The PremiseGoing back to biblical times there have been protests about the concentration of wealth. It thus seems that there must be some underlying reasons why this remains a popular idea. Several arguments can be made in favor of a more equitable distribution of wealth.
Redistributing WealthLet us assume, for the moment, that the arguments for redistribution are more persuasive than those against. Then how would redistribution be achieved? There seem to be only two avenues. The first is through the appropriation of wealth. This has been done several times in history. Henry VIII seized the wealth of the Catholic church in England and kept part for the treasury and redistributed part to his supporters. During the French revolution much of the wealth of the aristocracy was seized by local authorities or looted by the populace.
The results of such drastic actions are hard to foresee. It may lead to a permanent realignment of power in society, as in England or it may lead to anarchy and the rise of a dictator as in France.
The second approach is via taxation. Once again there is a historical example in Britain. During the 20th Century the government decided that the hereditary landowners had too much wealth. They established a plan whereby the wealth would be transferred over many decades via death duties. As the lord of the manor died off his heirs would have to pay a tax on the value of the estate. This has had the effect of gradually transferring the wealth of the aristocracy to the government. One difficulty has been that, in many cases, the estates are worth so much that the heirs cannot find buyers and they get transferred to the "National Trust". This is the nub of all wealth transfer schemes. In order to tax the wealthy at a rate that forces them to sell part of their assets there must be buyers who can afford to purchase the items. A painting appraised at one million dollars is worth nothing if there are no buyers. Even assets like stocks depend upon a pool of buyers for them to be convertible to cash.
When the wealth of a society gets sufficiently unbalanced it ceases to valuable since there are no people with the resources to purchase it. During the French revolution most of the furniture in the estates was looted and much of it was used for firewood. It had no value in a peasant's home. It didn't fit, wasn't practical, and the decorative detail was useless.
So any plan that is going to shift the balance of wealth has to deal with issues of extracting real value from the accumulations of the wealthy without causing a drop in the marketability of the assets.
Can wealth redistribution take place in the US? The least disruptive approach would be changing the tax code to be more progressive. This could be modifications to the income tax, the restructuring (not elimination) of the estate tax, and imposition of either wealth taxes or consumption taxes. The wealthy can be expected to object to all of these changes. In addition they have the political and economic clout to promote their self interests. A concerted effort by the people can succeed. Recent examples in countries like the Phillipines and Poland show the power the people can have when they join peacefully for a change in the organization of society.
The Interest in Wealth RedistributionIn the US there is, currently, little interest in wealth redistribution. The populist impulse that existed around 1900 has not re-emerged around 2000. Many people attribute this to a general satisfaction with their standard of living of the majority of the middle class. In addition there is a wide spread native optimism which makes people feel that they have a good chance of moving up the economic ladder during their lifetime and thus any increased taxation on the wealthy will impact them at some point in the future. The fact that this is not borne out by statistics does not alter people's perceptions. In Europe the middle class is much more aware of the limited mobility within classes and is much more attuned to keeping wealth imbalance within limits.
The Arguments for Unfettered Wealth
Self interestAs is usual in discussions of public policy one can cut through a lot of posturing if one asks the question "who's ox gets gored?" In other words, are those objecting to change going to be negatively affected by the changes. It is obvious that the wealthy and their dependents (apologists, lackeys, and beneficiaries) potentially stand to lose the most. One should thus examine their arguments in this light. Those favoring redistribution are usually the poor so it is clear that they will support any position that potentially gives them more.
ConclusionHistory has shown that when societies get too unequal bad things happen. They either become economically inefficient or they become subject to social unrest. In many cases both happen simultaneously. The banana republics of South and Central America are a good example. For hundreds of years a small ruling oligarchy has run things. Things are even pretty good for these people. However, the societies as a whole have not prospered. They have been subject to continual poverty and revolution and much of the development that has taken place is in the hands of foreign investors. The wealth of the few has been maintained at a high cost to the majority.
As new societies arise which are more equal and more efficient, the oligarchical societies will fall ever further behind. The peasant class that kept things going, inefficiently, will no longer be enough. The capital needed for growth will not be present and the expertise needed to deal with modern technology will not be in place. We can see such failed societies in parts of Africa.
We in the US need to decide if we are going to slip into an inefficient oligarchy, risk civil unrest or redirect our resources and wealth into more equitable avenues. No society is perfectly egalitarian, but when we have reached a point where the top one fifth in Manhattan makes $350,000 and the bottom fifth makes $7,000 we are probably near an economic tipping point. How we deal with the coming challenge is up to us.