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Warren Buffett Believes America’s Huge Wealth Disparity Is Due to 1 ‘Inevitable Consequence’
Warren Buffett Believes America’s Massive Wealth Disparity Is Due to 1 ‘Inevitable Consequence’
Unlike most billionaires, Berkshire Hathaway Chairman and CEO Warren Buffett has always been a staunch defender of the American working class.
He has famously suggested raising taxes on wealthy individuals like himself and recently said that no American would have to pay “a penny in federal income taxes” if other corporations paid their fair share. “We have always expected at Berkshire to pay substantial federal income taxes,” he said at the company’s annual meeting.
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With that in mind, some of Buffett’s more unconventional thoughts on wealth inequality probably deserve a closer look.
“There is no conspiracy behind this depressing fact: The poor are definitely not poor because the rich are rich. Nor are the rich unworthy. Most of them have contributed brilliant innovations or managerial expertise to the well-being of America,” the famed investor wrote in a 2015 Wall Street Journal op-ed.
“Rather, this widening gap is an inevitable consequence of an advanced market-based economy.”
Here’s a closer look at Buffett’s argument.
An advanced market economy
Buffett believes that the market economy has become increasingly “specialized,” with “economic rewards flowing to people with specialized talents.” This, he says, has caused wealth disparity, with many people barely surviving while others thrive.
“It was an agrarian economy a few hundred years ago,” he said in an interview with CNN. “It’s very difficult to, you know, get 20 times the wealth of the next guy because you were a slightly better farmer. But if you’re better at some skills now, you can become incredibly wealthy at a very young age… You can capitalize on that.” [the] value of an idea. And so wealth moves on a large scale, even in advance.”
Now, he says, there is a “mismatch” between the demands of attractive jobs and the skills of America’s first workforce, which is “simply a consequence of an economic engine that constantly demands more top-notch talent while reducing the need for commodity-like tasks.”
The brutal truth, he says, is that “a lot of people” will be left behind in an advanced economic system.
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According to him, the solution is the right economic policies. “Firstly, we should want, in our rich society, that every person who is willing to work receives an income that provides a decent lifestyle. Second, any such plan must not distort our market system, the key element necessary for growth and prosperity,” he wrote.
Simply put, he thinks it’s difficult for the average American to achieve significant wealth. Investing offers a simpler way to secure your financial future and grow your money in this specialized market-based economy.
Buffett’s advice to people is to “just keep buying” and ignore the “talk” about the market. In a interview with PBS, he said: “They should be willing to bet on America… They should just keep buying and buying and buying a little bit of America as they go along. And in 30 or 40 years they will have a lot of money.”
Building wealth through investments
You don’t need to be a professional or an investment genius to start accumulating capital. The Vanguard S&P 500 ETF, a simple index fund that tracks the S&P 500 with an expense ratio of just 0.03%, has delivered average annual returns of 14.3% since its inception in 2010 at the end of May.
Investors may also consider other popular asset classes such as bonds and real estate, or alternativessuch as fine art, crypto, and farmland. Always do your research, consider your risk tolerance, and consult a financial advisor when exploring more niche areas.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.