Who are the real wealth creators?

By Mike Tudoreanu

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Current United States politics has an obsession with business owners. Republican U.S. Rep. Eric Cantor posted on Twitter last month that Labor Day supposedly celebrates people who “built a business and earned their own success.”

Flickr/tobym

This was a shocking disregard for the real meaning of Labor Day – it celebrates workers, not bosses – but it was also a perfect example of the prevailing political attitude today. The Democrats may not go so far as to lie about public holidays, but both parties seem to agree that corporate executives and shareholders are the engine of the economy, the “wealth creators” who shower their blessings upon us in the form of jobs and wages.

I dedicated my column two weeks ago to debunking the myth that the rich somehow earned their wealth through hard work or innovation. I ended that column by saying that the rich are getting a lot of wealth that rightfully belongs to others who worked for it. That statement contains an idea that should be common sense, which almost passes unnoticed … yet it is an idea rejected and opposed by the entire political establishment, Republicans and Democrats alike.

The idea is that people have to work in order to produce wealth. Human labor, including both physical and intellectual effort, is the source of wealth. Not all effort produces wealth, but all wealth is produced by effort. You definitely can’t create wealth by doing nothing. Inaction is not productive.

This may seem obvious, and the rich and powerful do occasionally pay lip service to it – for example, by saying that America was built through hard work, which is very true – but they are careful to avoid going further and drawing any serious conclusions. Such conclusions would be very inconvenient for them, because they would have to admit they are not the real wealth creators.

If human labor is the source of wealth, if we can agree that the only way to get something useful is to have someone work for it, then we must conclude that the real wealth creators are the working class (including everyone who works for a wage). And if inaction is not productive, then every time someone gets money simply by waiting for it, without taking any action to produce something, then they are getting wealth that rightfully belongs to someone else – someone who worked for it.

Suppose, for example, that a number of workers are making pastries in a small pastry shop on rented land. They get money for their pastries, and they pay some part of that to the landowner as rent. What did the landowner do to earn the rent money? Nothing. The rent money represents wealth that was produced by the workers, and it rightfully belongs to them. The landowner may have worked in the past to earn the money to purchase the land, but he is not working in the present. He deserves to keep the money he earned in the past, but he does not deserve to get extra money on top of that in the form of rent payments.

If you worked for a million dollars in the past, you deserve precisely $1 million – no more and no less. If you are getting additional wealth without doing additional work, then you are taking away the products of someone else’s labor.

Now suppose those workers have a boss, who owns a large chain of pastry shops. They work for him, producing and selling pastries. At the end of the month, all the earnings from the shop go to the boss, and he pays the workers their wages. Naturally, the boss makes a profit from this arrangement. That’s the purpose of being a business owner, after all. He looks at those earnings he receives at the end of the month, and divides them in three piles. The first pile is used to pay the material costs of running the business (supplies, maintenance, utility bills and so on). The second pile is used to pay workers their wages. The third pile is profit, and the boss keeps that for himself.

But who produced all that wealth that goes into the three piles?

The workers did. They were the ones who made all the pastries, and they were the ones who sold them. Yet they don’t get to decide what happens with the wealth they produced, and they only get to keep a small part of it (the second pile). Of course, they couldn’t have kept the first pile anyway, because it was needed to cover expenses.

But what about the third pile – what about profit? That wealth was produced by the workers, yet the boss kept it for himself.

So, just like the landowner, the capitalist boss is getting something for nothing. For the landowner it was called rent, for the capitalist boss it is called profit. But it’s the same concept. It is unearned money.

The landowner can get it because he owns the land, and the capitalist boss can get it because he owns the business. In both cases, these people may have worked in the past, but they keep getting money despite not working any more in the present (at least not in the pastry shop where their money comes from).

Of course, I’m presenting a very simplified picture here. The reality of business – even a chain of pastry shops – is much more complex. Still, the basic point remains the same. Wealth is produced by hard work, but capitalism robs from those who work and enriches those who don’t.

What is to be done about it? That is a question for another column. For now, I think we should start by reminding our out-of-touch politicians who the real wealth creators are. And the next time Democrats and Republicans argue about who “built that,” we should give them the real answer: The workers built that.

Mike Tudoreanu is a Collegian contributor. He can be reached at [email protected]