If you think taxing the stock market only affects the "rich" you are severely out of touch or intentionally ignorant. 401k, defined benefit pension plans, etc are uses by millions and millions of middle class people.
Why would it "not work"? The whole point of my idea is the wealth redistribution. Taxing the rich does not have the same effect as redistributing shares in the economy, from the generational wealthy to everyone else.
If the "non rich" receive $50,000 in shares when they are born, that will generate a lot of dividends over the years. They would no longer be born into poverty and would no longer need cash "most of the time". Everyone would get richer, except for the already well off.
When you are poor, and you need cash, you sell things of value.
If you give a rich person 50k in shares, chances are he'll keep it. If you give a poor person 50k in shares, he'll sell it.
The rich person has sufficient immediate resources so that he can afford to take a long view.
The poor person has immediate needs, and thus has a short term view.
Thus one-time wealth transfers are ineffective. Money tends to flow towards money. Those with money are best positioned to start a new business, and extract maximum revenue from that business. Those without money have to earn as employees. Those with money have resources and (especially) time, to educate themselves above their current skillset.
In short, any single redistribution is a short term solution. It will have short term benefits, but in the medium term all the wealth will flow back together again.
This is not a bug in the system. It is the explicit end-goal of capitalism. You can't fix yhe underlying problem by random redistributions.
This is not new. It's been going on for hundreds, or thousands of years. Over and over the cycle repeats. It usually ends in a bloody revolution, with a redistribution. (Think French, Russian revolutions as examples.) Then the wealth simply starts flowing together again.
Socialism (as distinct from communism) such as we see in much of Western Europe, seeks to tax economic activity (as distinct to accumulated wealth) [somewhat mitigated by inheritance taxes] to provide a continuous redistribution.
Capitalism (such as we see in the US) taxes economic activity in order to funnel funds to the wealthy. (Rich companies get rich govt contracts.)
Every person believes their system is the best. This makes changing the system hard. Explaining to a person in the US how the system makes them poor, does not make them vote against the system. It just makes them dream of becoming rich.
Unfortunately "simple" schemes such as yours fo not address the underlying cause, only the symptoms. And for this reason it wouldn't achieve the goals you are hoping for. Which is a pity, because those goals are achievable, and some countries have made strides in that direction.
Norway, for example, has the sovereign wealth fund. It gives every citizen a dividend every year. It avoids wealth consolidation simply by distributing the dividends, not thd shares themselves.
Although lots of countries have oil, and derive profits from it, Norway (as far as i know) was unique in not spending that income, but rather creating the sovereign wealth fund.
That long-term thinking, which was fundamentally socialist not capitalist though, is exactly what puts them in such a strong position now.
So your counter argument is that the “poor” person will simply sell it because they are immediately cash strapped. That may very well be true.
But first of all, I am not arguing that _poor_ people get ownership shares in the economy, but everyone, at birth. I have no reason to believe that a majority of the population will not be able to manage this wealth.
I argue that if each person receives a nest egg, combined with the economic schooling and support required to manage it, most people would not go spend it but would make it grow.
You even make this point for me,
“ Money tends to flow towards money. Those with money are best positioned to start a new business, and extract maximum revenue from that business. Those without money have to earn as employees. Those with money have resources and (especially) time, to educate themselves above their current skillset.”
That is literally my point. By further boosting the working and middle classes, we will give them(us) the tools to create new businesses, build stronger communities.
My scheme is not targeted at reducing poverty, although that will be a second order effect. I am mainly interested in building a more stable society with overall more prosperity for the common man.
I am neither socialist nor capitalist. I understand both ideologies well.
> My scheme is not targeted at reducing poverty, although that will be a second order effect. I am mainly interested in building a more stable society with overall more prosperity for the common man.
...Regardless of the feasibility of your proposal, I don't think this tracks?
Your scheme would give money to people. The first-order effect of that is reducing poverty.
Making society more stable is a second-order effect, predicated on that reduction in poverty.
Your argument is well made, but alas I fear will not work. There are two reasons (among several) which I feel make it ineffective.
Firstly, there's an assumption that with economic schooling people would understand the benefits of delayed gratification and make decisions based on long-term outcomes.
I would suggest this is unlikely. We need look no further than health to see that people are very good at maximizing short term gain, at the expense of the long term. We know smoking is bad (long term) and yet it remains popular. We know exercise is good, yet it is clearly ignored by many, if not most. We are constantly educated around food choices, yet fast food and processed food dominate despite obvious long term effects. I would argue that economic education would be even less effective than health education.
We could further look at the levels of debt US folk are willing to accept to get short term gains. Some like housing and education offers a long term return. Others, like credit cards or vehicle financing simply trades short term gratification for long-term obligations. Again the prevalence of the long term outcomes does not appear to inhibit short term thinking.
Secondly, while the framing of your solution is a fit to US culture, the root of it is not.
You've suggested "shares in the economy" which "pay dividends". This lines up nicely with US capitalism terminology, but implies the shares can be sold. (And the ability to sell the shares undermines your argument, because once sold the under class is no better than before.)
So let's frame it differently, but also see how doing so makes it profoundly un-American.
Let's skip the "shares" part. Rather let the govt take your shares, and manage it for you. Dividends flow to you from birth. We could call this "basic income". You can't sell your shares (although nothing stops you selling your income.)
Since the govt would need ever more shares, the economy would need to grow larger than the birth rate (doable) and the govt would (over time) become the majority share holder in most companies. (Incidentally the Norwegian wealth fund is mostly invested -outside- Norway, which is useful, but would be impractical for the scale of the US.)
Personally I'm a fan of Basic Income. I believe that as production becomes more automated it is inevitable. But I accept that culturally the US can't do it - the idea of "money for nothing" goes against the very core of American culture.
Consider Covid as a test case. The US govt could afford generous support for citizens including cash. Supply chain woes, coupled with free cash, lead to some inflation. This inflation was lower than other countries. Supply chains recovered faster. Inflation dropped faster than elsewhere. Nevertheless citizens voted that administration out, largely because there was inflation at all. Instead they turned to a candidate who campaigned on raising tarifs (and all the education that the explicit goal of tarifs is to raise domestic prices seems to have been ignored, which is another nail in the economic education approach.)
Ultimately the administration which did offer "free money" (think also student loan debt relief) was punished at the polls for such un-American thinking.
So, let me be clear. I agree that having social support beyond your income is a good thing. Many countries already do it. But selling socialism is difficult in the US (not least because most Americans think socialism is the same as communism.)
You are making your argument based solely on what will or will not work in the USA.
- I am not American; I’m from Sweden but live in Switzerland.
Generally people are healthy in both countries and have a social democratic slant; Sweden more so than Switzerland. But the Swiss has a better understanding of personal responsibility and wealth management, to some degree.
- I am not opposed to the general idea of an UBI.
The main problem I see it will concentrate even more power to the people in charge of government, while my proposal gives the individual agency to pursue their dreams. Ideally both would be implemented together.
- you have not yet provided an argument why my pet social reform would be detrimental to society, it appears your argument is that most poor people would spend their small wealth on basic necessities.
I believe that may very well be the case. But I also believe that a large minority would be lifted from strictly selling their labour and be given a chance to fund their own enterprise.
Long term, I still believe this is the best way to disrupt the constant concentration of wealth, together with an UBI.
Forgive me for assuming you were American. That was my bad.
My argument was indeed around the late-capitialistic environment of the US. Talk of cultural barriers to your approach are in that context. (And i believe are valid.)
The European context is different. Socialism is better understood there, and indeed far more accepted in things like universal health care, unemployment support and so on.
And while wealth inequality exists in Europe (they basically invented aristocracy) there's a difference in flavor there compared to the US.
The release of capital to allow those without it to start a new business would be enormously valuable. I've worked with impoverished entrepreneurs and it often takes very little capital to bump them up a significant level.
I'm not convinced that simply allocating capital to people at birth, long before they need it to accomplish something, would be efficient. Perhaps making capital more accessible in later life would be more effective?
The need for dividends as income along the way is reduced somewhat as in a European context there are already social income streams in place (obvious locations vary and ymmv.)
Yes, the control of the capital would be progressively handed over between age 18-30. Perhaps a small stake(5-10%) could be allocated by the individual earlier, but not withdrawn.
I do believe this plus an UBI should be the way forward for humanity. But it seems the way we are heading is back to feudalism.
