6 Thoughts on Wealth Distribution

Why are we here?

1.) We are here because our founders believed that “large governments and relatively small business both faced the same general problem, agency costs;” and that these costs could be overcome by “employing similar techniques” (Wright 70). They allowed “stakeholders to elect managers responsible for the day to day operations of the firm or polity, attempted to align the incentives of the managers with those of the stakeholders, and established procedures for monitoring the managers” (Wright 70). Alternatively, these checks and balances can be viewed as defense for personal property, as was typical for liberal discourse of the time. Indeed Locke’s belief that individuals “create government in order to reduce such property losses,” (Wright 70) seems concordant with the founders understanding of property, as is shown in Federalist 10:

The most common and durable source of factions has been the various and unequal distribution of property. Those who hold and those who are without property have ever formed distinct interests in society. Those who are creditors, and those who are debtors, fall under a like discrimination (Madison Fed 10).

2.) We are here because Madison’s fear of majority factions stems from the fact that a majority party (debtors / low and middle income citizens) has the potential to vote for property redistribution at the expense the minority party’s (creditors / wealthy Americans) property; or as the founders defined it, individual liberty. The infatuation with reducing taxes also comes from this fear, as even the most progressive thinkers expressed that lessening “the burthen of public taxes” would allow the nation to enjoy “that abundance, of which it is now deprived” (Paine, Rights of Man 37).

3.) We are here because Alexander Hamilton argued that “money is with propriety considered as the vital principle of the body politic; as that which sustains its life and motion and enables it to perform its most essential functions” (Hamilton Fed. 30). The government has “the power of creating new funds” because this “would enable the national government to borrow, as far as its necessities might require” without crippling the population with taxes (Hamilton Fed. 30). In Hamilton’s view, the power of creating new funds while keeping taxes low was best achieved by enlarging the nation’s “prosperity of commerce,” which, he argued was “the most productive source of national wealth” and therefore should be the “primary object of [our] political cares” (Hamilton Fed. 12).

This language enables us to depart from the federalist rhetoric and approach the constitution from an economic standpoint, thereby allowing us to better understand the discourse and intentions.

4.) We are here because, “From the perspective of 17th century constitutional thinkers [such as] John Locke, there is no essential difference between political corporations and business corporations” (Wright 68). “Both ‘political’ and ‘business’ governments, therefore, serve the interest of the individual” (Wright 68).

The founders saw government as an organization to promote the interests of its constituents, similar to the way that a business promotes the interests of its investors. Thus,

“The the framers saw governments officials as agents, [who] if left unmonitored, will not always act in the interest of their principals, the nation’s citizens”…“The federal form of U.S. governance itself was [intended to be] an effective means of reducing the principal-agent problem because the local, state, and national governments monitored each other closely” (Wright 59, 60).

5.) We are here because the founders', “recognition of the need to create mechanisms to reduce agency problems” in our bureaucracy are manifested as checks and balances in our constitution(Wright 66). These agent monitoring provisions ensure that leaders do not “breech the contract between government (agents) and the people (principles)” by “inducing leaders to act on behalf of the nation’s owners, the citizenry, and not in their own self interests” (Wright 71).

6). We are here because even our founding fathers had to earn their new conditions, and did so by structuring American bureaucracy such that it theoretically corresponded to the prevailing macroeconomic discourse of the time. Moreover, this alignment made possible the coming of the industrial revolution and guaranteed the maintenance of the established superstructure, most notably the dominant class hierarchy.


“In times of imminent change, our verbal and sentimental worship of the constitution, with its guarantees of civil liberties of expression, publication and assemblage, readily goes overboard. Often the officials of the law are the worst offenders, acting as agents of some power that rules the economic life of a community.” –John Dewey, Liberalism and Social Action 64

-Wealthy Americans

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