Investors and welfare queens

It is my opinion that investors and welfare queens are really not very different, in terms of their effects upon society. Both are parasitic, in that they harm the rest of society by draining the pool of common resources without adding to the common pool of resources.

Consider that in any society, there is a collection of resources which is available to the society as an whole. Different economic systems distribute the control, or ownership, of these resources, in different ways. Through labour, new resources can be added to this resource pool, or those resources can be transformed into a more useful form. Meanwhile, to survive and to enjoy life, each person in the society will consume a certain amount of resources.

Now, a labourer therefore produces new resources. Generally, the labourer will not retain ownership of these resources, but exchange said ownership for ownership of some other resources. Thus for example, a logger will exchange the labour which produces lumber for money which can be exchanged for food, shelter, and so on.

The investor, however, does not produce new resources for society. Suppose I invest in a logging operation, by purchasing some land with trees on it. Now, I let loggers harvest these trees, in exchange for getting a percentage of what they get for the lumber. I have not personally produced anything for society. Indeed, the loggers would be better off if society gave them direct control of the forest, since they could keep more of the profits; the people who purchase the lumber would also be better off, because they could get it more cheaply. The only person who benefits from me investing is… me, because I produce absolutely nothing.

In this way, then, investors are parasites upon society. They leverage their ‘control’ of certain resources to coerce others in society to give them more resources, without producing anything.

Therefore, they are virtually identical to welfare queens, who leverage their lack of resources to get society to give them more resources without having to produce anything.

Now, the solution in my opinion is not to do away with private ownership and investment. For one thing, it is very hard to distinguish between privately owned items and privately owned items that are used for production. Rather, we should require some form of profit-sharing for capital gains. For example, some might argue that the labourers involved should receive a percentage of all profits made by the investors. This is a viable solution, but I do not think it is optimal. In particular, with the advance of technology, it becomes possible to invest in machinery that allows labourers to be cut out of the process almost entirely.

Instead, therefore, I would recommend placing a high tax on capital gains, and using the revenue not to fund the government itself, but to fund a basic income: a stipend, or pension, given to every citizen without any conditions.

However, I am not necessarily saying exactly how this should be implemented. I am not an economist. I am merely stating two principles:

  1. Investing is a process whereby an owner of property uses that ownership to gain more property, without personally contributing to the increase of the pool of resources available to society.
  2. Therefore, investments ought to be taxed at a far higher rate than labour.

Exceptions of course should be made in cases where a person’s wages are absurdly high. For example, CEOs who make hundreds of thousands of dollars for a single day’s work are clearly receiving far more resources than they can personally add to the pool of resources in that time period, and therefore they too should be very heavily taxed.

Some would argue that heavily taxing private investing goes against the principle of letting people do what they wish with their goods. However, I am not suggesting that we should legislate what people do with their own things privately, only that we should require them to share the profits when they decide to use their goods for investment – because then they are demanding resources from society, without providing resources to society.

Others would argue that we should go for a Marxist approach, in which all resources are held in common. My objection is that 1. I like private ownership of private things, 2. it’s very hard to clearly differentiate goods into personal vs. non-personal, if we want to allow private ownership of personal items but not of anything else, and 3. pragmatically, Marxism is a recipe for disaster. In particular, under Marxism, in practice, it is necessary to turn over control of most resources to some small group who are charged with redistributing them, and this group will almost always become corrupt. There are also issues with motivating people, when their work does not really benefit them.

By rather allowing private ownership, but taxing any goods that are used in an investment-like manner, we avoid the second problem above, as well as the third, while still forcing a sharing of the profits of investment.

EDIT:

To clarify what I am saying, I am proposing that all goods should be allowed to be owned privately, and freely used for private purposes, but taxed whenever they are used as means of production, i.e. whenever they are used in the manner of an entrepreneurial investment.

Advertisements

One thought on “Investors and welfare queens

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s