Wealth and Poverty: The Relationship Isn't What You're Told
(AP Foto/Matt Rourke)
Wealth and Poverty: The Relationship Isn't What You're Told
(AP Foto/Matt Rourke)
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The myth asserting that as the rich get richer the poor get poorer isn’t true. Contrary to headlines about wealth inequality, we’re winning the war on poverty. The business of creating wealth lifts over 50 million people a year out of poverty.  

China serves as a telling example of the effect that wealth creation has on poverty. After China’s revolution in 1949, Chairman Mao installed a centralized system that he claimed would allow everyone to share in the wealth. The results weren’t good. Between 1958 and 1962, 20 million died from famine. When China’s new leader, Deng Xiaoping, visited the U.S. in 1979, 88 percent of the population in China lived below the poverty line. China was poor, broken, and trending further downward.   

After his U.S. visit, Deng Xiaping created four Special Economic Zones (SEZ) within which those with talent and ideas, if successful, could create businesses, export goods, bring in foreign investment, and earn money for themselves. Today, China has 20 SEZ, creating substantial wealth for the country. China is now the second-largest economy on the planet and home to 626 billionaires. Over the 40-plus-year timeframe, the population living below the poverty line has decreased from 85 percent to less than 1 percent as the rich grew richer and the poor became substantially less poor. 

Some on the left still decry large companies and the entrepreneurs who created them as greedy and larcenous, hording cash for themselves to the detriment of the rest. Many believe that companies like Apple, Amazon, and Google make everyone else poorer. This is a mistaken belief. These successful companies make the majority of their money for the rest of us in multiple ways every day.  

For example, here are three ways Amazon benefits our overall economic status.  

1. Creates jobs – Anyone creating wealth has to hire and pay a lot of people along the way. In 2021, Jeff Bezos was one of the richest people on the planet. At the same time, Amazon employs and pays 1.6 million employees. These aren’t just warehouse staff, but also some of the most sophisticated computer engineers on the planet. Amazon is a human potential factory giving meaningful work to people at all levels. Imagine the economic lift and multiplier created by 1.6 million workers buying groceries, contracting services, paying taxes, and enriching a community. Amazon paid more than $46 billion to its workforce last year. These are new jobs and real money that hadn’t existed prior to Amazon’s creation. 

2. Pays shareholders – Although Bezos created it and brought it into existence, he owns less than 10 percent of Amazon. Banks, pension funds, labor unions, insurance companies, and other institutional investors own 60.7 percent of Amazon. When you get a loan for a car, a pension as a teacher, strike pay from a union, or home insurance after a fire, there’s a little bit of Amazon wealth making each transaction possible. Amazon makes money primarily for the institutions that own it, and they are good institutions providing value to society. In the last decade Amazon has risen in value by 1,588 percent. That means every $1,000 invested by the pension fund paying for your teacher’s retirement is now worth $16,881.75 — very good value for a very good cause and real money moving into the economy to benefit multitudes.   

3. Funds research and development – When it comes to research and development, NASA is usually considered the gold standard. It put a man on the moon, and it keeps extending space technology further. Research and development is good for the economy. In 2019, NASA generated $64.3 billion in economic output, supported 312,000 jobs, and generated $7 billion in tax payments. Amazon invested $42.74 billion in research and development in 2020 — two-thirds of NASA’s budget! Research and development has more benefit than just the economic wealth it creates. It’s how society creates better medicine, computers, MRI machines, global telecommunications, and an overall better global standard of living.   

The proof that wealth creators benefit the poor is in the numbers. As the world went from 15 billionaires in 1980 to 2,755 today, the percentage of the global population living below the poverty line declined from 45 percent to 22 percent, and the trend continues downward. Poverty remains an important issue and we still have substantial work to do. That’s undeniable.  

Perceived inequality and excessive wealth fuels anger and speculation that the system is rigged for only a few, but it isn’t. Jeff Bezos created a company that spins billions in new wealth for the benefit of many millions. In return he keeps a small piece of it, which is fair. Inequality can’t be ignored, but neither should it become the false context for bad policy. Wealth creation leads to an improved standard of living for everyone.  

Derek Bullen is Founder and CEO of S.i. Systems, one of the largest professional services companies in Canada, with thousands of information technology consultants working on projects for blue-chip corporations and government agencies across Canada. His new book is In Defence of Wealth: A Modest Rebuttal to the Charge the Rich Are Bad for Society (Barlow Books, 2022), and previously published High Velocity, a book to help new IT professionals develop their soft business skills. Learn more at bullenbooks.com.  

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