A Radical, Redistributive Re-imagining of Capitalism?

My Comments: You may have heard me describe myself as a Social Capitalist. That term is my effort to describle my views as an economist troubled by the widening gap in income across this country.

Sooner or later we have to come to terms with what I call unfettered capitalism which in my judgement, has the same flaws as communism. In theory it should be OK but in real life it falls short and is inherently flawed.

So where on the spectrum between private ownership of the means of production and state ownership of the same should we be? Much is said these days about socialism that suggests it is inherently evil and on a par with communism. But tell that to those of us who accept and spend our Social Security checks every month.

As humans, we exist in a society that is comprised of fellow humans, who for one reason or another, identify with what is, in 21st century terms, a nation state. The pre-cursor of this was, or were, tribal states that paralled our evolution on this planet as sentient beings.

Our membership in a nation state implies the role played by the state in our collective well being. The discussion has to focus, and indeed is beginning to focus, on the role we are prepared to assign to the nation state on behalf of its members.

Social security is, as the name implies, an effort to re-distribute the rewards of free enterprise such that those who find themselves unable to survive without help, benefit from a nation state decision that is socialist in nature.

Unfettered capitalism is demonstrating its inability to satisfy the needs of a huge demographic. That demographic, to borrow a phrase, is comprised of the lower 99% of society when defined by income. We are being subjected to financial and social pressures that are clearly not in our best interest as members of this nation state.

So what do we do about it, if anything?

My time as an active and presumably rational member of the nation state is running out. To the extent I can, I plan to write and continue to speak out. The existential risk of unfettered capitalism and how it has the potential to seriously harm the safety and well being of the 99% referenced above is real.

Any number of people are now declaring themselves potential leaders of society. Their ideas about universal health care, universal minimum income, and similar ideas, need to be fully explored. And thanks should be given to Donald Trump and his cronies for encouraging this shift in thinking. Without their manifest incompetence, the 1% would gain even greater leverage and further hasten our demise.

I have no earthly idea how this will all play out over the coming years. But play out it will and we’ll gravitate toward an economic model that will ensure the survival of society. Either that or we’ll all be dead and it won’t matter.

by Art Carden \ Feb 5, 2019

How can we address inequality and work to alleviate poverty? Proposals for Basic Income Guarantees (BIG), sometimes called Universal Basic Income, have gained traction. For The Hill, Michael Munger explained this past summer why a BIG is “a solution to a looming problem,” and a 2015 issue of the Independent Review offered a series of essays on the issue.

Into the fray steps Bucknell University economist Marcellus Andrews with a similar proposal for a really free market approach to income distribution. He outlines his ideas in a short 2017 book, The Vision of a Real Free Market Society: Re-Imagining American Freedom.

He essentially proposes establishing a sovereign wealth fund for the US that pays an annual dividend to everyone in the country. How? The US government buys mutual fund shares. The means of production remain privately owned and managed, but the government is able to accomplish its egalitarian ends by reaping and redistributing some of the income from those means of production.

Working well, I can see this solving a few important and knotty problems. For better or for worse, people are paying a lot of attention to income inequality and this proposal is probably a constructive step toward reducing income inequality.

It has a lot of drawbacks, however. First, getting and maintaining the privilege of managing the funds will be a political circus. Second, as Milton Friedman pointed out in discussions of social security privatization in 1999, it seems virtually impossible to imagine massive government ownership of private assets that doesn’t get very political very quickly. Every special interest is going to come crawling out of the woodwork as this could be ready access to funds. I anticipate a lot of pressure to avoid investing in politically unpopular industries. There would be massive and likely perpetual pressure to direct funds away from politically unpopular and toward politically popular causes. Even with all these inevitable political inefficiencies, it is an idea worth taking seriously because it would still almost certainly be better than the current dog’s breakfast of social programs and initiatives called “welfare.”

Andrews is proposing a real re-imagining of capitalism. It’s a new vision for a free market society that looks to achieve progressive goals through relatively libertarian, free-market means.

The big problem was originally pointed out by Ludwig von Mises in an article that should have ended the debate about the viability of socialism. Private ownership of the means of production is necessary if people are going to be able to allocate the means of production to their highest-valued uses. Government ownership—socialism—is essentially arbitrary and chaotic.

Andrews’ proposal adds a layer in between government ownership and control by proposing that the government own shares in mutual funds rather than the actual firms themselves. It becomes, then, an owner of mutual fund shares rather than a direct owner of the means of production. The market is preserved while throwing off a share of the profits that can then be distributed socially. We get progressive goals by libertarian means. Nothing could be better.

Of course, nothing works quite the way we can imagine it. The constitutional questions have to be solved, and I’m not convinced that the politicians we actually elect will administer the program impartially. Recent evidence on the labor market effects of Alaskan oil revenue distribution, however, leaves me more optimistic than I might otherwise be. It accomplishes the distributional goals of the left without the distortionary effects of taxes on capital income.

Would Andrews’s proposal be better for growth than the status quo? Probably. Is it perfect relative to my ideal policy? No, but relative to the mish-mash of programs we currently have, it is probably an improvement.

Source: https://www.forbes.com/sites/artcarden/2019/02/05/a-radical-redistributive-re-imagining-of-capitalism/#62ec0f6f79b4