This article is part of a series by Jeffery J. Smith on the surplus—also known as “economic rent”—that exists in the economy. Currently, this surplus is hoarded; yet once shared, this surplus could generate undreamed of possibilities for the entire human population. To see the entire series, visit progress.org/counting-surplus

The human brain can tolerate contradictions—even seem to need them, especially when it comes to self-appraisal (I’m generous) and one’s behavior (but a bad tipper)—for any length of time. Yet sometimes pressure builds to reconcile contradictions, to reverse one to align with the other. Currently, certain social trends—specifically, growing concern about inequality—are converging, pushing curiosity about Earth’s worth to a tipping point when official statisticians would record, extract, and publish passably accurate data.

Rich Who Want to Share

One of the contradictions—or at least a surprise—is that some very wealthy want to change the system that made them that way.

  • Bill Gates’ dad wants to tax very rich people.
  • Warren Buffett’s son wants to require charities to spend all their money so that they could no longer perpetuate fortunes.
  • Likeminded 1%-ers have banded together to form groups like Patriotic Millionaires and Smart Capitalists for American Prosperity.

The embarrassment of riches, perhaps, pushes the elite to try to stabilize what disparity destabilizes—the social order.

Some of the wealthy have even bit the hand that fed them. The US has a Communist Party due to one of the inheritors of the General Motor’s fortune funding his red comrades. An inheritor of a tobacco fortune campaigned against the sale of cigarettes. And an inheritor of the Baskin-Robbins fortune tried to persuade Americans to adopt a diet that left out sweets.

The decision to become charitable might have been moral; philanthropy is a normal human trait. Or maybe just self-servicing to preserve the system that put the rich so high above everybody else. Either way, it’s way exciting to know that people with the power to make major changes are advocating them.

Concentrated Into Fortunes

By now, nobody denies the disparity. If the US economy were partitioned on a per capita basis—and it should not be, that’s not the point—each American would receive about $180,000 every year. Instead, most families earn about $45,000 per year while most rich individuals get several million dollars annually even when retired. That’s income. Ownership of wealth is also skewed but worse, 10 times as worse.

Another contradiction, or perhaps puzzle, is that huge output (GDP) does not provide widespread prosperity so much as it concentrates huge fortunes. Our system of government-granted privileges more than amply rewards those whose ideas and initiative became the tech revolution. But our laws and customs failed to grasp that opportunity to make material suffering unnecessary. The quantity of goods and services is so enormous that life on Earth could be lived in perfect comfort by everyone. No more deprivation, nor exhaustion. That we don’t let such bounty liberate us contradicts the purpose of bounty: leisure.

It’s an opportunity we miss repeatedly. Industrial inventions like railroads expanded the middle class but also created Robber Barons like Carnegie and Rockefeller and lowered the standard of living of many. Mechanization could have been a boon for all.

Pressure Mounts on Non-Rich

Instead, some poor actually do go to bed hungry while people with jobs and homes suffer a different famine, that of time. The leading cause of death among men between the ages of 20 and 35 is suicide. Stressed out workers produce much less at the same time as medical care costs much more. Stress, anxiety, and depression are predicted to be the second biggest causes of ill health in Western countries by 2020.

American society is approaching or is already at another tipping point where people question work and the workweek, as especially do some young adults, many tens of thousands of dollars in debt for student loans. They envision an end to rote work or meaningless work, even to an end of the financial definition of useful contributions. You can see why the rich may be worried, or sympathetic.

Another contradiction headed for a tipping point is how human economies degrade the ecosystems that make the the rest of civilization possible. The possibility of global climate change has accentuated this concern and made more people interested in alternative economies. Already, ecological economists have estimated the replacement value of all nature.

Closing the Income Gap

Down the road, maybe those who’d close the gap in income would take a peek at everyone’s outgo for land and resources. But meanwhile, they default to the familiar take from the rich, give to the poor. It’s an idea that does have a pedigree. At the dawn of the Industrial Revolution, England paid people enough to buy bread. About a century ago was the Social Credit movement. Now we have people promoting Basic Income Grants. Heck, even a Silicon Valley billionaire believes in BIG as does a wealthy pharmacist in Germany.

However, despite needing to tighten their belts, the poor are not rioting. Despite needing to pop their pills, the middle class are not voting socialist. Why should the wealthy worry? They could just enjoy the irony—many people who need an extra income apart from their wages reject something for nothing.

As many poor say, they want a hand up, not a hand out. The do-gooder rich must fight not only their fellow rich but also intended recipients! The irony is delicious.

Achilles’ Heel of Income Transfer

Further, if a transfer of wealth or income from rich to everyone else were instituted, there’s an excellent chance it’d not work. Economically, it would very likely inflate prices. Landlords in particular would just raise their charge. Note how:

Politically— take from the rich, give to the government, then hopefully benefit the poor—has the middleman problem of an expensive bureaucracy (any waste or graft aside).

I am bemused that people so successful in other fields—making money, legislating change—don’t consider this bigger picture of administration, inflation, and rejection (however, it’s not the first time that advocates failed to consider all the angles).

Raising Income, Not Prices

There’s more than one way to improve the economic lot of most people besides extra money in the pocket—lower the prices everyone faces.

If inflation is an indicator of excess debt (too much newly printed money … in a simple model of a modern economy), how could government pay everyone an extra income without going into debt or inflating prices? If it did work, recipients would feel less desperate, so they’d need not borrow so much and government would not have to run up a bill providing many social services.

One sort of extra income for all would actually slow, stop, and reverse inflation. That is: a social salary funded from the worth of Earth. Government would redirect society’s spending for land and resources, away from the pockets of present recipients, into the public treasury, then back out again as a rent share (a Tom Paine idea long ago).

An apparent contradiction is that one sort of extra income for all would actually slow, stop, and reverse inflation. That is, a social salary funded from the worth of Earth. Using fees or dues or taxes, government would redirect society’s spending for land and resources, away from the pockets of present recipients, into the public treasury, then back out again as a rent share (a Tom Paine idea long ago).

Spending this “Citizen’s Dividend” would not inflate housing or land because the public recovery of site value—the land dues or land tax or land use fee or lease sum—would keep landowners in competition among themselves. If any of them tried to raise what they charge, their tenant would simply move to a new building that another owner erected in order to have income to pay the land dues.

Thus a rent share solves the inflation problem, and the administration problem since it could reduce so much current bureaucracy. However, its advocates must still deal with the rejection problem. This extra income, too, feels like charity, not justice.

Overcoming Rejection

Thomas Piketty made a lot of noise with his book, Capital in the 21st Century. However, more exacting analysis shows it was not capital that swelled and skewed income and wealth; it was land.

Most people bundle together land and capital into one category of assets. Thomas Piketty made a lot of noise with his book, Capital in the 21st Century. However, more exacting analysis shows it was not capital that swelled and skewed income and wealth; it was land. While land is private property, its value is generated by the progress and presence of the surrounding society, not by anything the owner has done as owner—another contradiction.

Most people, however, unaware of the public nature of location value (and probably owning some land themselves), view rent payment as a tax on the middle class, a tax that would spare the rich. Which is ironic: The rich know better where their fortunes come from—oil, downtown real estate, privileges like monopolies on fields of knowledge (patents and copyrights).

Because having to pay rent to community motivates owners to use their land efficiently, economic nerds like the policy. Most people, however, unaware of the public nature of location value (and probably owning some land themselves), view this payment of rent as a tax on the middle class, a tax that would spare the rich. Which is ironic. The rich know better where their fortunes come from—oil, downtowns, privileges like monopolies on fields of knowledge (patents and copyrights).

...the only social salaries in existence are rent shares.

Despite these obstacles, the only social salaries in existence are rent shares. Alaska pays residents a dividend drawn from oil revenue. Aspen helps a majority of families afford to live in that ritzy resort by using some recovered location value. And Singapore—which taxes land higher than most places and other things much less—operates so efficiently that they pay citizens a dividend.

Windfalls

To share common wealth would not be to redistribute it but to predistribute it, before an elite or state has a chance to misspend it.

These distributions exist because people see their sources as windfalls—Alaska’s oil, Aspen’s site value, and Singapore’s budget surplus. What would it take to see all the worth of all the worth as a windfall? Counting it. Show its immensity. Show how land dues could replace counterproductive taxes, how rent shares could replace addictive subsidies to rich and poor alike. Generate the contradiction of an embarrassment of riches. Once seen as a common heritage, to share common wealth would not be to redistribute it but to predistribute it, before an elite or state has a chance to misspend it.

People trying to close the income gap and people trying to count Earth’s worth do not now overlap. Yet counters are in awe of big sums, and there’s no spending stream bigger in the GDP than society’s spending for the assets nobody made. And demanders of an extra income, in need a viable source of revenue, might shift their aim from assembled fortunes to torrential flows in stream. Thus the paths of demanders and counters could cross.

Imagine their synergy bringing about a Citizen’s Dividend. What a break for the masses! In expanded free time, we’d enjoy leisure, finally could get a life. Would the rich who try to ameliorate the worst of the system that made them wealthy actually go for that? And pony up the funds for a counting.

This article is part of a series by Jeffery J. Smith on the surplus—also known as “economic rent”—that exists in the economy. Currently, this surplus is hoarded; yet once shared, this surplus could generate undreamed of possibilities for the entire human population. To see the entire series, visit progress.org/counting-surplus

© Text Copyright Jeffery J. Smith rights reserved.
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