Too Capitalized

A while ago, Apple was sitting on no less than 100 billion US Dollars. In such times, many will think that this is absurd. The truth is, it is not. And with such an amount, Apple could have done miracles in Europe if it is to make some sort of a lousy investment or misuse the amount of cash that it has accumulated from continuously increasing sales of its highly innovative products. In many sarcastic examples provided; Apple was capable of buying ‘a country’ and not just buying it out. If I may take you a few years back; many stories were publicized by the media on how people made money ‘disappear’. But how is that even possible? How can someone like Madoff make 50 billion US Dollars disappear? And no, that’s not genius if you are behind bars. Those who are familiar with the concept of “distribution of wealth” would realize that money cannot simply disappear. The latter indicates that wealth, despite its form, decreases somewhere to increase somewhere else. So what happens when wealth is not fairly distributed?

There is no such thing as a healthy economy in which everyone has an equal share of everything. This is a reason why we see a major chunk of the world’s accumulated wealth in the hands of few. In the matter of fact, a fair distribution will only exist in markets where there is perfect competition in all products, theoretically speaking. To illustrate, such a competition brings everyone close enough to equilibrium since exchanges take place between everyone with everyone, leaving no chance for people to accumulate significantly more wealth than the rest. Despite that, a few exceptions might be there for reasons like inheritance or perhaps a natural disaster wiping off the wealth of a few candidates. Right now, we have many large corporations and a few extremely wealthy people who have been exploiting markets and arbitrages wherever possible to accumulate wealth. Such wealth eventually becomes similar to the one that Apple had before they chose to pay dividends. In a way, this is partially why a monopoly is not normally preferred.

Does this mean that those corporations should be broken down into their small respective business units? And should the latter be promoted individually as separate legal entities? If that’s an argument, a counter argument can be supported if long as those big corporations are giving back to the community in whatever ways they choose. Yet, what would be enough as a payback? That complicates things even further as it can be anything from donations to charity to creating jobs and building schools if generous. And to undermine such an argument, one could state that those business units would eventually become bigger and if successful; we will be back to square one. What might sound a bit reasonable is to prevent the ‘big guys’ from accumulating so much wealth by taxing them heavily, which was proposed by many politicians and economists and is applicable to humans. However, taxes decrease overall welfare in economies besides a more severe impact if the funds raised from the tax system are not spent in effective ways.

There is no optimal solution here that can be modified and applied in every economy. Each economy is special in its own way with its value differentiated formula components. People, hence companies, are global traders who utilize different business opportunities that are directly and indirectly presented to them worldwide. Because of that, countries do not only have to come up with their own policies but with ones that consider the policies of others. In our world today; the unequal, might be unfair, distribution of wealth is what segregates people based on their income level for all sorts of reasons. A scenario like that cannot be random even if certain factors that contribute to it can be. Those who have achieved the ultimate status of accumulated wealth are more likely to maintain it, with fluctuations between first and second places, third and forth places, etc. while others dwell in their respective levels unless an extraordinary shift in income happens. After all; how would they if “behind every great fortune, there is a crime”. (Honore de Balzac).