called the fair distribution of
wealth. What is that? Well, the best way to answer the question is to look at a
fictitious example and draw inferences from it.
Let us say that the United Nation appoints you goodwill
ambassador to go to the most primitive regions of the World and prepare the
people there for the development that is moving in their direction, and the modern
way of life that is about to hit them. To avoid seeing these people experience
the famous “culture shock” that may disrupt their sense of cohesion, the UN
gives you unlimited resources to do as you see fit.
You will have a printing press that will print real money
you can distribute among the inhabitants. You will have a staff that will
remain in touch with the rest of the world to order anything you ask for. And
whatever you need will be shipped to you right away anywhere you find yourself.
Upon this, you go into a village where 12 families are
established. You notice that they live mostly on the meat of the migrant birds
and animals that pass through the area once in a while. But this happens so
sporadically, that the people are forced to go through periods of feast and
periods of famine – unable to control their destiny. You tell them they can
have the control they yearn for if they will adopt some of the modern ways of
living you came to tell them about. They say they are interested, and you start
delivering your lesson.
You tell them that when the birds and the animals are
abundant, they can eat well but they can also save some of the meat for when
the birds and the animals do not come. They can do so because there is
something called refrigerators, a number of which will be brought to the
village. To this end, you instruct your staff to order refrigerators of the
kind which are powered with solar panels during the day, and powered with the
burning of animal fat during the night.
Because you also want the people of the village to learn
about finance, you print some dollars and tell the head of each family that he
or she can have a refrigerator only in exchange for money. You reassure them
that you will show them later what they must do to earn the money. But for now,
you will distribute the money among them so that they see how they can go about
buying a refrigerator.
The first thing you do is probe the people to see if they
can count. To your surprise, you discover they are good with numbers, even
proficient in what some people in the advanced world might call “high”
arithmetic. You start with the first lesson by giving each of them one dollar.
You say there are 12 of you, each has one dollar, and there are 12
refrigerators. How much will each of you pay to buy a refrigerator? And they
all agree each will pay one dollar to buy one refrigerator.
You take back the dollar bills and give each of them 100
dollars in various denominations. You ask: How much will each of you now pay
for a refrigerator? And they answer 100 dollars. Very good, you say, but you
let them know that unfortunately, you do not expect to receive 12
refrigerators. There may only be 6 of them coming to the village. What will
they do? They think about it for a moment, and someone says: I shall get
together with my sister and bid 200 dollars for a refrigerator we will share
between us.
You ask if the others will do the same, and four more heads
of family say they have a brother or a sister with whom they will share a
refrigerator. This leaves two unrelated families who are nevertheless good
neighbors, and they decide they will pool their money to buy one refrigerator
to use between them. But you caution the people of the village that all the
refrigerators are not here yet except for 2 which are in storage near the
village. The other 4 may take a long time before they come. And 6 more after
that may or may not come.
You now grab the basket that was sitting beside you filled
with money. You walk to the people and randomly clutch fistfuls of bills that
you hand to each head of family. When all the money is given out, you get back
to the podium and say to the people you don't know how much each of them has,
but there are 2 refrigerators on which they can start to bid.
One head of family says he has 300 dollars, and he bids that
much for one refrigerator. Another head says he has 500 dollars, and he bids
for the other refrigerator. A third head says he has 1,000 dollars, and he bids
for the first refrigerator thus topping the person who bid 300 dollars. A
fourth head says he only has 200 dollars which means he must be out of the
bidding game. The fifth says he only has 250 dollars, and he too must be out.
The sixth head of family joyfully declares that he has 3,000 dollars, and he
bids 1,500 dollars for each of the 2 refrigerators. He will take them both,
leaving nothing for the other people.
Someone in the audience cries out this game is unfair. And
you ask: Why is it unfair? The answer comes back: “Because of the way that the
money was distributed.” Upon this, a general discussion ensues during which
time two important points are made. First, it is pointed out that a more
equitable way must be found to distribute the money than just handing it out.
Second, it is reckoned that the person who will get the two refrigerators will
never have to go out and hunt again because he can now store the meat for the
others who will have to pay him with some of what they catch. This one has got
it made; he is set for life.
And this is when the people of the village ask you: How is
the money distributed where you come from? You scratch your head, and you admit
to the people of the village you're not sure it is done in a fair way. But you
have something in this regard they may wish to hear for themselves. You tell
them it is the recording of a speech given by President Obama of the United States of America .
Here are some passages:
“I spent a year traveling and listening to stories of
workers losing their jobs, of teachers whose salaries weren't keeping up with
the rising cost of groceries, of young people who had the drive and the energy
but not the money to afford a college education. These were stories of families
who worked hard but felt like the odds were stacked against them. In an earlier
period, whether you owned a company or swept its floor, this country offered
you a sense that your hard work would be rewarded with fair wages.”
“But over time that engine began to stall. Washington doled out bigger tax cuts to the
very wealthy and smaller minimum wage increases for the working poor. Used to
be that as companies did better, as profits went higher, workers also got a
better deal. And that started changing. So the income of the top 1 percent
nearly quadrupled, but the typical family's incomes barely budged.”
“So in many ways, the trends that I spoke about of a
winner-take-all economy where a few are doing better and better while everybody
else just treads water – that's a problem. This growing inequality not just of
result but inequality of opportunity is not just morally wrong; it's bad
economics because when middle-class families have less to spend, businesses
have fewer consumers and the economy as a whole suffers.”
And the people of the village ask you if this is what you're
bringing to them. You admit you're not sure it's the best thing in the world
but it is unavoidable. So get used to it.