Are you a 1-percenter? Like it or not, if you earn at least $370,000 annually in the United States, then you automatically become a member of this elite club. Membership has its benefits, of course. You buzz around the country in your private jets. You pull up next to your fellow chaps at stop lights and chat about mustard from the back of your limousines. You yuk it up with your cigar-smoking, Blue-Label drinking, fat cat buddies at the country club. And don’t worry—you’ll eventually understand your butler’s English accent without a problem.

Meanwhile, the rest of us chumps in the real world, banking a measly one-tenth of your income, will carry on, struggling to find contentment as we feed our families with your (delicious, typically crab- or steak-based) table scraps. You greedy 1-percenters should fork over some of that cash—er, show a little compassion—for us lowly peasants as we try to survive another back-breaking workday. After all, our greed for your money is nobler than your greed for your money!

Fueling the Envy Fire: The Gap Narrative

MindTheGap1If you have a pulse, you know the narrative. The rich have everything, the poor have nothing, and it’s not fair. Damn the gap between the rich and the poor! So-called progressive politicians who make use of this narrative might admit to a little bit of campaign exaggeration here and there, but their ends justify their means: America’s beloved career politicians require a story to fuel a populist fire of envy in order to capture votes in elections if they are to prolong their membership among America’s royal class. The narrative of the gap between rich and poor works perfectly.

Does the gap between rich and poor exist? Yes. Is the gap a problem? Maybe, maybe not; I’ll let economists with experience far exceeding my own undergraduate studies in economics debate that question. The answer to that question is inconsequential for the sake of this conversation. My point is only that the wealth gap between rich and poor serves as a fundamental source of many debates in twenty-first-century America.

Most debates about the gap, however, presumptuously ignore the “Should” question (“Should the gap be narrowed?”) in preference for the “How” question, so I’ll jump straight to it as well: How can the gap between rich and poor be narrowed? The answer is extraordinarily simple. The gap can be narrowed in exactly two ways:

  • Option #1: Make the rich poorer.
  • Option #2: Make the poor richer.

Which option is better? Let’s evaluate by moving one line at a time.

Option #1: Make the Rich Poorer

MindTheGap2Lowering the “Rich” line will successfully narrow the gap , but no one’s life improves as a result. The only thing that happens is that life gets worse for rich people. Sure, the gap is narrower, but the poor are still just as poor as they were beforehand. If you hate the rich and seek vengeance against them, Option #1 likely appeals to you, but Option #1 is ultimately a “nobody wins” scenario.

(And by the way, if Option #1 appeals to you, you are a jerk. Call me a bleeding-heart liberal if you must, but—unlike you—I believe that everyone has the right to maintain and improve their own lives. Enviously rejoicing in the concept of anyone’s life getting worse is morally wrong.)

Option #2: Make the Poor Richer

MindTheGap3By raising the “Poor” line, the gap is successfully narrowed, the lives of the poor improve, and the rich maintain their lifestyle. Option #2 is a “win-win” scenario and is clearly the better option to exercise.

Are There Really Two Options?

And now let’s address the elephant in the room. Some economically ignorant people will surely dispute my proposition that two options actually exist. In the minds of these people, Option #1 and Option #2 must always be exercised together by their very nature—as if it were impossible to raise the condition of the poor without giving them wealth wrested from the rich.

These people worship at the altar of Robin Hood. They falsely believe that it is necessary to seize wealth from the rich (typically in the form of taxes) to improve the financial well-being of the poor. These people think about wealth in the world as a single pie: if the wealthy get a smaller piece of pie, then the poor get a bigger piece of it, and vice versa.

Such people are ignorant about two important aspects of wealth. First of all, wealth is not a static thing. It doesn’t just “exist” in the world like a pie waiting to be divvied up. On the contrary, wealth is literally created by human beings, when an individual uses his or her time and resources to produce a valuable good or service. The phrase “time is money” has some truth to it, but it’s more accurate to state that time is potential wealth.

Second, as long as time itself continues, new wealth can always be created. There is no ceiling on the amount of wealth that can exist in the world. The continual increase of wealth proves that.

Hence it’s foolish to get caught up in an economically illiterate debate about how to divvy up the economic pie, as if there were only one pie to eat and its size always remains the same.

Thus the “everybody-wins” solution is simple: empower people to use their time to make more pies, and everyone will be better off.

Who Is a 1-Percenter?

Cynical people who still refuse to see the light are most often the ones calling for redistribution of rich people’s wealth in America today. Would these people’s opinion about what to do with rich people’s money change if they themselves became 1-percenters? Most would say “Certainly not! The rich have to pay their fair share, and I would be happy to do so if I became a 1-percenter!”

Then open your wallet.

If you are reading this article in the United States today, you are rich by global standards. Don’t believe me? Check out GlobalRichList.com for some perspective.

Remember us poor chumps pulling in a measly one-tenth of a rich person’s income? If we make $37,000 U.S. Dollars this year, then our income places us among the richest 0.7 percent of wage earners in the world! We are all 1-percenters.

Even a person making minimum wage at a full time job in America is rich by world standards: with an income of approximately $15,000 per year, these folks are among the top 8 percent of wage earners in the world.

Making Option #2 Our Reality

Why is America so rich by global standards? Despite our relative “youth” as a nation, the United States has become the richest nation in the history the world because of our embrace of capitalism and free markets. This combination empowers free individuals to use their time to create wealth with relative ease. The history is clear: this stuff works!

Therefore, to narrow the gap between rich and poor on a world stage via Option #2 (the only way it could conceivably be done, given the huge amount of poverty in the world), capitalism and free markets must be promoted across the globe—and especially in poor societies and nations.

This is not merely an economic issue but also an issue of morality. It is morally right to empower individuals with opportunities to build wealth for themselves, their families, and their communities. Likewise, it is morally wrong to keep people poor by shunning capitalism and free markets.

As it happens, I am not the only one coming to these moral conclusions:

In 2012, U2 rock star and poverty-fighting activist Bono recognized the incredible power of Capitalism and free markets to raise people out of poverty in poor nations, saying “Aid is only a stopgap.… Entrepreneurial capitalism takes more people out of poverty than aid,” and, “Welfare and foreign aid are a Band-Aid. Free enterprise is a cure.” Bono is passionately fighting to find a cure for poverty through capitalism and free markets. He is right to draw these moral conclusions.

Social entrepreneur Barrett Ward has built an entire business around the concept of empowering impoverished individuals to use their time to build wealth. As explained in the December 15, 2014 EntreLeadership podcast, fashionABLE is “an apparel company that creates employment opportunities for vulnerable women in Africa.” By introducing the principles of capitalism and free markets to its employees, fashionABLE is narrowing the gap between rich and poor, one family at a time.

Don’t Be A Jerk. Real Lives Are At Stake.

Unless you are that “Option #1 Jerk,” you will agree that empowering people to maintain and improve their lifestyles is a morally good concept. Evidence shows—and the laws of economics dictate—that people can best improve their lives in lasting ways when a society embraces capitalism and free markets. We must stop allowing ourselves to be pitted against one another by “progressive” politicians seeking perpetual reelection, and instead unite behind ideas that work. Let’s narrow the gap between rich and poor by supporting capitalism and free markets across the globe.