The success of America and Brtain before it is often cited as a strong argument for benefits of capitalism. Most people totally miss the real difference between America and other nations. It wasn’t the power of free enterprise that made America powerful. It was the relatively flat social strata. America had a society in which there was a much smaller distance between creating value through ideas and hard work. Now, over 200 years later, companies compete far more on using money to make money, rather than producing something new and useful and making money off of a physical product.
Wealth disparities are far more harmful to the advancement of society than any sort of disincentive to create due to taxes. The vast majority of people who created not only revolutionary technologies but also more mundane efficiency increases did not do so with the goal of producing maximum profit. Unlike the current era where many very smart and economically advantaged people enter into banking and finance or go to business school after determining that those places offer the best place to make fast money, the majority of the people who built iconic American companies created something they felt would benefit society, not themselves.
Bill Gates, Steve Jobs, Steve Wozniak, John Romero, John Carmack, Richard Garriot, Raph Koster, and other major icons of the computer age created incredible products because that was their passion, not because of a naked desire for wealth. The first program language compiler was created by Rear Admiral Grace Hopper and she didn’t do it because she wanted to become rich. Nikola Tesla also invented brilliant products because he enjoyed doing so. He never looked at what products were making the most money and tried to get in on the gold rush.
Redistribution of wealth does not damage the economy. High taxes may cause businesses to move because they are negatives for individuals but a relatively level starting point for all citizens provides utility to the society as a whole. On a societal level giving 10000 people 1 million dollars provides a larger net benefit than giving 1 person 10 billion dollars or 100 people 100 million. Motives for creation and invention exist well beyond pure greed and furthermore rewards that don’t require the slow centralization of capital exist. These rewards can come in many forms including social and prestige based forms.
This issue also relates to the primary topic of this site, how and why to implement political reform. Having competition among political ideologies and parties, which requires a relatively level starting point that will be provided by proper political reform, has the same benefits as vigorous competition between businesses, competition most effectively generated by allowing for a more even economic playing field. As an example, the way that Uber, and other wealthy capital funded companies, subsidize early prices to amass market share is very anti-competitive and anti-efficiency. Spend money on a better service, not forcing out competition through a war of financial attrition.