Beyond Wealth Inequality

By Amanda Page

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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.

 

4 comments

  • What people do not realize is that all economic reality is virtual – that is, reward and wealth distribution are created by the dominant economic paradigm that is for all practical and material purposes made up. The current system continues to operate on the concept of scarcity among production wherein the potential of production is now unlimited – to do this for the wealthy is to translate commodity potential into power addiction. To maintain control, the wealthy must counter pose the threat of poverty, a kind of living death for those afflicted – this spectre is held up as reminder of the scarcity that exists as a modus operandi to continue as much adhering to the status quo as is possible to maintain

  • I don’t have a problem with someone having 100 Million: I do; however, have a problem with someone having a billion, 10 billion, and hundreds of billions of dollars in wealth. You are essentially just asking for a few individuals to inflict their biases and prejudices on the rest of humanity with potentially devastating impact. And, I have a problem while others live and die in poverty.

  • What is the optimum level of convergence? What is the ideal range of income distribution for growth and equity is what I am getting at. There is a convergence level at which wealth is more effective over all and poverty is capable of being mostly eliminated. Capitalism as it now exists is a system that is cannibalistic of other economic possibilities – not because they are less effective but because the nature of this form of economic cannibalism is exclusivity – so that it may disease the economic system and then consume others until it kills the host. The super wealthy act as social parasites once capital has been removed from its primary role as a force of production and is instead stored up as a form of wealth bereft of social liquidity. Mort Main or the Dead Hand sets in and crushes the economic modus vivendi or improvement of living conditions for all. After an excessive period of this activity – social explosions are often the result.

  • Alperovitz makes good points. Certainly, worker-owned firms would better distribute surplus to those who produce it, but more than that they would give employees a sense of inclusion in the productive process. Part of class distinctions is a sense of exclusion or inclusion, and so an individual with a personal stake in his or her work will internalize their role in society, feel more content, and maybe even be more productive.

    Creating a nest egg for each child would increase college enrollment in the working class, and anything that does that is obviously good for reducing inequality in the long run.