True, but everybody gets more than they had before. The employees get jobs, suppliers get paid on contracts, clients get goods and services. Everybody wins. When an owner cashed out the business isn’t wound up. When Bill Gates pulled most of his wealth out of Microsoft the employees weren’t thrown on the dole and all the businesse’s properties dynamited. His shares and those of other founded and investors were sold as a going concern to new investors. It’s called economic growth.
However there are risks with too much wealth tied up in too small a demographic group. It reduces the diversity among those investing, thus reducing the diversity of investments. This could distort economic development and leave productive opportunities unexplored. It could also lead to political capture by this monied elite.
Everybody wins, but the people with the most win the most.
In the limit that means they end up controlling all the things.
You would somehow need "little people" wealth growth (in aggregate) to outstrip "rich people" wealth growth for this not to happen, but it can't because the little people have to spend non-negligible fractions (or all of) their income to stay afloat. Basically, the rich win by not actually spending (proportionally) much money.
Thinking of it in exponentials, assuming you invest everything you don't consume, normal people have a drag on their exponential coefficient which is their cost of living. They also tend to invest less efficiently in aggregate due to not having wealth managers and specialised tax consultants and so on.
In an investment race, highest exponent wins. There is a confounding factor of population growth though.
Up until relatively recently we had a perfect solution to this problem: 90% marginal tax rates as an acceptable idea, amongst other things.
What the economy needs is for massive wealth accrual to be met with equally massive backpressure. Allowing for much higher taxes at the very high end of income/investment returns acts as a kind of non-Newtonian fluid in the flow of wealth, keeping it all from going away from those who haven't even had the opportunity to get some yet.
Except that raising taxes on those with high incomes doesn't actually increase tax revenue and in fact can lead to it decreasing due to their income being diverted to non-taxable forms and increased use of tax loopholes. That's not a theory, it's a lesson that's been learned in practice time and time again.
im not so convinced of this grim scenario. It is often that rich people lose their status. Index funds outperform most hedge funds.
Where difference investment options shine is, as you mention, being able to skirt taxes, or have access to information, or state regulation.
In the tech sector, the requirement of being an accredited investor to be able to invest in startups has the following effects: increases investment returns for investors. Reduce amount of founders and their payoff and lowers wages because they cant trade their stock freely, showing captivity.
On taxes: it is dreamed that better tax policy might nake the rich pay what they owe. But that mindset is what got us here. Id say lower the taxes on the common, and that might not solve it, but would vastly reduce the exponentiality.
On information: in this I part with milton and say that all income of any kind should be public. Society will take a hit on privacy, but this information is too valuable to hide. Knowing that everyone woyld not need to speculate on how the rich make money, and given freedom might even compete with them in the same assets.
Game is rigged, unfortunately, by the people that think they are fixing it.
I don't think that's true of real estate speculation, especially not when it involve housing, because that causes the people with less to have to pay increasingly large proportion of their income to the wealthy in order to have somewhere to live.
However there are risks with too much wealth tied up in too small a demographic group. It reduces the diversity among those investing, thus reducing the diversity of investments. This could distort economic development and leave productive opportunities unexplored. It could also lead to political capture by this monied elite.