Consistently devaluing everybody else's investment (via new shares) is essentially just mandatory inflation, on top of existing inflation.
Not to sound rude, but this is basic econ stuff. You can't just increase the supply of something and expect the value to keep increasing.
It’s not “everybody else’s”. I am not saying the value of the shares will increase, I am saying the value will be redistributed.
Inflation is a tax on poor already, so why not double-tax the rich via share dilution and Zucman tax.
Top 10% owned 93% of shares in 2023.
https://markets.businessinsider.com/news/stocks/stock-market...
The rich are in a position to buy up the shares distributed this way, while the non-rich are mostly in a position to need cash most of the time.
If you want to tax the rich, just be honest about it and tax the fucking rich. Anything less is simply not going to work.
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.
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.
(Otherwise, 100% cosigned.)
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.
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.
...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.
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.)
- 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.
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.)
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.
The solution is a recurrent tax on capital, like the Zucman tax.
It's a common trope but no. "The poor" don't live / operate on savings. "The poor", kinda by definition live by earning a paycheck or receiving subsidies and spending it all. As long as you have a stable situation (say, fixed x% inflation day in, day out) then what currency that paycheck is denominated in, is totally irrelevant. Money in minus money out equal still no savings in any dodgy currency. (It's different when there is the chaos of hyper-inflation - where the paycheck of one week cannot buy the groceries of the next.)
Inflation is a tax on people with savings and investments. Not on the poor but on everybody else. Poor retirees, yes.
In reality, most poor people I know does manage to save a tiny, miniscule amount each month. What they can't afford, is investing. Because the amount saved is so tiny, many investment apparatus doesn't apply to their tiny savings (fees just gobble up any gains made on that tiny amount) and they often desperately need the liquidity for their ever unpredictable life circumstances. These factors are ofc made worse in country like US where liquidity is your safety net, not social safety nets.
So, whatever small, tiny amount of savings they have is disproportionately being obliterated by inflation. Because unlike middle class that can throw it in a fund that can keep it above inflation rate, their savings are often cash, taking direct, unmitigated hit of the inflation
Still: inflation not a tax on the poor but a tax on anyone with savings and investments. Some of which are poor, yes.
One might say "liquidity" savings are particularly difficult to protect - but really, many investments are not a great defense either. Defending any investments against inflation is difficult. Among which, "throwing it in a fund" might keep it a little above official inflation numbers - but also might not provide serious return above that, and exposes emergency funds to volatility. So, to me, that doesn't solve the problem of inflation - poor or not. A tool, not a solution.