Beyond Wealth Inequality
By Amanda Page
Academics have been mesmerized by Thomas Piketty’s new book, Capital. Piketty covers a lot of ground in the Harry Potter sized tome, but the heart of the book is about growing wealth inequality. Piketty’s main recommendation for this problem is a global wealth tax. Observing the potential infeasibility of his suggestion, Capital may not be the best resource going forward.
Gar Alperovitz wrote America Beyond Capitalism almost a decade ago, yet its message still rings true today: wealth is unequally distributed and therefore some people possess less freedom. (If you need proof that wealth is unequally distributed, well, that’s where Piketty’s work is useful.)
Alperovitz explores a variety of ways people can accumulate wealth. Full or partially worker owned firms (ESOPs) give employees the chance to own stock in their company and receive increasing dividend payments if the company does well. Worker cooperatives are fully owned by the employees in most cases. They not only receive the financial benefit of any surplus the company produces, but also are governed by democratic decision-making. Community development corporations (CDCs) are non-profits that engage in profit-making in order to lend money to projects that benefit the community. Individual development accounts (IDAs) are investments the government could potentially place in an individual account for every child. The investments would grow in value until the child turns 18.
When wealth is accumulated through any of these channels, people’s income will be more secure and they will possess more freedom to do what they will with their time and money – leading to a better democracy and a more meaningful liberty.
Additionally, almost all of these institutions would incentivize productive and socially beneficial investments and jobs. For example, if you were a worker-owner you might choose to purchase your inputs from a local store instead of a major corporation. Or perhaps your CDC would approve a loan for a new building to provide affordable housing floors for low-income people.
Of course wealth-building projects aren’t perfect. For one, wealth entails the exposure to the financial system, which many think is already too large. Serious proposals to distribute wealth more equitably must critically think about how to confront these issues.
But for the time being, we know wealth is distributed unevenly and that starting to move forward with potential solutions will require lots of time and effort. That doesn’t mean we have to wait for governments to implement a global wealth tax – we can start from the ground and move up by building wealth-equalizing institutions.