Because the rich are getting richer, and hoarded money is useless to the rest of society. Regardless of why they get richer, the economy exists to serve society. Large amounts of money lying in investments hoping to outpace inflation is not useful to society - there are practical limits on how much money can be invested usefully at all, determined by how many capital intensive tasks businesses take on as a whole.
Perhaps in older times when there were railways to build, factories and assembly lines to setup, power grids and communication networks to build, there was more room for investment in the sense of spending money now to gain rewards later.
Now that businesses have little trouble raising capital, we may be getting closer to the point where new technology/ideas are scarcer than capital. In that climate, money may be more useful to society in the hands of government or regular people than the beneficiaries of investments like entrepreneurs.
Concretely, when $1B is better used to build housing or improve healthcare, than invested into 10 "Uber for X" startups, it makes sense to tax more and let the government use the money for just that.
> Because the rich are getting richer, and hoarded money is useless to the rest of society.
That´s it. Once there is too much super-rich capitalism stops working, as decisions are not an average of million of small transactions, but it is a centralized economy decided by a few.
Also, the rich spend more money in luxury items that have no return value. A garage with 10 Ferraries doesn´t produces almost anything, it is wasteful. For the same cost you get 200 cars that allow workers to get to their jobs, go shoppping, etc. The same goes for an "iceber manssion" on London vs an apartment building.
And that wealth also creates corruption. So much money on so few hands creates an unchecked source of power. Why do you want to serve the public, that has no extra money to spend on you, when you can serve the elite that has more resources that they need and can share them with you?
A large part of Gates' money goes to preventing common disease, providing education etc. Buying mosquito nets was the latest one I saw.
These aren't investments and they aren't going to generate a monetary return for Gates. Under traditional economic dogma, no one should ever do this. Its not an investment, its donation.
Money set out purely for generating return can be hoarded when theres no good use for it. Money lying in an investment fund or an investors bank account is useless while not invested and can continue to be useless when invested in a company that fails or does nothing to help society.
> These aren't investments and they aren't going to generate a monetary return for Gates.
That's correct, but it isn't hoarded, either. It's spent.
> Under traditional economic dogma, no one should ever do this. Its not an investment, its donation.
There's no such dogma.
> Money lying in an investment fund or an investors bank account is useless while not invested
It's always invested. Investment accounts/funds do not hoard cash in Scrooge McDuck cash vaults, either. It's all invested.
> and can continue to be useless when invested in a company that fails or does nothing to help society.
Wealthy people tend to be good at investing, which is why they're wealthy in the first place. Besides, money spent on a failed investment was still spent, and others were the recipients of that money.
My simple point is there are many cases where money better serves society as charity (no return on investment) rather than as an investment. There are cases where the free market fails to solve societal problems - all those charity companies and problems like healthcare/education.
I'm tired of seeing the same trope of "the free market solves all problems" when there are clear counterexamples. Its clear as day to me that $1B spent on malaria is better than $1B spent on the next advertising startup. The ad company may have been a great investment and many employees would be recipients of the money like you say. Doesn't change the fact that there are better uses for the money - uses not served by the incentive structure of free markets.
Charity and the free market are not antiethical to each other. Charity is part of the free market.
Also, you're arguing that you know better how to spend money than others. Probably about 90% of people feel that way about it, too, and they all have different ideas than you.
I am talking specifically of incentives. Capitalism incentivizes creation of economic value and ideally societal good by rewarding it with money. This particular incentive structure does not reward things like charity because there is no money to be made. People do it for reasons outside of money, which is great but limited to a few since its not really incentivized by the system as a whole. So i would not say charity is part of the free market.. it is orthogonal to the market.
As for the central planning argument that a single planner cannot effectively organize all of society, I agree. But central planners (such as government) already do have some influence in the structure of the economic system, which behaviors are rewarded vs. not.
Don't you think there might be other ways of setting up the world that incentivize behaviors differently? Whatever way has worked so far might not be the best going forward when the problems we are solving at society scale change.
Perhaps in older times when there were railways to build, factories and assembly lines to setup, power grids and communication networks to build, there was more room for investment in the sense of spending money now to gain rewards later.
Now that businesses have little trouble raising capital, we may be getting closer to the point where new technology/ideas are scarcer than capital. In that climate, money may be more useful to society in the hands of government or regular people than the beneficiaries of investments like entrepreneurs.
Concretely, when $1B is better used to build housing or improve healthcare, than invested into 10 "Uber for X" startups, it makes sense to tax more and let the government use the money for just that.