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What to do with wealth

4 months ago
David Surdam
black and white photo of men counting money

“The man who dies rich, dies disgraced.” – Andrew Carnegie

Not content with income redistribution, many politicians are advocating a “wealth tax” to redistribute wealth. The top one per cent of American households own a large proportion of wealth in America.

Setting aside the issues of whether such a tax is constitutional, whether wealthy Americans can avoid the tax (after all, they can hire top tax attorneys and accountants), or whether such redistribution is good for the economy and society, a wealth tax raises questions for wealthy Americans: What should they do with their wealth?

Many of the wealthiest Americans gained their wealth by serving consumers—Bill Gates, Sam Walton—unlike wealthy people in previous societies, who accumulated wealth by conquest, claiming royalty, and other self-serving but undesirable means. If Bill Gates is adept at finding and promoting products and services that consumers like, we should hope he retains plenty of capital in order to continue doing so. Bill and Melinda are noted for donating large sums to various charitable organizations, but, as economists point out, there is an opportunity cost associated with their largesse. Would society be better off, if they continued to plow their profits back into Microsoft and their other investments instead of donating money to charity?

Andrew Carnegie was a ruthless, savvy industrialist. He was adept at paring costs, lowering the price of steel; his acumen benefited Americans. He had his blemishes, as all people do. His famous aphorism, quoted above, may seem self-serving. Unlike his peers, such as John D. Rockefeller, J.P. Morgan, and James Duke, Carnegie actually fulfilled his aphorism. Upon his death, he left modest bequests to his wife and daughter. There is no Carnegie fortune today, unlike the Rockefellers. He was not interested in ensuring that his children, grandchildren, great-grandchildren, and onto posterity were born rich. I suspect he felt that inherited riches were demoralizing.

Carnegie endowed universities, libraries, and social research, especially after he withdrew from industry. Several small towns in Iowa have Carnegie libraries. To be sure, he made some mistakes in disbursing his wealth, but he insisted upon investing money only after careful investigation and deliberation.

Carnegie was probably unaware that such disparate men as Muhammed and John Wesley espoused the same philosophy. They disbursed their wealth before and upon death. Although Wesley was a minister, he gained large sums from his writings, but he died almost penniless (and not because of indulgent spending).

I suspect that underlying these men’s philosophy was a self-confidence that they knew best how to disburse their wealth. Carnegie, Rockefeller, Duke, and Leland Stanford (who was a true “robber baron”) endowed some of America’s finest private universities. These industrialists would undoubtedly have opposed government confiscation of part of their wealth to be disbursed indiscriminately.

Few of us will attain wealth even remotely similar to Gates or Walton. Each of us, however, probably feels that we are the best stewards of the wealth we’ve earned. We have both the responsibility to disburse such wealthy wisely and, for now, the freedom to do so. The question ultimately becomes, “Who is best at spending your money?” Stated this way, readers may realize, that, as short-sighted and self-interested as we may be, the majority of us would answer, “I am!”

 

The views and opinions expressed are those of the author and do not imply endorsement by the University of Northern Iowa.

Author

David Surdam University of Northern Iowa

David Surdam

David Surdam received his Ph.D. in Economics from the University of Chicago. His dissertation, "Northern Naval Superiority and the Economics of the American Civil War," was supervised by Nobel-Prize Winner, Robert Fogel. Professor Surdam has taught at the University of Chicago, Northwestern University, Loyola University of Chicago, and the University of Oregon.

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Comments

Submitted by Adam Schmidt on
I personally think that the idea of what to do with massive accumulation of wealth is put on the shoulders of the person who created the wealth. I understand that can be seen as narcissistic or short-sided but if you were able to create this level of wealth for yourself, you should be able to spend/not spend it any way you see fit. If you spend your money on causes and charities that you think are important to the advancement of society then allocate your wealth there. If you want to donate to high education donate to higher education. This is an extremely subjective question to ask because there is no right answer. It's up to the individual and how they want to spend the wealth they have created.

Submitted by Isaac Paul Lafleur on
I think the remark you made at the end of the article is interesting and connected to some debate we've recently been having in my business ethics class. The average American individual (in my experience) seems to think in this way, and want the lowest possible taxes. Even talk of taxing the top percentage of wealthy Americans seems to have inspire negative thoughts in average income earners. Surely there is a balance between money needed for public good and money an individual has earned and should keep, but it seems America's individualistic trait shines through on this topic.

Submitted by Baron West on
I do think that it is great for those wealthy people who donate to charities that they are passionate about. However, there are wealthy people who are "donating" to charities that aren't really in existent. For those people I do not think it is fair what they are doing and that is why I wonder if redistributing wealth is a better way to go. There are so many wealthy people who have gotten their wealth by doing unethical things which I believe is wrong. I can also see it from the other side though that those who really worked for their wealth and success do deserve it and therefore should be able to do as they please with it. When talking about wealth I don't know that there is one right answer because it can be seen from the views of multiple people and even I go back and forth between what I believe should be done.

Submitted by Ryan Falk on
I do agree with the final statement that a vast majority would answer that they feel they are doing what is best with their wealth accumulation. However, as an emerging entrepreneur I do feel that you hold a right to do what you want with the wealth you have created. You can hold on to it and watch it accumulate, spend it, and even give back to whatever community or charity you think is best fit. The decisions you make on where your monetary contributions are going should be left completely up to the individual, there is no proper answer. Spend it, invest it, die with it. Choose what you feel is best and makes you happy.

Submitted by Kelsey Feldmann on
I think this article has some good viewpoints about where people should invest their money. While I don't believe that everyone should be the ones figuring out where their money should go, I also believe that lots of people that are rich because of hard work should be the ones deciding where it should go. I know that if I was rich I would probably hire someone that was good at figuring out where the best places to put money that would have the greatest impact on others' lives. I think it is a great idea to not give all your money, if you're super rich, to your kids and so on because then they will grow up not learning how to be a hard worker and making their own living.

Submitted by Courtney Ott on
In my opinion, I think it is wrong for people to get their wealth by doing unethical things. Growing up, I have always been told to "work for what you want." If you work hard for your wealth and become a successful person, you deserve to do what you want with your money, whether that's donating, or redistributing it to your friends and family. It's always great to put your money to a good cause, or help out your family and friends if needed, but not necessarily if they money was made in an unethical way.

Submitted by Joel Gan on
I saw an article online on how the world's 26 richest people own as much as the poorest 50%. If I were to break it down into numbers, the top 26 billionaires own $1.4 trillion — as much as 3.8 billion other people. Did you know that the world’s richest man, Jeff Bezos, the owner of Amazon, saw his fortune increase to $112bn. Just 1% of his fortune is equivalent to the whole health budget for Ethiopia, a country of 105 million people. I felt extremely disgusted at how much wealth certain individuals own and yet sit idle, not contributing back to the society who clearly needs it more, this also got me thinking that why do people need so much money anyway? This widening gap between the rich and the poor is hindering the fight against poverty, adding that a wealth tax on the 1% would raise an estimated $418b a year – enough to educate every child not in school and provide healthcare that would prevent 3 million deaths. What would an additional 1% tax do to billionaires, or millionaires anyway? And following the theory of utilitarianism, shouldn't we ought to create the highest amount of happiness to the greatest number of people?

Submitted by Emilie Thalacker on
This topic is something that our Business, Ethics and Society class has been discussing lately. In my opinion, the best spender of the money that I worked hard for is myself. I believe that is a right that I have. I don't want someone else deciding where my money goes. Whether I want to invest it, spend it on myself or give back to the community, is my choice. I do think it is sad that some are living so lavish and others are living with nothing but life is all about choices (in a lot of circumstances). Overall, very interesting article!

Submitted by Phillip A Zimmerman on
Good article. Wealth should be distributed according to the amount of value you provide to the market. People should get paid based on their worth and I think that we the people should choose how to spend our money we rightfully earn. People have issues with the way the top percent make their money.They are smart people who found a problem and found a solution to that problem. They are good business men and should be rewarded as such. In today's society making money is easier now more than ever because of the internet. Everyone can get a little piece of wealth and do whatever they want with it.

Submitted by Kayla Smith on
This article brought up a good point that I hadn't thought about before reading. Should individuals that make products that are ground breaking to society would be better off investing more money into their business rather than giving to charity? It's an interesting idea because these highly talented people have the ability to innovate and create society altering products and on paper, it would make sense for them to get as much money as possible and put it into their ideas. But it's important that these highly talented people have the opportunity to reap the full benefit of their contribution to society. If they aren't able to give back to the people that they love or to organizations that help the world the way that they want to help it, their reward for being successful doesn't taste as sweet.

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