My Gedanken Experiments

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Where Is the Gold of Toulouse

Aug 20, 2011 | Blogroll, Economy, Featherbed of Lies | 87 comments

In this episode, the feather I am removing from the featherbed of lies deals with the tax cuts for the rich.  Or, rather, how the rich seem to have this notion that the more they amass at the expense of their fellow citizens the more comfortable they will be and that their wealth will prevent their children from ever lacking for anything.  It makes them warm and comfortable to see their vast fortune in comparison to the rest of society.  They see themselves passing down this wealth to their children for generation upon generation.  History shows that this does not happen.  So I ask you … where is the Gold of Toulouse?


First, I give you a bit of history.  In Colleen McCollough’s book The First Man in Rome, the story of the Gold of Toulouse is laid out.  From other writers I have read, her book is well-researched, although I do not know all of her sources.  One source may have been this.  At one time, there was a massive storage of gold in the bottom of a lake in Toulouse.  Some say it came from raiding Delphi during the Greek empire, others say it simply came from a very wealthy part of Europe.  But the amount was great.  Rome conquered the area and was bringing the gold home to the Mother state.  En route, Caepio, knowing what the legions were transporting, sent his own troops, who ambushed the legion and made off with the gold.  This gold would have made him incredibly wealthy and his heirs wealthy for all time.  Except that a few generations later, there is no sign of that wealth.  After the fall of Rome, there is no sign of his family remaining and living in great luxury.  Nobody knows what happened to the gold of Toulouse.

This is not the only story of vast fortunes being dissipated in a relatively short time.  Where are the wealthy feudal lords?  Why are the castles of Europe in ruins?  We know what happened to the wealthy nobles in 18th century France.  Why are there no wealthy warlords in China?  What has happened to these vast sums that families had at one time?

About five years ago, I sat next to a Mexican businessman on an airplane trip.  He was telling me how in Mexico (a land where the income gap is extreme), he had to keep his children inside a compound and was constantly worried about them being kidnapped for ransom.  He was afraid that even his own security guards would be cajoled into assisting in such an event.  He was hoping that his company would send him and his family to China for him to work, where his family would be safe.  So … his children could not go to the local school and could not leave the compound without security staff?  This is the joy of being wealthy?  And this was before the news reports we now hear every day about the violence in Mexico.  This is a society that saw a huge income gap and people turned to drug sales and other criminal activities to alleviate their poverty.

I present here my theory.  It is nothing but a theory, and I am no historian.  My theory is this:  the only way you can hang on to wealth is for your society to be stable.  When the gap between the haves and the have nots becomes too great, and when the lower class becomes too badly used, the society gets unstable and the economic security vanishes.  It gets carted off in revolution or the economy fails.  Without a stable economy, the wealth disappears.  Instead of having vast wealth for generations, the wealth is either squandered or carried off.

As a side note, it is interesting to me that those individuals (think Warren Buffet and Bill Gates) who have come about their wealth in an open and honest fashion have been responsible in their acquisition and use of their wealth.  They have not tried to amass more by clandestine means, nor have they oppressed their fellow citizens in its accumulation.  On the contrary, they give it away to worthy causes which they research, and encourage others in their situation to do likewise.  It is the ones who hide behind a corporate veil, themselves not well known to the public, who seem to me to commit the fraud and scurrilous tactics.  It also appears that the ill-gotten gains are the ones that turn out to be most precarious.

So my message to those in the wealthy class who are pushing for these ridiculous tax cuts for the rich – you are placing your own wealth in jeopardy.  By feathering your own nests at the expense of your fellow citizens who are suffering, you risk destabilizing the country that gave you the opportunity to become wealthy.  And for what?  Once you have enough wealth to buy everything you need and put some away, what good does it do you?

Economists are familiar with the law of diminishing returns.  Once you have a certain amount of something, the next unit of that something is of less value to you.  We just had Thanksgiving.  After you finished that big meal, how valuable to you was another piece of pie?  When you walked in to the dinner hungry, that pie was worth a lot to you.  But after the big meal?  It may have actually held negative value to you.  You can only wear one pair of shoes at a time.  When you already have a different pair of shoes for every day of the month, how valuable to you is the next pair?  But if you are barefoot, that first pair of shoes means a great deal.  So to whom is the tax cut more valuable?  To the wealthy person who already has what he needs?  Or to the person who is struggling to feed her children or repair the car he needs to get to work?  Economists have a term for this – Welfare Economics.  It is not the economics of welfare.  It is the economics of the welfare of the country – how do you get the greatest value for every unit of resources. In terms of the welfare of the country, the extra $40 to the middle class family yields a higher return than an extra $4000 to the wealthy.  It makes a greater difference in the life of the person who receives it.  In terms of Welfare Economics, the tax cuts for the middle class have a great return.  The tax cuts for the wealthy have virtually no return.

As the gap between the haves and the have nots in this country grows, so does the discontent.  We see the anger already out there in the streets (although the tea baggers have not yet figured out who the villains are).  It is already beginning to destabilize our economy and our nation.  When a nation is destabilized, it isn’t a question of whether it will fall, it is a question of how.  Will it be by forces from within or forces from without?

When you look at the accumulation and retention of wealth, the rich have a greater stake in ensuring that the tax cuts for the middle class pass and the tax cuts for the rich are defeated.  This is why people like Warren Buffet and the group of millionaires who are calling on our government to tax them more are doing so.  They understand that their own wealth depends on having a country with a healthy and satisfied middle class.

So the feather I am pulling out of the featherbed of lies is that there is something to be gained by the wealthy person who extracts greater wealth at the expense of his fellow citizens.  That is a lie.  In fact, he puts his own wealth in jeopardy.


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