Friday, April 22, 2011

Capitalism Makes The Poor Richer

From The Wall Street Journal, "The New Face of 'Poverty': How economic freedom spreads the wealth around" by James Taranto:
Among "the persons whom the Census Bureau identifies as 'poor,' " 38% were homeowners. Among "poor" households, 62% owned a car, 14% two or more cars, nearly half had air-conditioning, and 31% had microwave ovens. "Nationwide, some 22,000 'poor' households have heated swimming pools or Jacuzzis.

One thing only rich people had back in 1990, though, was portable telephones. That's changed, hasn't it? If you're reading this column, you very likely have a cellular phone. You may even be reading this column on your cellular phone."
Between the olden days of 1990 and today, we've heard endless complaints, including in the Times, about rising "income inequality." In a strange twist, we've even ended up with a president who has said he would like to "spread the wealth around" by heavily taxing the "rich" and increasing handouts to the "poor." The story of the cellphone shows how a free economy spreads wealth. In actual material terms, the "poor" get richer as the rich also get richer.
All without subsidies or czars for air conditioning, microwaves, swimming pools or cellphones. Capitalism is amazing! It is a process of a constant competitive battle to lower prices to reach more users. In doing so, people are better off.


  1. I wonder how capitalism would have allocated the radio frequency spectrum for cell phones without the aid of government.

  2. These days, the FCC auctions off spectrum to the highest bidder. If the government had not claimed ownership of the radio spectrum, competition, failures, mergers and acquisitions, etc would have resulted in winners and losers. The money paid to the government would have instead gone to shareholders and consumer benefits.

    In most markets there are multiple cell phone providers. Without government approvals needed for entry, more companies would have started and the final product might be different than we have today, for better of worse, but it would still satisfy consumer needs.

  3. Would nobody own a particular frequency or band? Would it be problematic for a new entrant to transmit at a frequency already being used? If so, what would prevent the new entrant from doing so? Or vice-versa, each time a new entrant enters, the existing players flood the new entrant's frequency with noise.

  4. If you had a choice of spending millions of dollars to build cell phone towers, advertise your cell phone business and all the other cost, would you pick the same frequency? Plus, who knows, frequency technology might have evolved like the internet, where bandwidth can carry many different providers without interference, akin to Skype.

    Plus, laws (criminal and civil would still forbid intentionally disrupting cell phone communication.