CHAPTER IV THE CONCENTRATION OF FORTUNES
§ 1 the Problem
There is a distinction between the concentration of enterprises and the concentration of wealth. As businesses grow larger, modern capitalism allows people with limited resources to start significant ventures, contradicting the idea that wealth is concentrating in fewer hands. The decline of individual merchants in large industries supports that many new types of enterprises are emerging and thriving. Claims that the wealthy are becoming fewer and richer while the poor are increasing and poorer lack solid economic proof and do not align with historical evidence.
§ 2 the Foundation of Fortunes Outside the Market Economy
Wealth can be obtained through exchange in a capitalist economy or through violence and petition in a militarist society. In feudal societies, the strong control property while the weak have instability in their ownership because it relies on the grace of the strong, often lacking legal support. Large-scale land ownership did not arise from market forces but from military and political actions, maintained through force rather than economic advantages. Land ownership can also originate from gifts, as seen with the Church's possessions in the Frankish kingdom. In market economies, maintaining large estates is challenging, leading to legal protections that prevent their division. Concentration of wealth is especially prevalent in agriculture despite its economic disadvantages. Historically, significant land ownership was held by very few, and capitalist societies like North America show minimal large-scale land ownership.
§ 3 the Formation of Fortunes Within the Market Economy
The idea that wealth is constantly increasing for the rich while poverty is growing for the poor comes from observations but lacks solid economic backing. Many believe that since wealth is finite, if one group becomes richer, another must become poorer. However, this view overlooks that in a market economy, wealth can grow overall due to new businesses and opportunities, while older riches may decline. Therefore, the assertion of "the rich getting richer, the poor getting poorer" is an oversimplification.
Casual observations often lead to this belief, as visitors to wealthy areas see luxury and may become aware of poor neighborhoods, leading to a conclusion that industry benefits a few at the expense of many. However, the important question is whether the number of wealthy individuals is decreasing while poverty increases. This requires a detailed economic analysis rather than emotional appeals or superficial statistics.
Statistical efforts to show rising poverty and declining wealth concentration often fail, as income measurement can be unreliable due to changing purchasing power. It’s also noted that wealth from trade and industry often doesn’t last more than two to three generations within a family. Families can rise quickly from poverty to wealth, but they also tend to lose this wealth if not properly managed.
Capital, or wealth in the form of investments, does not automatically generate income. It requires successful management and continual investment. Industrial capital is especially vulnerable since it relies on production success, which can vary. Unlike land or natural resources that can continue to yield value, industrial capital can be lost entirely if investments fail.
The notion that wealth can endlessly grow is incorrect. To maintain or grow wealth, entrepreneurs' skills and successful endeavors are necessary. Most heirs fail to meet the demands of entrepreneurship, leading to the rapid decline of inherited fortunes.
To secure their wealth, wealthy families often invest in land, transforming their fortunes from industry into real estate. Historically wealthy merchant families frequently became landowners to maintain their status. In summary, while the rich may have capital, their wealth requires ongoing efforts and strategic management to sustain it.
§ 4 the Theory of Increasing Poverty
The theory of increasing poverty suggests that as wealth grows in a capitalist system, poverty among the masses also increases. This idea, rooted in Marxist thought, argues that the more wealth is accumulated, the more misery, hard work, and moral decline exist for the working class. However, evidence shows that in advanced capitalist countries, actual living conditions for workers have improved over the years.
While some Marxists continue to promote the idea of increasing poverty for its propaganda value, the newer concept of relative poverty, introduced by Rodbertus, is becoming more accepted. This concept states that poverty is a social issue based on people's needs and expectations. Kautsky adds that social poverty is more important than physical poverty, but this view has faced criticism for lacking clear reasoning.
Critics argue that growing frustration and envy among the masses don’t necessarily mean that conditions are getting worse. Instead, they suggest that as people's economic situations become closer to each other, feelings of envy might actually show that inequalities are decreasing. Overall, the argument that social poverty is increasing is often seen as a way to justify anger toward economic differences rather than a clear indication of real hardship.
§ 1 the Problem
There is a distinction between the concentration of enterprises and the concentration of wealth. As businesses grow larger, modern capitalism allows people with limited resources to start significant ventures, contradicting the idea that wealth is concentrating in fewer hands. The decline of individual merchants in large industries supports that many new types of enterprises are emerging and thriving. Claims that the wealthy are becoming fewer and richer while the poor are increasing and poorer lack solid economic proof and do not align with historical evidence.
§ 2 the Foundation of Fortunes Outside the Market Economy
Wealth can be obtained through exchange in a capitalist economy or through violence and petition in a militarist society. In feudal societies, the strong control property while the weak have instability in their ownership because it relies on the grace of the strong, often lacking legal support. Large-scale land ownership did not arise from market forces but from military and political actions, maintained through force rather than economic advantages. Land ownership can also originate from gifts, as seen with the Church's possessions in the Frankish kingdom. In market economies, maintaining large estates is challenging, leading to legal protections that prevent their division. Concentration of wealth is especially prevalent in agriculture despite its economic disadvantages. Historically, significant land ownership was held by very few, and capitalist societies like North America show minimal large-scale land ownership.
§ 3 the Formation of Fortunes Within the Market Economy
The idea that wealth is constantly increasing for the rich while poverty is growing for the poor comes from observations but lacks solid economic backing. Many believe that since wealth is finite, if one group becomes richer, another must become poorer. However, this view overlooks that in a market economy, wealth can grow overall due to new businesses and opportunities, while older riches may decline. Therefore, the assertion of "the rich getting richer, the poor getting poorer" is an oversimplification.
Casual observations often lead to this belief, as visitors to wealthy areas see luxury and may become aware of poor neighborhoods, leading to a conclusion that industry benefits a few at the expense of many. However, the important question is whether the number of wealthy individuals is decreasing while poverty increases. This requires a detailed economic analysis rather than emotional appeals or superficial statistics.
Statistical efforts to show rising poverty and declining wealth concentration often fail, as income measurement can be unreliable due to changing purchasing power. It’s also noted that wealth from trade and industry often doesn’t last more than two to three generations within a family. Families can rise quickly from poverty to wealth, but they also tend to lose this wealth if not properly managed.
Capital, or wealth in the form of investments, does not automatically generate income. It requires successful management and continual investment. Industrial capital is especially vulnerable since it relies on production success, which can vary. Unlike land or natural resources that can continue to yield value, industrial capital can be lost entirely if investments fail.
The notion that wealth can endlessly grow is incorrect. To maintain or grow wealth, entrepreneurs' skills and successful endeavors are necessary. Most heirs fail to meet the demands of entrepreneurship, leading to the rapid decline of inherited fortunes.
To secure their wealth, wealthy families often invest in land, transforming their fortunes from industry into real estate. Historically wealthy merchant families frequently became landowners to maintain their status. In summary, while the rich may have capital, their wealth requires ongoing efforts and strategic management to sustain it.
§ 4 the Theory of Increasing Poverty
The theory of increasing poverty suggests that as wealth grows in a capitalist system, poverty among the masses also increases. This idea, rooted in Marxist thought, argues that the more wealth is accumulated, the more misery, hard work, and moral decline exist for the working class. However, evidence shows that in advanced capitalist countries, actual living conditions for workers have improved over the years.
While some Marxists continue to promote the idea of increasing poverty for its propaganda value, the newer concept of relative poverty, introduced by Rodbertus, is becoming more accepted. This concept states that poverty is a social issue based on people's needs and expectations. Kautsky adds that social poverty is more important than physical poverty, but this view has faced criticism for lacking clear reasoning.
Critics argue that growing frustration and envy among the masses don’t necessarily mean that conditions are getting worse. Instead, they suggest that as people's economic situations become closer to each other, feelings of envy might actually show that inequalities are decreasing. Overall, the argument that social poverty is increasing is often seen as a way to justify anger toward economic differences rather than a clear indication of real hardship.