No, the rich don’t get rich at the expense of the poor

Many people seem to believe that the rich only become rich at the expense of others. This world view is called zero-sum thinking because its adherents regard economic life as a zero-sum game, just like tennis, where one player has to lose for the other to win.

In his poem “Alfabet,” the German poet Bertolt Brecht formulated this zero-sum mindset as follows:

“Said the poor man with a twitch:

Were I not poor, you wouldn’t be rich.”

Although this thinking is very common, it is fundamentally wrong, as demonstrated by the incredible developments in China over the past four decades. At no other point in history have so many people escaped bitter poverty in such a short time as in China. According to official World Bank figures, the percentage of extremely poor people in China in 1981 stood at 88.3%. By 1990, this had fallen to 66.2%. And by 2015 only 0.7% of the Chinese population was living in extreme poverty. In this period, the number of poor people in China fell from 878 million to less than ten million.

The Chinese economic miracle began with Deng Xiaoping’s economic reforms. It was Deng who declared: “Let some people get rich first!” Over the next few decades, the Chinese state permitted the private ownership of the means of production and allowed the free market to exert greater influence. In spite of the fact that the state still exerts a strong grip on the Chinese economy, it has substantially reduced its role since the period under Mao Zedong. And under Deng, capitalist “special economic zones” were created all across China.

Under Mao, China was not home to a single billionaire. By 2010, however, the number had risen to 64 thanks to Deng’s capitalist reforms. Today there are 324 billionaires in China, and that’s not counting the 71 billionaires in Hong Kong. Nowadays, no other country in the world – except for the US – has as many billionaires as China. If zero-sum theory were correct, this development would be impossible. But zero-sum beliefs are wrong: The sharp decline in poverty and the simultaneous dramatic increase in the number of billionaires are merely two sides of the same coin.

Most rich people do not become rich because they take from the poor, but because they create a great benefit for others. Jack Ma is the richest man in China, with a fortune of $34.6 billion. He became so rich because he founded Alibaba and other successful companies that met the needs of hundreds of millions of his fellow citizens.

A quick glance at the Forbes list of the world’s billionaires reveals that almost everyone on the list became rich as an entrepreneur or because they continued businesses that their parents had founded and took them to the next level. A majority of the world’s top ten richest people are self-made entrepreneurs. Jeff Bezos, the richest man in the world with a net worth of $131 billion, became rich in a similar way to Jack Ma, namely through e-commerce.

Bill Gates, the second richest man in the world (and the richest for a long time) did not become rich by taking anything from the poor, but by giving the world something. And this is not a reference to the billions Gates’ foundation has donated to philanthropic causes, but to the computer hardware and software, including the Office programs, that so many of us use every single day.

Larry Ellison, No. 7 on the Forbes list, built his wealth on software for customer relationship management databases. He is followed by Mark Zuckerberg at No. 8, who had a great idea with Facebook, which now has almost two billion users. Larry Page and Sergey Brin, at Nos. 10 and 14 on the Forbes list, became rich because they developed the most successful search engine on the planet.

Zero-sum thinking is not only misguided, it has a negative impact on every single zero-sum believer and on society as a whole. Psychologists have discovered that zero-sum thinking is a major source of envy. Anyone who believes that the only way to become rich is at the expense of others will naturally envy and begrudge the rich their wealth. This zero-sum mindset is also the basis of the socialist theories that have brought so much suffering to humanity over the past hundred years or so. Bertolt Brecht, the author of the poem quoted at the beginning, was not just a poet, he was also a communist who revered Josef Stalin.

Anyone who believes that it is only possible to become rich at the expense of others has created a barrier to their own success. Honest people who believe that the rich are all crooks, are unlikely to strive to become rich themselves. Zero-sum beliefs function as an unconscious psychological barrier against wealth. And people with no moral scruples who think in zero-sum terms can even find themselves drawn to a life of crime. Across the world, prisons are full of people who thought they could only get rich at the expense of others.

The facts tell a completely different story, as the example of China demonstrates. The biggest economic success story in human history began with the realisation that, rather than harming society, everyone benefits when people become rich or even super-rich as entrepreneurs. It’s not only the small number of billionaires who have profited from China’s economic reforms, it’s also – more importantly – the hundreds of millions who were previously living in bitter poverty.

 This article is based on Rainer Zitelmann’s latest book, ‘The Power of Capitalism’.