It is raining. But Johnny does not care about the weather; not anymore, at least. He reclines his leather chair and takes a cigar out of the wooden box resting on the table beside him. He holds the cigar under his nose, smells on it and takes a deep puff, the scent of tobacco filling his nose. Carefully he cuts a few millimeters off from the sealed end. While he lights the cigar with a chip of cedar wood, he thinks back at the time when he still cared about the weather. Back in the 1920s in New York, he was one of the young men, who had to pay regular visits to the shop owners in his district. On a special evening, he was driving with another friend of his »streetcrew« to a small grocer’s store. He and his friend were dressed in perfectly fitting suits and both had matching hats to round their outfits off. They arrived at the store, parked the car and stepped out in the rain. It was pouring, as it so often did in New York. This time it was Johnny’s turn to keep watch in front of the shop while his friend walked in and »talked« with the shop-owner. Johnny remembers this evening very well even though nothing special happened. He remembers this special evening because of the rain and his suit. A few hours ago, Johnny had been at the tailor store to pick up his first bespoke suit ever. He had been proud of the new Italian cut and the fine wool he had chosen. Johnny had liked this suit instantly. And now, a few hours later he was standing outside a shop in the pouring rain, waiting for his friend to collect the »protection money«. He was standing there, crouched to the wall, smoking his cigarette while he observed water stains getting bigger on his new suit. Finally, his friend came out of the shop. Even though it took him only five minutes to collect the money from the owner – this owner always paid instantly – the waiting had felt like an eternity to Johnny. Johnny exhales the smoke from his cigar. Now he is rich. Now he is the boss and he has other young men collecting money for him. There is no need to think of the distant future. But anytime when the rain is lashing on the windows, he thinks of that night and his new suit with the water stains on it.
Theory:
The second way to get rich is to force people to give you their money. If you force 10 people to give you one dollar you are ten dollars richer. If you are able to force 1 million people to give you one dollar, you are a millionaire. Unfortunately, in our modern states the government is the only institution which is allowed to use force. If you find yourself in the position of being the government, you are lucky. You just need to force any individual in your country to pay you some money or punish them otherwise. In ancient times it was called tribute. Nowadays it is called taxation. According to the country you live in, this taxation can vary and sometimes amount to quite a bit: income-tax, value-added-tax, compulsory social-insurance, etc. The government is the law-maker. Therefore, this form of coercion is defined as »legal«. In the more likely case you don’t find yourself having power over a country, all your options of forcing people to give you their money will be deemed »illegal« and bring certain consequences with them. You can start walking from shop to shop and »ask« for »protection money«. If you do this in an area with a strong government, the police will show up and tell you that you are not entitled to do so and put you in jail. If you do the same thing in an area without a strong government, your plan could work. But suddenly you are in the position of being the »government« and you have to be able to scare off and punish other groups who want to »collect« money within your territory. The same holds true not only for collection of »protection money« or taxes but for any other form of coercive redistribution of money. In any case you need to have sufficient firearms and power to coerce people within your territory to follow your rules and give you money (police force) and at the same time you need to be able to defend and protect your territory against intruders (military). The principle behind the coercive way to money is monopoly. In the discussed case it was »monopoly of force« – that you are the most powerful individual or organization in a certain area. But it can be any other form of monopoly as well. John D. Rockefeller held a monopoly on the oil resources of the US, Carlos Slim had monopoly on telecommunication in Mexico. Every monopoly finds itself in a unique position: The monopolist is the price-maker and the crowd is forced to become the price-taker. The monopolist can ask whatever he wants and the crowd has to pay. However, a monopoly can only be sustained if it is backed by the government or the ruling class, otherwise it will be overthrown by the ruling class and the monopoly will be broken down. This leads us back to the »monopoly of force« principle. Without this coercive monopoly – being the most powerful within a certain territory – no other monopoly can be sustained.
Pros:
Just force a big crowd of people to give you a share of their money and you don’t have to work. You are rich and can enjoy your cigars.
Cons:
However, substantial power is needed to (a) force the crowd to give you their money and to (b) protect the territory against intruders. Acquiring this power might be quite difficult.
(PART 3/11 This is the 2nd from the 9 ways to get rich. See my Blog for the other parts of the story.)