Wealth and Want
... because democracy alone is not enough to produce widely shared prosperity.
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Stakeholder Society
In recent years there have been proposals that the US should create an account for each child born, funded upon their birth and added to a bit each year, so that when they reach adulthood, they would have a stake in society, a start in life.  They could use it to buy a house, or go to college, or have a nest egg.

I don't doubt that such proposals are well intentioned.  But I regard them as a small bandage rather than as something that will make a genuine difference. 

You might argue that it would be better for our young people to have them than not to have them, whatever size we can make them.  I disagree. Who will actually benefit from them? The landlords who rent to the young people when they receive their "stake." Those with houses to sell, or land to build on. The argument is similar to that on reparations: All Benefits Go To The Landholder.

The stake we each need -- adult and child -- is our per capita share of the land rent.  Some Geoists argue that it should be distributed in the form of a Citizen's Dividend. But all Georgists will likely agree that, whether we distributed some or all of it in the form of a citizen's dividend, or use that revenue as the basis of our common spending (instead of income taxes and sales taxes and building taxes), we will all be better off, because our common treasure will be distributed among us, not privatized by a small segment of favored landholders. (It has even been said that it would be better to collect land rent and throw it into the ocean than not to collect it! Socializing land rent is that important!)

Increasing the non-housing wealth holdings of the bottom 90% of us from 2001's 15% of the aggregate to, say, 20% is not the point! (source: A Rolling Tide), though one can only imagine the benefits for the economy were we to do such a thing!

Peter Barnes: Capitalism 3.0 — Chapter 7: Universal Birthrights (pages 101-116)

The standard argument against third wave universal birthrights is that, while they might be nice in theory, in practice they are too expensive. They impose an unbearable burden on “the economy” — that is, on the winners in unfettered markets. Much better, therefore, to let everyone — including poor children and the sick — fend for themselves. In fact, the opposite is often true: universal birthrights, as we’ll see, can be cheaper and more efficient than individual acquisition. Moreover, they are always fairer.

How far we might go down the path of extending universal birthrights is anyone’s guess, but we’re now at the point where, economically speaking, we can afford to go farther. Without great difficulty, we could add three birthrights to our economic operating system: one would pay everyone a regular dividend, the second would give every child a start-up stake, and the third would reduce and share medical costs. Whether we add these birthrights or not isn’t a matter of economic ability, but of attitude and politics. ...

A Children’s Opportunity Trust

Not long ago, while researching historic documents for this book, I stumbled across this sentence in the Northwest Ordinance of 1787: “[T]he estates, both of resident and nonresident proprietors in the said territory, dying intestate, shall descent to, and be distributed among their children, and the descendants of a deceased child, in equal parts.” What, I wondered, was this about?

The answer, I soon learned, was primogeniture — or more precisely, ending primogeniture in America. Jefferson, Madison, and other early settlers believed the feudal practice of passing all or most property from father to eldest son had no place in the New World. This wasn’t about equal rights for women; that notion didn’t arise until later. Rather, it was about leveling the economic playing and avoiding a permanent aristocracy.

A nation in which everyone owned some property — in those days, this meant land — was what Jefferson and his contemporaries had in mind. In such a society, hard work and merit would be rewarded, while inherited privilege would be curbed. This vision of America wasn’t wild romanticism; it seemed quite achievable at the time, given the vast western frontier. What thwarted it, later, were giveaways of land to speculators and railroads, the rise of monopolies, and the colossal untaxed fortunes of the robber barons.

Fast-forward to the twenty-first century. Land is no longer the basis for most wealth; stock ownership is. But Jefferson’s vision of an ownership society is still achievable. The means for achieving it lies not, as George W. Bush has misleadingly argued, in the privatization of Social Security and health insurance, but in guaranteeing an inheritance to every child. In a country as super-affluent as ours, there’s absolutely no reason why we can’t do that. (In fact, Great Britain has already done it. Every British child born after 2002 gets a trust fund seeded by $440 from the government — $880 for children in the poorest 40 percent of families. All interest earned by the trust funds is tax-free.)

Let me get personal for a minute. My parents weren’t wealthy; both were children of penniless immigrants. They worked hard, saved, and invested — and paid my full tuition at Harvard. Later, they helped me buy a home and start a business. Without their financial assistance, I wouldn’t have achieved the success that I have. I, in turn, have set up trust funds for my two sons. As I did, they’ll have money for college educations, buying their own homes, and if they choose, starting their own businesses — in other words, what they need to get ahead in a capitalist system.

As I hope my sons will be, I’m extremely grateful for my economic good fortune. At the same time, I’m painfully aware that my family’s good fortune is far from universal. Many second-, third-, and even seventh-generation Americans have little or no savings to pass on to their heirs. Their children may receive their parents’ love and tutelage, but they don’t get the cash needed nowadays for a first-rate education, a down payment on a house, or a business venture. A few may rise because of extraordinary talent and luck, but the majority will spend their lives on a treadmill, paying bills and perhaps tucking a little away for old age. Their sons and daughters, in turn, will face a similar future.

It doesn’t have to be this way. One can imagine all sorts of government programs that can help people advance in life — free college and graduate school, GI bills, housing subsidies, and so on. Such programs, as we know, come and go, and I prefer more rather than less of them. But the simplest way to help people advance is to give them what my parents gave me, and what I’m giving my sons: a cash inheritance. And the surest way to do that is to build such inheritances into our economic operating system, much the way Social Security is.

When Jefferson substituted pursuit of happiness for Locke’s property, he wasn’t denigrating the importance of property. Without presuming to read his mind, I assume he altered Locke’s wording to make the point that property isn’t an end in itself, but merely a means to the higher end of happiness. In fact, the importance he and other Founders placed on property can be seen throughout the Constitution and its early amendments. Happiness, they evidently thought, may be the ultimate goal, but property is darn useful in the pursuit of it.

If this was true in the eighteenth century, it’s even truer in the twenty-first. The unalienable right to pursue happiness is fairly meaningless under capitalism without a chunk of capital to get started.

And while Social Security provides a cushion for the back end of life, it does nothing for the front end. That’s where we need something new.

A kitty for the front end of life has to be financed differently than Social Security because children can’t contribute in advance to their own inheritances. But the same principle of intergenerational solidarity can apply. Consider an intergenerational transfer fund through which departing souls leave money not just for their own children, but for all children. This could replace the current inheritance tax, which is under assault in any case. (As this is written, Congress has temporarily phased out the inheritance tax as of 2010; a move is afoot to make the phaseout permanent.) Mind you, I think ending the inheritance tax is a terrible idea; it’s the least distorting (in the sense of discouraging economic activity) and most progressive tax possible. It also seems sadly ironic that a nation that began by abolishing primogeniture is now on the verge of creating a permanent aristocracy of wealth. That said, if the inheritance tax is eliminated, an intergenerational transfer fund would be a fitting substitute.

The basic idea is similar to the revenue recycling system of professional sports. Winners — that is, millionaires and billionaires — would put money into a kitty (call it the Children’s Opportunity Trust), to be divided among all children equally, so the next round of economic play can be more competitive. In this case, the winners will have had a lifetime to enjoy their wealth, rather than just a single season. When they depart, half their estates, say, could be passed to their own children, while the other half would be distributed among all children. Their own offspring would still start on third base, but others would at least be in the game.

Under this plan, no money would go to the government. Instead, every penny would go back into the market, through the bank or brokerage accounts (managed by parents) of newborn children. I’d call these new accounts Individual Inheritance Accounts; they’d be front-of-life counterparts of Individual Retirement Accounts. After children turn eighteen, they could withdraw from their accounts for further education, a first home purchase, or to start a business.

Yes, contributions to the Children’s Opportunity Trust would be mandatory, at least for estates over a certain size (say $1 or $2 million). But such end-of-life gifts to society are entirely appropriate, given that so much of a millionaire’s wealth is, in reality, a gift from society. No one has expressed this better than Bill Gates Sr., father of the world’s richest person. “We live in a place which is orderly. It’s a place where markets work because there’s legal structure to support them. It’s a place where people can own property and protect it. People who have the good fortune, the skill, the luck to become wealthy in our country, simply have a debt to the source of their opportunity.”

I like the link between end-of-life recycling and start-of-life inheritances because it so nicely connects the passing of one generation with the coming of another. It also connects those who have received much from society with those who have received little; there’s justice as well as symmetry in that.

To top things off, I like to think that the contributors — millionaires and billionaires all — will feel less resentful about repaying their debts to society if their repayments go directly to children, rather than to the Internal Revenue Service. They might think of the Children’s Opportunity Trust as a kind of venture capital fund that makes startup investments in American children. A venture capital fund assumes nine out of ten investments won’t pay back, but the tenth will pay back in spades, more than compensating for the losers. So with the Children’s Opportunity Trust. If one out of ten children eventually departs this world with an estate large enough to “pay back” in spades the initial investment, then the trust will have earned its keep. And who knows? Some of those paying back might even feel good about it. ... read the whole chapter


Ted Gwartney:  Estimating Land Values

Each person has a right to keep what he or she produces, but no one has the right to waste what belongs to all people, the land which includes the natural environment. Each person should have an opportunity to use the best land for his business or personal needs, as long as they are willing to pay the land rent that other land users are willing to pay.

If the value of land rent exceeds the community's needs for public services a method of dispensing of the revenue can easily be found. To maintain an equitable society, where nobody has special benefits that they do not pay for, it is important to collect all of the land rent. The community should use what is needed for public services and improvements such as schools, hospitals, parks, police, roadways, utilities and defense -- and reserve a fund for emergencies.

An ethical proposal might be to then divide the excess revenue that is not needed for public facilities and services at the end of each year and send each citizen in that community an equal portion of the remaining revenue. This is similar to the method used in Alaska and Alberta. Equality of opportunity to be productive can only be accomplished by recapturing all of the market rent of land and ensuring that all people benefit from its value.

Not only is land rent potentially an important source of public revenue, collecting all of it would ensure that the equal opportunity to be productive would be available to all citizens. People could fund useful buildings, equipment and wages, rather than having to buy land at inflated prices. Many countries, including the United States, were started on the premise of using land rent to fund public services. Many countries suffer economic loss because they no longer collect the market rent of land.

The value of land can be estimated with an acceptable accuracy, at a cost which is very small compared to the revenue to be obtained. A proper system of assessment and taxation of land can provide for the proper economic use of the land. A land site should be available to the user who can make the highest and best use of the site and maximize the site benefits for all people. A land tax can provide a major source of public revenue which the local governing body could use for the benefit of all people. A land tax can prevent the dispossession of our children, the future producers in the society. Justice requires that land values, which are created by society and nature, be made available for public improvements. This is the responsibility of good government. Read the whole article

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Wealth and Want
... because democracy alone hasn't yet led to a society in which all can prosper