Common Error No. 81


81. "Under capitalism the rich waste resources on luxuries."

yachts.jpg They don't waste resources, they spend them. One of the points about being rich is that you can do nice things and buy good stuff. These goals help to inspire people to economic achievement and what Adam Smith called "the constant and uninterrupted effort of every man to better his condition."  In pursuing their own economic advancement, people help others by providing goods and services for them. What poorer people call luxuries are an important spur to keep richer people continuing to do that.

In spending, they create a demand, and with it a range of businesses to supply that demand. They employ every type of service from hairdressers to waiters. When they buy luxury yachts, they employ boat builders, fitters, decorators, seamen and chefs. When they fly to Monaco they employ airline pilots, cabin staff and travel agents. When they drive Rolls Royces and Lexuses they employ car-makers, mechanics, chauffeurs and car salesmen.

They perform a useful function in testing and selecting new products and services. What is initially the prerogative of the very rich often spreads down through the population as economies of scale and production lower its prices, and which rising affluence makes affordable. Foreign holidays are one example; it used to be only the rich who could afford them. It is often the sight of the rich enjoying their luxuries which inspires others to strive for the same. It is not up to some self-appointed group to deride luxuries and tell us what we need and should be content with; people can be their own judges of that.

What the rich do is to spread their wealth through society, providing opportunities for others to benefit from it. By spending on luxuries, they create jobs in large numbers and give other people the chance to improve their own economic lot. They should do more of it, not less.