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POLITICAL ECONOMY OF INEQUALITY 

On the Origins of Great Wealth

Gary Olson

Virtually everything was created at public expense and then gobbled up by enterprising opportunists like Gates.

F. Scott Fitzgerald wrote in one of his short stories, “The very rich are very different than you and me”. Ernest Hemingway has a character in one his reply by saying “Yes, they have more money.” A more concise retort might be that the secret behind every great fortune is a great theft, to paraphrase Honore de Balzac.

There are 657 billionaires in the United States, whose combined wealth grew by more than $1.7 trillion in the year of the pandemic. Further, we know that the one-tenth of the 1% own more than than the bottom 90%. Where does this wealth originate?

Bill Gates and computers are instructive examples. First, from birth, Gates benefited from numerous external advantages that played a critical role in his later success. They ranged from wealthy, well-connected parents  and an elite private school in Seattle to unique access to early computers and exposure to software development even before graduating from high school.  For an account of Gates’s many advantages — and a thorough assault of the myth of the “self-made man” in the United States — I recommend Malcolm Gladwell’s book “Outliers: The Story of Success” (NY: Little Brown and Co. 2008).

Second, and closely related, we learn from Gladwell’s book that Gates readily acknowledged, “I had a better exposure to software development at a young age than I think anyone did in that period of time, and because of an incredibly lucky series of events.” And any person with an iota of integrity will admit the indispensable role played by several previous decades of government subsidies in developing that software. 
We know, from Kenneth Flamm’s  historical overview, “Creating the Computer,” that computers were born at public initiative and public expense. During the 1950s, the funding came from the taxpayer funded Pentagon and the National Science Foundation. Virtually everything was created at public expense and then gobbled up by enterprising opportunists like Gates. For example, the Pentagon was absolutely fixated on having a communication system that could survive a nuclear attack. The answer? The internet.
“I’ll go further and say that Microsoft exists, not only because of massive public investments (our tax dollars) but from the indirect contributions of millions of individuals, from teachers, farmers and nurses to truck drivers, secretaries and sanitation workers. In short, as someone once noted ‘It takes a village to produce a billionaire.'”
Flamm explains that “Key players in the military first tried to convince established businesses and investment banks that a new and potentially profitable business opportunity was presenting itself. They did not succeed and, consequently, the Defense Department committed itself to financing an enormously expensive development program.” As Noam Chomsky has asserted, “Capitalism means, we don’t take the risks. The public takes the risks and we take the profits. As much as possible, risk and cost have to be socialized and profits privatized. That’s the basic principle.”
The Air Force and the Atomic Energy Commission, as detailed by Flamm, were responsible for initiating data-based software; the genesis of artificial intelligence research was not intrepid entrepreneurs but the military in the 1950s. The U.S. government and especially the military sponsored research were behind video terminals, the drawing tablet, light pen and even the mouse. Flamm notes that more than half of IBM’s R&D budget was in the form of government contracts in the 1950s and 1960s — in other words, from the taxpayer.


The Whirlwind, one of the first computers with a visual display. (1951). That year also saw the first Univac.


Further, the vaunted AT&T and its Bell Laboratory was a wholly government supported monopoly. They developed the transistor but because of its prohibitive  expense, for their first decade only the government procured them for military application. Incidentally, Flamm points out that because European governments were reluctant to provide these massive taxpayer subsidies to industry, Europe fell hopelessly behind the United States.

I’ll go further and say that Microsoft exists, not only because of massive public investments (our tax dollars) but from the indirect contributions of millions of individuals, from teachers, farmers and nurses to truck drivers, secretaries and sanitation workers. In short, as someone once noted “It takes a village to produce a billionaire.”
And what has this great wealth been used for? For personal aggrandizement, fantastic comfort and immense privilege. And it permits the accumulation of even more profits, leverage over private and public life and coopting government to do its bidding.
Finally, I’ve always been partial to the injunction “To whom much is given, much is required.” If we apply this to the United States, the “much” is rarely given voluntarily while the “required” has neither been required nor demanded. And although I wouldn’t presume to improve on scripture, I would suggest this corollary: “From whom much is taken, much is owed.” In short, if all production is social — from public investments to our collective labor — where is our dividend?
Gary Olson is Professor Emeritus of Political Science, Moravian College in Bethlehem. PA.

SOURCE: https://www.greanvillepost.com/2021/04/25/on-the-origins-of-great-wealth/

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