5.2 What's Wrong with Redistributing the Wealth?

 A good place to start when explaining this is to explain the idea of wealth creation.  To explain this we'll make up a story about Farmer Fred, a farmer in the imaginary country of Bellwell.  Farmer Fred grows apple trees.  When it's time to pick the apples he hires help who climb the trees with ladders and pick apples for him.  Almost ever year there has an accident of a helper falling off a ladder or hurting their back lifting heavy bags of apples.  Fred has decided to stop this from happening any more by buying a platform that can carry workers safely to the top of the trees in his orchard and that can carry the apples for them.  Here is a video of the platform Farmer Fred wants to buy.


With this movable platform Farmer Fred figures his men will be able to pick 10x as many apples as they could previously.  He'll be able to sell his apples for a fraction of the price so that the country bakery will be able to sell lots of delicious apple pies.  He will make a lot more money than he did before.  He will be wealthier, his customers will be wealthier and his workers will be safer.  How will his customers be wealthier?  For the same money that they spent last year they will get not only apples but delicious apple pie.  Wealth is not only money, it is what you get for the money you have.  One problem is that the platform costs a lot of money.  Farmer Fred and his family have been skipping vacations to help him save up enough money for the platform.  He knew it would cost a lot of money but figured that within a few years he'd earn all that money back and then some.

Just before Fred was about to buy the tractor and the platform the cost of the platform went up and the cost of everything went up.   Farmer Fred's taxes also went up.  Farmer Fred couldn't afford to buy the platform anymore.  He couldn't even hire the same number of workers as he did in the past.  He had to charge more money for fewer apples. 

Why did the cost of everything go up?  The president of Bellwell, president Jobama was elected because he promised to redistribute the wealth.  He promised to increase the taxes on the rich and give the tax money to everyone who wasn't rich.    Everyone except the very rich voted for Jobama because they all wanted more money.  Fred was considered rich because he owned a farm.  So he suddenly had to pay a lot more taxes.  The company that made the platform was also considered rich so they had to pay more taxes.  They had not choice but to charge more for their platforms so they could pay the taxes.  Oil companies were considered rich so president Jobama taxed them.  The oil companies had to pay more taxes so they raised the cost of gas and oil.  That meant that truckers who carried materials the platform company needed had to charge the platform company more for those materials.  That made the platform company increase the price of platforms even more.  The high cost of oil affected all of Farmer Fred's customers.  They had less money to pay for apples.

Farmer Fred became discouraged.  He had worked very hard to save up for the platform and now he realized that no matter how hard he worked he'd never get the platform and the government would take more of his earnings away.  He decided that working hard wasn't worth it and he'd be better off retiring early in Panama where the cost of living was lower and there were fewer taxes.  The result of all of this, no apples from farmer Fred.  Fred would no longer create wealth in the form of apples and apple pies.  

Taking money from those who have more and giving it to those who have less is called redistributing the wealth.  The story above shows some of the ways that redistributing the wealth from those who have more to those who have less can reduce everyone's wealth.  One of the results of redistributing the wealth in the above story was inflation.  For the same amount of money people got fewer apples.  Money lost its value. 

The current Democrat administration of Joe Biden (2021) is giving welfare to illegal immigrants.  Welfare is spending money and not getting useful products producted in return.  If money is printed to pay for welfare than everyone's money loses value.  Money's value depends on the products that are produced when it is spent.  If fewer products are produced the money is worth less and there is inflation.  There is a lot of inflation during the Biden administration.

If inflation gets bad enough money can become worthless.  That has happened to several countries in the past Venezuela being the most recent example. 

Hugo Chavez was elected to lead the country of Venezuela beause he promised to redistribute wealth to the poor.   Venezuela had a lot of oil wealth.  After he was through with his wealth redistribution all of Venezuela became poor.  The video below tells the story.  It is upsetting and if you are a child you may not want to watch it.  The video mentions how Hugo Chavez seized peoples assets.  That means he seized their property.


One thing the above video didn't mention is that Hugo Chavez spent a lot of money on his military to ensure that he would stay in power.  When leaders redistribute the wealth they worry about angry people who they take the wealth from.  There were many angry hungry people who he arrested. Hugo Chavez worried the United States would step in to help people overthrow him.  Hugo Chavez made sure that he would stay in power by spending a lot of money building up his army.  We learn in the video that Chavez nationalized the oil companies and the cement companies.  That means he took took the equipment and property away from private companies who knew how to produce oil and cement. 

Nearly 6 million Venezuelans fled to neighboring countries since President Nicolás Maduro took power in 2013.  Now in 2021 many are coming to the United States.

Briceno, one of the Venezuelan refugees said “The truth is, it’s better to wash toilets here (the U.S.) than being an engineer over there (Venezuela).”


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Many people who want socialism say that it wasn't socialism that made Venezuela and other Socialist nations poor.  Could it be that it was just bad management that made those countries poor?

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