Destructive Economic Myth Debunked: Capitalism Causes the Rich to Get Richer and the Poor to Get Poorer – 6 Reasons this Is a Socialist Lie

▶ Key Takeaways

Those who hate capitalism and want to replace it with socialism argue that capitalism causes the rich to get richer and the poor to get poorer.
This is a myth based on the lie that the “economic pie” is fixed in size, so that if the “rich” take bigger slices, there is less left over for the poor.
Capitalism increases total wealth so that the economic pie keeps expanding: everyone gets a bigger slice – rich and poor alike.
Capitalism produces the wealthiest economies in the world.
Socialism destroys wealth and leads to shortages and poverty because it is based on envy.
Capitalism is based on economic freedom and human dignity.
Free-market capitalism is an incentive-based economy that rewards motivation and individual effort.
Capitalism entices people who live in socialist countries to leave their countries and immigrate to the U.S.

[Editor’s Note: The myths, lies, and false promises of socialism are spreading across America and are deceiving many. This special analysis is to help you know the truth about socialism and capitalism.]

For decades, the myth that capitalism causes the rich to become richer and the poor to become poorer has been preached throughout the world – especially in affluent Western societies.

Socialists/Marxists and “progressives” repeat this mantra all the time … as if this myth were proven fact.

You know the saying: tell a lie often enough – and loud enough – and people will begin to believe it…

But a quick glance at the economies of the countries of the world shows that the freer a country is economically:

the less poor people there are per capita
the less poor the poor people are

Here are 6 facts to back up this observation.

1. Capitalism thrives under freedom and small government.

Countries with a small government, low taxes and free markets make both poor people and rich people richer.

How is this possible?

It’s possible because the “economic pie” isn’t a fixed size.

The combination of free enterprise and equal opportunity causes the pie to expand, transforming a society into a more affluent society overall.

The economic miracle of free enterprise is based on giving everyone equal opportunity … and the resulting expansion of wealth lifts people out of poverty.

The smaller the government, the lower the taxes and the freer the markets, the smaller will be the income gap between the rich and the poor.

This is key: Capitalism produces greater wealth for all people.

2. Capitalism creates a dynamic, growing economy.

When taxes are low and government regulations are few, it’s easier for entrepreneurs to start their own businesses and become successful.

New successful businesses lead to:

more jobs
more opportunities for people to support themselves
fewer people who are dependent on government programs
less crime due to lower unemployment and less government dependency

More jobs and more people employed produce more purchasing power.

More purchasing power causes more demand for products and services.

Higher demand for products and services causes the economy to expand.

An expanding economy is a good thing for everyone.

Why?

Because an increasing supply plus an increasing demand stabilizes prices.

Socialism, on the other hand, reduces supply by increasing taxes and government regulations on businesses.

When supply is reduced, prices always increase.

This is Economics 101: The Law of Supply and Demand.

This is why Socialism never works in the long run.

It has destroyed every economy it has ever taken control of.

3. Capitalism produces the wealthiest economies.

Countries that have more economic freedom are richer – and its citizens live better – than the citizens in countries that have high taxation on the rich, and heavy regulations.

The 5 countries with the most economic freedom in 2026 are:

Singapore
Switzerland
Ireland
Australia
Taiwan

Capitalism reigns in these countries… and government regulations are few.

Notice that the U.S. isn’t in the top 5 … in fact, the U.S. is #22.[1]

Why?

Despite overall free-market capitalism, the U.S. government heavily regulates and subsidizes the following industries:

Energy
Finance
Healthcare
Transportation

Most people don’t realize that the U.S. is energy independent, and yet our energy costs are sky-high because government regulations prevent the oil industry from constructing new refineries to process our own crude oil.

The 5 countries with the least economic freedom are:

Zimbabwe – #172
Sudan – #173
Venezuela – #174
Cuba – #175
North Korea – #176

In these countries, the rich are the socialist government leaders and their friends.

4. Capitalism is not based on envy, but on freedom and the human dignity of each person.

Envy causes some to despise capitalism and its consequences.

Why?

Because when envy takes over the minds of people:

They strongly desire to have what others have that they lack – which can include not only wealth, but also incentive and the motivation to work hard.
They want to “even the playing field” by taking away the wealth of others and redistributing it to themselves.

Envy is the rationale behind Socialism.

Those who prefer Socialism are not only economically illiterate – they want to take by force what rightfully belongs to others, even if it hurts everyone.

Ludwig von Mises referred to this as the Fourier Complex:

“Resentment is at work when one so hates somebody for his more favorable circumstances that one is prepared to bear heavy losses if only the hated one might also come to harm. Many of those who attack capitalism know very well that their situation under any other economic system will be less favorable. Nevertheless, with full knowledge of this fact, they advocate a reform, e.g., socialism, because they hope that the rich, whom they envy, will also suffer under it.”[2]

5. Capitalism gives people economic freedom … plus the incentive to create, innovate, produce, trade and become prosperous.

Free-market capitalism is an incentive-based economy.

People who are motivated and have the incentive are free to:

Start their own private business
Create a product or service that meets the needs and wants of people
Improve their product or service when other businesses create a competitive product or service
Compete with other companies on price and customer service
Reap the rewards of their innovation and hard work and become wealthy

There is no limit to how much risk an entrepreneur can take in creating a product and starting a business.

If the risks pay off, there is no limit to how wealthy a business owner can become…

And there is also the possibility of failure and economic loss if an entrepreneur or business owner makes poor business decisions.

An incentive-based economy that rewards innovation and hard work will produce an increasing number of wealthy people…

And those who are already wealthy will become richer as the economy expands.

Therefore, in countries that have free-market capitalism, the rich do become richer … but the poor also become richer.

How?

Think about all of the industrial and technological innovations over the past 100 years that have made life easier and richer for middle-class and low-income people:

The automobile
Mechanized farming equipment
The internet and personal computing
Cell phones and search engines
Online shopping services
…to name just a few

The innovators who developed these products and services became very rich.

But their innovations created millions of jobs… and gave all people – even the poor – more free time to pursue their own interests – including working more hours and earning more money.

According to the 2026 Global Innovation Index of the World Intellectual Property Organization, the top 5 most innovative economies are:

Switzerland
Sweden
United States
South Korea
Singapore[3]

All of these countries have relatively low taxes compared with the rest of the world – with the exception of Sweden.

But Sweden has a very low amount of regulations – which makes up for its high taxes.

6. Capitalism entices people to leave their own country and come to the U.S.

If an economic system only shares what it has, but doesn’t produce anything new, that country is doomed.

Capitalism is an economic system in which anyone can innovate and create wealth … all the while retaining individual freedom and self-determination.

Socialism does the opposite of capitalism:

It takes away economic freedom through high taxes and government control over businesses, prices, and the economy
It decides which businesses will succeed and which will fail
It determines which products and services will exist
It creates shortages of basic necessities
It leads to poverty
It creates social chaos.

The history of Socialism is marked by failure, bloody protests followed by government clamp-downs… and hopelessness.

A simple way to gauge where people are better off is to see where people are moving.

Are more people moving to the countries with the least economic freedom … or are more people moving to the countries with the most economic freedom?

People worldwide want the economic freedom and opportunity of the U.S.

Why?

To lift them out of poverty and to give them a better, freer life.

What do you think? Email me at [email protected].

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FAQs:

Q: Who spreads the idea that capitalism causes the rich to get richer and the poor to get poorer?
A: Those who hate capitalism and want to replace it with socialism.

Q: Why do so many people believe the myth?
A: Because it is repeated constantly in affluent Western societies. If a lie is told often enough and loudly enough, people start to believe is as truth.

Q: What faulty assumption is the economic myth about the rich and the poor based on?
A: The underlying assumption is that the economy is like a pie that has a fixed size. If the rich take larger slices, less remains for everyone else.

Q: Why is the “economic pie” not a fixed size under capitalism?
A: Free enterprise combined with equal opportunity expands total wealth, meaning that the economic pie keeps growing larger. As the economy grows, both rich and poor receive larger slices. Greater overall prosperity lifts people out of poverty.

Q: What conditions make capitalism work best?
A: Small government, low taxes, and free markets. Under these conditions both poor and rich become richer, income gaps tend to narrow in absolute living-standards terms, and overall wealth rises. The freer a country is economically, the fewer poor people there are per capita and the less poor those people are.

Q: How does a dynamic free-market economy expand?
A: Low taxes and light regulation make it easier for entrepreneurs to start businesses. Successful new businesses create jobs, reduce government dependency, lower crime linked to unemployment, increase purchasing power, and raise demand. Rising supply plus rising demand helps stabilize prices. An expanding economy benefits everyone.

Q: Why does socialism always fail?
A: Socialism raises taxes and regulations, which reduce supply. Lower supply drives prices up (basic supply-and-demand). Socialism is driven by envy rather than production. Historically it has produced shortages, poverty, and economic destruction in every country that has fully adopted it.

Q: Is capitalism based on envy?
A: No. Capitalism relies on economic freedom and recognition of individual human dignity. Envy fuels the desire to seize what others have produced and to “level” outcomes even when that harms everyone, including the envious.

Q: How does capitalism create incentives?
A: It rewards motivation, innovation, risk-taking, and effort. Entrepreneurs can start businesses, create products or services people want, compete on price and quality, and keep the rewards (or absorb the losses). The resulting innovations—automobiles, mechanized farming, the internet, smartphones, online commerce, etc.—raise living standards and create more free time for people at every income level, including the poor.

Q: Which countries are the most innovative?
A: The 2026 Global Innovation Index top five: Switzerland, Sweden, United States, South Korea, Singapore. These economies generally combine relatively low regulation (and in most cases competitive tax environments) with strong incentives to create and commercialize new ideas.

Q: Why do people leave socialist or low-freedom countries for places like the United States?
A: People vote with their feet. Free-market systems offer the chance to innovate, create wealth, and exercise self-determination. Socialist systems impose high taxes, central control over businesses and prices, and create shortages of necessities, poverty, and social disorder. Migration patterns show people prefer the opportunity and higher living standards of freer economies.

Q: Don’t the rich get richer under capitalism?
A: Yes. But the poor get richer also. In expanding free-market economies the rich do become richer—but so do the poor. Absolute living standards rise across the board because total wealth grows.

Q: What is the ultimate contrast between capitalism and socialism?
A: Capitalism is an incentive-based system of economic freedom that expands wealth and opportunity; Socialism is an envy-based system of control that shrinks supply, destroys incentives, and produces poverty.

About Craig Huey:

Craig Huey is a nationally recognized author, speaker, and publisher of The Huey Alert and Direct Marketing Update. Craig appears on national media such as FOX, FOX Business, Newsmax and more. He also co-hosts The Huey Alert Podcast with his wife Shelly and helps business leaders, Christians, conservatives, libertarians, young people and more understand the intersection of faith, politics, and freedom.

About Craig Huey:

[1] https://economicfreedom.heritage.org/

[2] https://mises.org/free-market/should-we-loot-rich

[3] https://www.wipo.int/en/web/global-innovation-index/2026/index