Krugman: The Rich Don’t Deserve to be Rich

Under the heading “The Undeserving Rich,” Paul Krugman tells us that we shouldn’t focus on the top 20 percent or even the top 1 percent on the income ladder. It’s the top 0.1% that really don’t deserve what they have. But guess what? He never explains why they are undeserving.

I assume we are talking about billionaires. So here are a few that pop to mind:

  • 7204953-1Mark Zuckerberg (Facebook)
  • Sergey Brin (Google)
  • Larry Page (Google)
  • Bill Gates (Microsoft)
  • Paul Allen (Microsoft)
  • Elon Musk (PayPal, Tesla)
  • Michael Dell (Dell Inc.)
  • Jeff Bezos (Amazon)
  • Steve Jobs (Apple)
  • Peter Thiel (PayPal)
  • Steve Ballmer (Microsoft)
  • Richard Branson (Virgin)
  • Larry Ellison (Oracle)

Readers: please use the comments section to explain who on this list doesn’t deserve what he has. Also, if someone else deserves their income, who would that be? And not to be overlooked, if you think these guys got unfairly rich at someone else’s expense, who are the unfairly plundered?

More on these and others.

Comments (23)

Trackback URL | Comments RSS Feed

  1. Buster says:

    If you’re going to bash the high wages of CEO and Wall Street financiers, why not go after the real problem: the slow erosion of shareholder rights. Interest groups have been successful in capturing the mechanisms that allowed shareholders to decide how their companies are run. If shareholders hold power in the companies they own stock in, they will reward the CEOs who deserve high pay and punish those who do not.

  2. Studebaker says:

    Why does Krugman believe the top 0.1% don’t deserve their pay? Rising inequity is easy to explain. The poorest citizens in the United States compete with low-income or even middle-class people abroad. By contrast, the wealthiest company founders did things differently than others before them. Notice that nobody on the list inherited an old, blue chip company. The list is composed of high-tech founders. Google is tremendous in terms of its power. Microsoft helped turn desktop computers in every office a reality. These firms changed the way we work on a daily basis. Facebook and its competitors changed the way we interact with our friends and families. Very few Christmas cards went out his year. Part of the reason is that friends and family already know what we’re up to because of Facebook. Why shouldn’t these founders be wealthy?

  3. Andrew says:

    These men and women listed are at the top 0.1% because they climbed their way to the top by creating innovative technologies that change and will continue to change our lives. There would be no home computing without Microsoft and Apple, the internet would not be as advanced without Google and no e-commerce without Amazon. Of course they’ve earned it.

    • Thomas says:

      Not to mention the vast amounts of charity work by he likes of Bill Gates and Mark Zuckerberg.

      • Matthew says:

        Or that the majority are a part of the giving pledge, an organization that encourages billionaires to give most of their fortunes to philanthropic causes.

        • Bubba says:

          I’m afraid the Giving Pledge will come back to bite proponents of free market ideas. The billions of dollars pledged to charity will fund endowments for non-profit organizations.

          Unlike the founders of these high-tech firms, the managers of these non-profit groups will be left-of-center elites. Non-profit groups are mostly composed of people who think taking wealth from the rich and using it to fund social programs is the way to fix inequity. I hate to say it, but some of the charities that are recipients of bequest will lobby for more government intervention — something the original donors would have opposed.

  4. Walter Q. says:

    It is wrong to stack the blame on those who created their fortune through entrepreneurial means. Blaming innovators for being wealthy and holding down the poor is not a means of reducing inequality.

  5. Jay says:

    Imagine all of the jobs that have been created thanks to these innovators, jobs that would otherwise have not been available. Free markets and entrepreneurship are better job creators than government intervention.

    • James M. says:

      We cannot justly say that many of the rich became rich purely by their own means. Many of the rich got that way by ripping off the middle and low class, as well as the unassuming. Would those wealthy deserve what they have?

      • Jay says:

        You are also making the assumption, along with Krugman, that all of the wealthy are scumbag bankers. This is untrue, as many of the wealthy founded corporations that are technology magnates and job producers. Many of these corporations try to reduce the inequality in America, by giving everyone access to information and advanced goods and services.

  6. perry says:

    Funny, George Soros isn’t on this list.

  7. John Fembup says:

    Let us suppose that people who have NOT earned what they have, do NOT “deserve” to keep what they have.

    And so let’s consider Paul Krugman. He is very intelligent. He was born highly intelligent. He didn’t uh I mean, uh he didn’t build that! Krugman did not “earn” his intelligence – he was born with it. So how can one argue that Paul Krugman deserves to keep his intelligence?

    But intelligence cannot be revoked, so what is to be done? Here’s a solution to the problem of unearned intelligence:

    The government should figure out a way to fit every citizen with a headphone tuned to our particular intelligence. This headphone would blare a cacophony of piercing, shrieking noise directly into our ears each time we tried to think or analyze. This noise would be tuned in proportion to our inborn intelligence. This would so hamper thinking, that no one would be able to keep the unfair advantage that comes from the unearned amount of intelligence they are born with.

    Kurt who? oh . . .

  8. Luis F. says:

    Those individuals (and many more) amassed their wealth by changing the world. Their inventions, companies and ideas have made life easier. These individuals have dedicated their lives to build their companies. They have spent countless hours working and many more worrying about their future. Those individuals did not become billionaires all of a sudden. They didn’t wait until someone gave them something. They sought opportunities and exploited their strengths. So when Krugman states that they don’t deserve their wealth is insulting. He is talking like a spoiled child envious of his neighbor, and with no economic ground for a Nobel Laureate in Economics.

  9. Kevin F. says:

    There is a reason why communism failed miserably, the system does not work. Those individuals do not deserve to be there, they have earned it through hard work. And that is the reason why capitalism has triumph, because it is based on the premise that high efforts are highly rewarded.

    • Thomas says:

      Capitalism promotes incentives for hard work. It’s also what promotes innovation and builds work ethics. Innovation is suppressed by any form of socialism.

  10. Barry Carol says:

    I don’t have an issue with your list of billionaire entrepreneurs. On the other hand, the compensation of corporate CEO’s and other senior executives is a far higher percentage of average earnings within those companies than it was 30-40 years ago. There are a couple of reasons for this. First, the stock market has soared over the last 30 years. Second, Boards never contemplated how high the market would rise when they started doling out generous stock option packages in the 1980’s. Third, Congress exacerbated the problem in 1993 when it denied tax deductibility for compensation in excess of $1 million annually unless it was “performance based.”

    I’m a free market guy who spent my career as a securities analyst (buy side). I think we have to pay enough to attract and hold qualified people. However, I don’t think we need to make corporate executives mega wealthy to get them to work hard on behalf of shareholders. It’s mainly the shareholders who pay for these lavish option grants and restricted stock awards in the form of earnings per share dilution.

    • John Fembup says:

      So BC, you’re still around? Hello again.

      “Congress exacerbated the problem in 1993 when it denied tax deductibility for compensation in excess of $1 million annually unless it was “performance based.”

      A point I’ve also made over the past 20 years. (ye gods, 20 years??!!??)

  11. Yancey Ward says:

    Krugman and others always miss the point- these people largely don’t consume their incomes regardless of how it was earned. If Bill Gates earns $1 billion/yr in MSFT dividends, it matters very little to society as a whole since Gates doesn’t use that income to compete for consumption goods services- Gates consumes several magnitudes a smaller fraction of his income/increased wealth than the average American. It isn’t like Gates is hoarding up food, medical equipment, cars, vacations, etc. that is depriving everyone else of higher consumption.

  12. John Fembup says:

    The 13 billionaires listed either founded or were key early entrepreneurs in 10 companies that by 2013 had more than 600,000 employees.

    Considering families, that translates into well over a million people – a million people whose lives and lifestyles are possible because of the products and earnings from these companies.

    That does not even count the countless other businesses, their employees and families, who also depend for their livelihoods on the payrolls from these 10 companies.

    That also does not include the significant local, state, and federal taxes that have been paid out of the incomes of these companies and these billionaires, and of their employees, and of the businesses that sold them stuff, and of THEIR employees.

    Not a single one of these 10 companies existed before 1970. Only 5 existed before 1990. These billionaires that recently created new products that other people were willing, voluntarily, to buy. The new products created wealth where it did not exist before 1970. These billionaires’ wealth was not stolen from others, was not “redistributed” to them by government.

    So do the executives on the list “deserve” their wealth?

    I say yes. In fact, I say there is no way they can be compensated enough, in return for what they have created for America and for the American economy.

  13. Barry Carol says:

    I think there is a significant distinction that needs to be made between the listed entrepreneurs and executive management of mature Fortune 500 companies some of which are shrinking in revenue and shedding jobs. I would evaluate the latter based mainly on how wisely and well they allocate capital on behalf of shareholders. All too often we see value destroyed by paying too much for acquisitions, buying back stock at high prices when the company is operating on all cylinders and expanding too aggressively when times are good. Even when they destroy value, we see these people rewarded and even when they’re replaced for poor performance, the exit packages are often astronomical.

    I think there are plenty of examples of excessive and undeserved compensation in corporate America. If it were up to me, I would copy Warren Buffett’s approach and eliminate stock options and restricted stock awards. Executives could still be given the opportunity for large performance based cash bonuses for adding economic value to the company beyond its cost of capital. The company could also provide low interest loans for executives who are willing to buy the stock outright like any other shareholder has to do if he wants to profit from its success.

    The problem is that it’s hard to break with the status quo. Any company that needs to hire a new CEO has to offer a compensation package that’s competitive with what peer companies are offering. If we were starting with a clean sheet of paper, I don’t think we would replicate the current status quo.

  14. Floccina says:

    Many people must love inequality because they buy more lottery tickets when the pot get really big.

    Also to Krugman, so what some wealth is random, I do not care. What do you propose, an end to patents/copyright and professional licensing? As far as finance education might help. Stop paying those high fees on stock trade, loans etc.

  15. John Bailey says:

    I don’t know about billionaires but there are certainly many millionaires and large corporations that use political connections to become wealthy and then defend and grow that wealth.

    The political class is doing very well.

  16. George Orwell says:

    Funnily enough, but the author manages to leave out the 6th through 9th richest people in the World from his list. Why is that, I wonder?

    Oh, yes, that’s because it’s the Walton family. And we all know how the Walton’s became so rich. They did it the old fashioned way: they inherited it.

    And tied at number 4: Koch Brothers. Another group who did it the old fashioned way.

    I’m sure if we actually went down the Forbes 400 list and looked at how many of those “earned” what they have as opposed to inherited what they have or started out with huge advantages, the comments would be a slight bit different.