Justifications for a Far More Equitable Distribution of Income and Wealth
Table of Contents
Many tens of millions of Americans have too little money to purchase the goods and services they would if they could afford to. And the wealthy can spend a small fraction of what they have. So, extreme inequality is reducing our nation’s GDP.
The International Monetary Fund’s analysis of economic performance in over 150 countries confirmed excessive inequality has detrimental economic effects. When a measure of inequality, the Gini, increased from the 50th percentile to the 60th percentile, the GDP per capita growth declined by about one-half percent per year. And they found that when taxes on high incomes and transfers, or redistribution, increase from the 50th percentile to the 60th percentile, growth increases by about one-half percent per year. (The Gini index has 0 to 100 range; at 0, everyone has the same income, and 100 indicates one person has all national income.) A comprehensive OECD study found a similar decrease in GDP growth with an increase in inequality.
The Beneficial Effects of High Top Tax Rates in U.S. History
The historical record in the U.S. also shows that higher top tax rates, which has the effect of reducing both pre-tax and post-tax inequality, has been economically beneficial. Larger GDP growth rates have occurred during periods when top tax rates were higher.
As a result of the New Deal and FDR’s other policies, and the ideals they established for subsequent policymakers, we raised taxes on top incomes as high as 94%. The effect was far from the economic disaster our “pundits” tell us would occur if we did the same today.
New Deal policies’ effects began in 1934, and FDR continued his extraordinary presidency until his death in 1945, a few months before the end of World War II. In the 20 years from 1934 to 1953, GDP growth rates averaged 6.42%, and top income tax rates averaged 83.2%. From 2005 to 2015, growth rates averaged 1.75%, and top tax rates averaged 36.25%.
Many factors are involved in economic growth, and correlation does not prove causation. However, the higher top tax rates supported public policies that caused the higher growth rates, as did the resulting reduced inequality. Our economic elite do not want these facts widely known, so they are not. On the contrary, elite domination of our mass media causes many Americans to hold the belief that high economic growth rates are incompatible with high top tax rates.
The 94% top marginal tax rate applied to incomes above a $200,000 threshold, which in 2019 dollars was $2.9 million. In 1944-5, when the 94% top marginal rate existed, few taxpayers had taxable incomes this large. One reason is we were a much poorer country then, but a more significant one for us is the 94% rate disincentivized top managers from taking exorbitant compensations because the government would get almost all of the excess incomes. When top managers get less corporate income, workers can get more. So the public benefit of higher top tax rates is not just measured by the amount of increase in government funds.
Social Resources’ Role in Wealth Creation
Without public investments in infrastructure, R & D, the legal system, and public education, we would not have a functioning economy. Since everyone made these investments, everyone should receive an appropriate return on them. An appropriate return to each individual is what maximizes happiness in society.
The above social resources are large, but much less widely acknowledged is the essential importance of the far more immense public resource of many generations of accumulated knowledge. This commonly inherited resource alone makes society a partner with each of us most responsible for our income and wealth.
Commonly inherited knowledge advancements are primarily responsible for the 30 times higher productivity now compared to 1775. Although some of this increase in productivity requires additional capital, an equivalent amount of labor and capital supplied hundreds of years ago that we provide today to produce our GDP would have produced less than 10% of our GDP. Over 90% of the wealth we create results from a commonly inherited social resource: knowledge. If widely known, this and other facts of fundamental social importance would motivate social change that would diminish an elite’s wealth and power. So, their influence on our media and educational institutions results in these facts being little known. For more information on this issue click here.
An Example Showing the Significance of Social Resources
An analysis of the sources of top popular sports athletes’ incomes reveals the dominant role of social resources:
No one would deny that top athletes’ hard and long work, combined with extraordinary innate capacities, are essential to their success. But who is more responsible for their tens of millions of dollars or more per year income (Lionel Messi, the Argentine professional soccer player, was paid $127 million in 2019 ) the athlete or the people responsible for the communications network that allows for the transmission of their image to millions of people? Without the commonly inherited social resource of knowledge and resulting technology—created by generations of scientists and engineers—our technological capacities would not exist. Without technology, top athletes would be playing for a small local audience, and most of their income would disappear.
Since the income and wealth of all the rich, not just top athletes, are founded on social resources and collective action, society can rightfully reduce them through the tax system. A tax system justifiably mandates that people pay a price for the value of the services they receive from their partner, society and its resources, the most significant of which is generations of accumulated knowledge.
Quantifying the Effect of Commonly Inherited Knowledge in Wealth Creation
In 1957, Robert Solow, Nobel Laureate in economics, wrote a landmark paper on economic growth. He detailed the role of knowledge and the resulting technology in economic performance improvements between 1909 and 1949. His conclusion: “Gross output per man-hour doubled … with 87.5 percent of the increase attributable to technical change and the remaining 12.5 percent to increased use of capital.”
In 1775, the U.S. per-capita real GDP was $2,153 (2019 dollars), by 2019, it was over 27 times larger, $57,997. Accumulated knowledge and its impact on technology resulted in the massive increase in value of goods and services produced per hour by an average person today. The 27 GDP/capita ratio is an underestimate of the productivity gains because worker hours per capita are lower now than in 1775. So, more than 26/27 or 96% of the economic value we produce per hour results from knowledge advancements since 1775 and the capital required for the machinery or hardware to implement these advancements.
The capital share of the productivity gains over the four decades Solow studied may not be applicable over other decades in the 1775 to 2019 period. Likely, capital played a smaller role and knowledge played a larger role in the productivity gains from the period from 1949 to 2019 because much of the gains were founded on computer technology, which is based on silicon, plastics, and mostly other inexpensive materials. The period from 1775 to 1909 may have had a larger capital share than Solow found in the 1909 to 1949 period.
However, it is a reasonable rough estimate that the capital share of productivity gains, on average, over the 1775 to 2019 period was the 12.5% Solow found over his four-decade period. Assuming this, 87.5% of the 96% increased value we produce per hour compared to 1775 results from knowledge gains exclusively. This 84% (87.5% times 96%) of the increase since 1775 is 81% of the total economic value we produced per work hour in 2019. However, the impact of knowledge gained before 1775 is also of major significance. For example, much of the physics and mathematics engineers use, including calculus, was developed before 1775. Accounting for knowledge developments before 1775 would bring the total contribution of inherited knowledge to wealth creation to over 90% in 2019.
Payments For Society’s Rendered Services
We add to the social resource of knowledge by using it to act collectively to create the social resource of educational systems and infrastructure. All our collective actions enabling our economy to function and advance are founded on the over 90% contribution of our commonly inherited knowledge base. Since people can make a justifiable claim only on what their labor and capital produce, the contribution to wealth creation of inherited social resources and those created collectively today justify a top tax rate of over 90%.
The above facts could justify a high tax rate on everyone. But we institute a tax system to create social benefits, which would result if taxes were reduced or eliminated on the middle and lower classes, and they received other forms of relief of financial burdens. A progressive tax system provides the moral advantage of minimizing the burden of the support of the government in serving its essential purposes: maximizing happiness within the citizenry and ensuring that justice prevails.
Further morally justifying progressive tax rates is very high income and wealth result from the value company owners and top managers receive from their employees’ labor. The average worker in large companies produces more in value than they receive in pay, and the total of this excess generated by all employees is enormous and is the source of the income and wealth of our economic elite.
Employers have always hired people if they would produce more in value than they would receive in pay, but now, on average, workers are producing more than ever in history above the amount they are paid. Both historically high corporate profits and upper management compensation is evidence of this. Since over 90% of Americans earn their income as employees, a small elite is benefiting from the productivity-enhancing power social resources provide to a large majority.
Economic System Reforms are Crucial
A far more beneficial solution exists to our extreme inequality and disconnect between worker productivity and pay problems than higher top tax rates and redistributive public policies: Fundamental improvements to our economic system to one that does not generate extreme inequalities. Despite it being morally and economically justifiable, redistribution inevitably causes resentment and conflict.
In The New Enlightenment and Amazon as Metaphor, I detail public policies to transform our economic system to one where worker-owned and controlled business enterprises would perform most economic activity at the end of a 20-year transition period. The resulting intrinsic qualities of our economy would create a far more egalitarian society requiring relatively little redistribution. The federal funds needed for the transformation process will be less than 1% of GDP per year.
The Inadequacy of the Wealthy’s Philanthropic Contributions
Some people claim we should not tax the wealthy more because this will reduce their philanthropic contributions, and they can decide better than the government on where to spend large amounts of money. But a well-functioning government decides where to spend vast sums based on the preferences of the rest of us. The time of kings and lords is over, or should be.
In 2018, the top 20 billionaires gave away only 0.8% of their wealth, excluding Gates and Buffet, only 0.3%. However, these percentages are based on the “charitable” donation dollars they itemize on their tax returns. Much of this money is directed to tax scams or self-serving vanity projects. The richest billionaires, on average, gain 6.8% per year in wealth, so they gave in “philanthropic” contributions less than 12% of the gains on their investments.[i] The more than 88% remaining means their wealth continues to boom without accounting for any exorbitant labor income.
The wealthy would not have created and supported unemployment insurance, Medicare, Medicaid, universal free K-12 education, social security, and other programs of immense benefit to our society. Only a democratic government can create such programs and support them with mandatory progressive taxes. It is unwise to leave social responsibility in the hands of people who have exploited society for personal gain.
[i] Capital in the 21st Century, pg. 435, Table 12.1, Thomas Piketty, Growth rate of top global wealth holders
Wealthy donors make tax-exempt “philanthropic” contributions to think tanks and advocacy groups to advance their wealth-protection agenda among policymakers and the public. The Koch Brothers have been prominent examples of this kind of “philanthropy.”
At the K-12 level, the wealthy give tax-deductible money to foundations that support their children’s schools. To further increase the likelihood their kids will get accepted into elite colleges and universities, they make large “philanthropic” donations to the schools and associated foundations, compounding economic and opportunity inequalities.
For every dollar a billionaire donates to “philanthropic” causes, the rest of us chip between 37 to 57 cents in the form of lost tax revenue.
Corporate high-profile philanthropy to good causes is mostly a ploy that makes exploitative labor practices or corporate malpractice more tolerated by the public and less likely to be regulated by policymakers. Likewise, CEOs give to charity to be seen as doing good without sacrificing their commitment to making profit at any social cost. Even Enron was well known for its advocacy of social responsibility before its massive and legendary 2001 fraud scandal destroyed it along with about $74 billion in shareholder wealth and $40 billion in creditor wealth. It also destroyed the jobs of its about 20,000 workers and $2 billion of their pensions.
Income and Wealth Incentives are not Responsible for Our Productivity
Since knowledge advancements are mainly responsible for our productivity, let’s look at the role personal income and wealth incentives had in motivating the most important of them. Over about the last century, the people below made foundational contributions to the knowledge responsible for most of our economic advancements. All received low-to-moderate compensations:
- The “father of computer science and artificial intelligence,” Alan Turing. (Compensation as a British government and university employee.)
- The discoverers of the nature of DNA, James Watson and Francis Crick, whose work is at the foundation of modern medicine, genetic engineering, molecular biology, forensic science, bioinformatics, phylogenetics and genetic genealogy. (Graduate student and research fellow salary.)
- The U.S. government and university employees who created the Internet.
- Nikola Tesla, who invented the induction motor and alternating current and with George Westinghouse built the first hydro-electric power plant in Niagara Falls, New York that started the electrification of the world. (Died in poverty.)
- Tim Berners Lee, the inventor of the World Wide Web. (Offered his browser for free.)
- The physicists who developed quantum mechanics. As much as 30% of GDP is based on inventions made possible by quantum mechanics.[i] (University salaries.)
All of these people whose work formed the foundation of our modern economy were very far from being billionaires. What drives persons of great intellectual or creative capacity is intellectual curiosity, the excitement of seeing or developing something new, an innate desire to excel, and the desire to make a meaningful social contribution, not massive financial reward. Thus, contrary to many “pundits’” claims, much higher taxes on high incomes and wealth will not lower national productivity.
The advancements that resulted in extreme wealth are relatively minor and did not require it, such as those associated with Amazon, Microsoft, Google, and Facebook. If Bezos, Gates, Page, Brin, and Zuckerberg had never been born, we would have e-commerce, computer operating systems, search engines, and online social networks.
[i] 100 Years Of Quantum Mysteries, Scientific American, Feb 2001, pg. 69 Max Tegmark and Archibald Wheeler
Extreme Economic Motivators are Destructive
Many corporate managers’ actions resulting in their and corporate owners’ massive income and wealth harm other people. The financial crisis most dramatically revealed the destructiveness of massive financial rewards as motivators. Pursuing them, industry executives instituted predatory lending policies and fraudulently sold high-risk loans and loan derivatives as low risk, among other criminal and antisocial acts. These actions were primarily responsible for the Great Recession’s incalculably devastating effect on many tens of millions of people worldwide, many of whom have still not recovered a decade after the recession officially ended. The managers responsible also would have destroyed their companies, were it not for vast amounts of public funds. Without such funds, Lehman Brothers Holdings’ managers did destroy their company.
Corporations dedicated to maximizing the wealth of their owners and managers have transferred costs to society of varying kinds and sizes. It is common for these costs to be massive. As a result, we are in urgent need of the radical reforms of the structure of our business enterprises that I detail in Amazon as Metaphor and The New Enlightenment. Until that happens, a high top tax rate will help reduce harmful behavior.
Businesses organized as private dictatorships, where a small clique can benefit massively from actions that abuse others, motivate abuse. (Dictatorships are social structures where the executive, legislative, and judicial functions are concentrated in one person or small clique, as they are in the corporate CEO and corporate board.)
The financial sector’s private dictatorships have also been extraordinarily destructive through their contribution to our extreme and rising inequality. Worldwide, one in five billionaires comes from that sector. In the U.S., in 2005, 13.9% of the top 1% were financial professionals, up from 7.7% in 1979. Much of their activities resulting in their extreme compensations are of questionable, low, or negative social value. For example, we don’t need to reward with an astronomical number of dollars the bank “geniuses” that pay depositors .05% interest, then lend the money they receive to credit card borrowers at 16%.
Although financial sector private dictatorships have contributed most, all corporations organized as private dictatorships are responsible for our extreme and rising inequalities.
More on the Disconnect Between Societal Contribution and Reward
Extreme income and wealth result from one or more of the following: monopoly pricing power; semi-monopoly pricing power based on collusion between the semi-monopolists; employing workers precariously and underpaying them; transferring jobs to low-wage, low-regulation countries; tax avoidance and evasion; profiting off human frailties (such as the drug company executives and major owners involved in the opioid crisis); lobbying government for advantages and subsidies, and otherwise pushing costs associated with a product onto society. Negative externalities are common in market transactions and are most extreme where massive incomes and wealth exist. Although some of the super-wealthy initially made significant positive social contributions, the process of rising to their vast wealth and income is destructive, as is their resulting power.
An extreme externality ignored in market transactions is the cost of greenhouse gases. The social costs of carbon could be as high as $893 per ton, which would far more than eliminate fossil fuel companies’ profits and the salaries of their managers and even of their workers if they paid these costs. (The CEO of the oil field services company, Halliburton, had total compensation in 2017 of $23,078,364.) Of course, providing an energy source is socially valuable, but if we priced fossil fuels based on their real costs, far more alternative sources of energy would have been sold instead, as well as energy conservation measures. A carbon tax will raise the price of carbon-based fuels closer to their real costs. Directing funds from a carbon tax to low- and middle-income people will reduce carbon pollution and inequality.
CEOs are strongly motivated to abuse labor market conditions to depress wages because they will massively benefit from the abuse. As noted earlier, the result of this abuse in the United States is 40% cannot come up with $400 for an emergency without selling something or borrowing money, and 78% live paycheck to paycheck—if they miss one paycheck, they cannot meet all their expenses. So, in our wealthy society, where most people contribute to creating its wealth, including those who do unpaid labor, most people are not justly compensated. From a moral, economic, and social perspective, those most benefiting from the social resources on which their society and their wealth are founded should be responsible for ensuring the society works for everyone. High tax rates on extreme income and wealth are essential to ensuring they meet this responsibility. And it will reduce the motive to depress wages and create negative externalities because any resulting exorbitant income and wealth will be mostly taxed away.
Optimum Tax Rates
Optimum rates are uncertain, but we are far from them. Evidence exists that a wealth tax of 90% on wealth above $1 billion, and marginal income tax rates of over 80% on incomes above that qualifying for the top 1% would be economically beneficial. The economic benefit is another moral justification for tax rates at that level. Appropriate tax rates on extreme income and wealth would raise sufficient public funds for radical societal advancements.
Society has the right to tax using a system that best serves all its members for this important reason also: Property is a creation of law with no independent origin apart from how the law structures ownership and property rights. Since the division of property or wealth and the means to acquire it can exist only within a system of laws, including tax laws, there can be no moral claim against taxation on the grounds that property or wealth is essentially “private.” It is a construct of a social system that established both property rights and the rules of taxation. Chartering corporations, buying and selling legal titles to property, making and enforcing contracts, suing for damages, and a legal system that allows people to receive paychecks and dividends from stocks, and that secures wealth in its various forms all involve government “intrusion,” as does taxation. All are equally justified to be designed to serve the best interests of society.
Libertarianism and Fake Libertarians Squared
The influence of “libertarians” has been a significant contributor to our nation’s extreme and growing inequalities and lack of liberty. In the U.S., “libertarian” means the opposite of what it meant throughout history: libertarian socialism. The root of the word “liberty,” implies libertarians are dedicated to freedom and to creating a society that maximizes it. Libertarian socialists see that abuse of state or private power to dominate others must end to maximize freedom. This requires economic and political systems where democratic control of the workplace, community, and federal structures gives people an equitable say in policies that impact them. Systems where an elite owns and controls the means of production and, as a result, dominates not just the workplace but also the government express the opposite of libertarian ideals.
U.S. “libertarianism” only opposes state power restricting freedom. But it ignores, and in fact favors, other forms of coercion and domination inherent in corporate capitalism. U.S. libertarians are radically opposed to the libertarian tradition, which opposed the kind of master-servant relationship essential to corporate capitalism.
People forced to enter a hierarchically structured organization to survive are not free. They may be free to choose which corporate hierarchy’s “boss” tells them what to do, but this is not real freedom.
Our nation fought a Civil War in which hundreds of thousands of Americans sacrificed their lives to end chattel slavery. During that period, people commonly called wage labor for a “boss,” “wage slavery,” and judged it not very different from chattel slavery. Americans viewed renting yourself, meaning working for wages, as degrading, an attack on one’s integrity. People forced into wage labor to survive despised the developing industrial system that was destroying their independence and individuality, and constraining them to be subordinate to masters. The Republican Party and Abraham Lincoln also viewed wage slavery as not very different from chattel slavery.
Their view regarding “wage slavery” gradually disappeared as corporations’ role in our society increased. Now most of us are indoctrinated to accept as natural and inevitable that the great majority of people do wage labor for a “boss.”
But the inherent injustices resulting from corporate capitalism have been growing, so the nineteenth-century view regarding “wage slavery” may and should return. Over the last few decades, an increasing concentration of capital has gone to a tiny elite who use it to support, control, and expand tyrannical institutions to which tens of millions of Americans rent themselves for wages insufficient or barely sufficient to live. For example, over one-fifth of adults cannot fully pay all of their current month’s bills. And 78% live paycheck to paycheck—if they miss one paycheck, they cannot meet all their expenses.
Enterprises based on wage slavery inevitably distribute the income they receive according to the preferences of the persons who own the machines, the factory, the office, or the fields. Abuse of this power has grown over recent decades. Wage slaves, or most Americans, have been working more hours to get a smaller fraction of the value they produce. The resulting increasingly vast wealth concentration in corporate owners and upper managers is growing their ability to destroy democracy in our political system, further narrowing the power people have over the decisions affecting their lives.
However the workplace is organized, more unbounded freedom exists when working to meet material needs ends. A small elite of owners and managers of corporations not only restrict freedom in the workplace and political system, they also do so by reducing the time we can be off work. If the managers and major owners, particularly of large profitable corporations, increased wealth and income over the last few decades were more justly distributed, it would have enabled us to reduce our work hours. Instead, the average work hours per household have increased. So elite domination of our economy has resulted in substituting time where our most unbounded freedom exists with time under their control.
For example, from 1965 to 2011, the average number of hours worked per household with children rose by 7.4%, while productivity increased by a factor of 2.5. In 2011, parents could have worked less than half the time they did in 1965 to produce the same material well-being. Instead, on average, they worked 7.4% more for little or no increase in material well-being for most Americans and a decline for many. If a small elite were not making all the important economic decisions, work-hours would have reduced substantially since 1965, and the realm of freedom would have increased accordingly.
A tiny elite’s growing capture of economic and political power would appall true libertarians. Anyone genuinely interested in maximizing freedom would see it requires some degree of fairness, so some coercive power from a democratically controlled state to limit the abuse of private power. U.S. “libertarians” are dedicated to the proposition that government policy should not attempt to create fairness or even limit extreme unfairness because this will necessarily violate some individuals’ liberty.
But state intervention is necessary when social conditions create liberty for the few at the expense of liberty for the many. Individual and corporate freedom must exist within the ethical boundaries that minimize constricting it for others.
With our extreme economic inequality comes inequalities of educational and business opportunities, healthcare access, and other conditions that limit tens of millions of Americans’ freedom to act to support a desirable lifestyle that would otherwise be easily attainable. Liberty and justice for all cannot exist unless justice allows liberty for all.
In addition to advancing liberty, moving toward a more egalitarian nation will increase prosperity. I will show evidence for this in Part 4 and how we can accomplish more egalitarian outcomes without redistribution and with some public policies that are essentially redistributive in Parts 2 and 4.
Our inequalities are so extreme that the title, The Wealth of Nations, of the famous book authored by the “father of modern economics,” Adam Smith, could be the title of the biography of some Americans. On February 11, 2022, Jeff Bezos had wealth greater than that of Iceland, Iraq, Ukraine, Ecuador, Lithuania, Costa Rica, and Cyprus combined. Elon Musk had the combined wealth of the same nations plus that of Luxembourg. No functioning democracy would allow systems to exist where a few individuals could take such a grotesque proportion of the wealth generated by collective action and social resources. Grotesque inequalities and poverty, environmental degradation, and other forms of social harm corporate capitalism generates can only be controlled by state power. (See Part 4 for more on the economic and moral justifications for a far more equitable distribution of income and wealth.)
Higher taxes on high incomes and wealth are a restriction of liberty of a kind that almost everyone accepts, one that disallows socially harmful behavior. Our elite’s appropriation of an excessive and growing proportion of the wealth we create collectively is generating social problems of the highest order—they threaten the survival of our nation. Higher taxes on high incomes and wealth can help rectify and disincentivize their extremes.
Jeff Bezos and many other super-wealthy individuals who call themselves “libertarian” are fake libertarians. They idealize only liberty for themselves to do what they want with their immense private concentrations of wealth and power without regard to their actions’ impact on others’ liberty. When employees are told what they must do in a Bezos warehouse or how much of the value they create for the company they can have, they are not free. Bezos is delighted with these conditions. He, like other fake libertarians, opposes democratically determined regulation on their socially harmful behavior or the taxes needed to help rectify unjust conditions limiting the liberty of most Americans.
But Bezos’s fake libertarianism has another dimension—we might call him a “fake libertarian squared” (or a fake, fake libertarian). He is not really an anti-government libertarian because he is dedicated to extracting astronomical numbers of dollars from the government. Without his extraordinary skill in this endeavor throughout the existence of Amazon, none of us would know his name. Many other super-wealthy individuals are fake libertarians squared. The billionaire Koch brothers (total wealth in 2018, $107 billion. Now just Charles, David Koch died in 2019) were other prominent examples. David Koch was the Libertarian Party’s 1980 vice-presidential candidate. Koch Industries received $430.1 million in state and local subsidies, mostly since 2010. Federal subsidies totaled $6.3 million since 2000.
 Reluctant Icon, Noam Chomsky, interview by Tim Halle, circa 1999
 Creating the Horror Chambers, Noam Chomsky on the tyranny of libertarianism, interview by Dan Falcone, Jacobin magazine, July 2015
 History is Not Over, Noam Chomsky, interview by David Cogswell, 4/18/97
 Federal Reserve, Report on the Economic Well-Being of U.S. Households in 2017, May 2018
 https://www.pewsocialtrends.org/2013/03/14/chapter-6-time-in-work-and-leisure-patterns-by-gender-and-family-structure/ , Federal Reserve Bank Of Minneapolis, Changes in Hours Worked, 1950–2000, Federal Reserve Economic Data, Nonfarm Business Sector: Real Output Per Hour of All Persons, Percent Change at Annual Rate, Quarterly, Seasonally Adjusted
 Forbes Releases 37th Annual Forbes 400 Ranking of the Richest Americans, Forbes magazine, 10/3/18
“Conservatives” Are Not Interested In Conserving The Values Of Our Founders
“Personal property is the effect of society; and it is as impossible for an individual to acquire personal property without the aid of society, as it is for him to make land originally. Separate an individual from society, and give him an island or a continent to possess, and he cannot acquire personal property. He cannot be rich. So inseparably are the means connected with the end, in all cases, that where the former do not exist the latter cannot be obtained. All accumulation, therefore, of personal property, beyond what a man’s own hands produce, is derived to him by living in society; and he owes on every principle of justice, of gratitude, and of civilization, a part of that accumulation back again to society from whence the whole came. This is putting the matter on a general principle, and perhaps it is best to do so; for if we examine the case minutely it will be found that the accumulation of personal property is, in many instances, the effect of paying too little for the labour that produced it; the consequence of which is, that the working hand perishes in old age, and the employer abounds in affluence.” Thomas Paine
All the Property that is necessary to a Man, for the Conservation of the Individual and the Propagation of the Species, is his natural Right, which none can justly deprive him of: But all Property superfluous to such purposes is the Property of the Publick, who, by their Laws, have created it, and who may therefore by other Laws dispose of it, whenever the Welfare of the Publick shall demand such Disposition. He that does not like civil Society on these Terms, let him retire and live among Savages. He can have no right to the benefits of Society, who will not pay his Club toward the Support of it. Benjamin Franklin
Other Founders expressed opposition to extreme inequality. If “conservatives” and anyone else wants to conserve their values, see more of their words expressing them.
National Leaders and Scholars on Social Resources Role in Wealth Creation
“It is as impossible for an individual to acquire personal property without the aid of society as it is for him to make land originally.” Everything an individual produces “beyond what a man’s own hands produce” results from living in society so he “owes on every principle of justice, of gratitude, and of civilization, a part of that accumulation back again to society from whence the whole came…”
Thomas Paine, English-American political activist, Founding Father, author and political theorist, inspired the “Patriots” in 1776 to declare independence from Britain.
The “prosperous business man” should consider “what single step he could have taken” without the “sum of intelligence which civilization has placed at his disposal” and the “inventions which he uses which he uses as a matter of course and which have been built up by the collective effort of generations.”
“The true function of taxation is to secure to society the element in wealth that is of social origin or… all that does not owe its origin to the efforts of living individuals. When taxation, based on these principles is utilized to secure healthy conditions of existence to the mass of the people it is clear that this is no case of robbing Peter to pay Paul. Peter is not robbed. Apart from the tax it is he who would be robbing the State. A tax which enables the State to secure a certain share of social value is not something deducted from that which the taxpayer has an unlimited right to call his own, but rather a repayment of something which was all along due to society.”
“An individualism which ignores the social factor in wealth will … deprive the community of its just share in the fruits of industry and so result in a one-sided and inequitable distribution of wealth”
Leonard T. Hobhouse, British sociologist of the late 19th and early 20th century and founder of theoretical sociology and the first professor of sociology in Britain.
“The ownership of personal or material productive capacity is based upon a complex mixture of inheritance (meaning of knowledge and other socially created factors), luck, and effort, probably in that order of relative importance. What is the ideal distribution from the stand point of absolute ethics may be disputed, but of the three considerations named certainly none but the effort can have ethical validity. From the standpoint of absolute ethics most persons will probably agree that inherited capacity represents an obligation to the world rather than a claim upon it.
Individual productive capacity is multiplied by the “total accumulated social inheritance [that] is mental or spiritual or ‘cultural,’ as well as ‘material.’ “There is “no visible reason,” why anyone is “more or less entitled” to benefit from a personal “capacity resulting from impersonal social processes.”
Frank Knight, Economist and one founder of the free-market Chicago School of economics.
“Technological knowledge is of the nature of a common stock, held and carried forward collectively by the community. In the main, the state of the industrial arts is always a heritage out of the past. New elements of insight and proficiency are continually being added …but such novel elements are always and everywhere slight and inconsequential in comparison with the body of technology that has been carried over from the past. Latterday industrial equipment and process embodies …the accumulated technological wisdom of the community.” So he argued, owners of productive capital receive an unjustly large benefit from the “common stock” of “accumulated technological wisdom” embodied in industrial equipment and process.
“Invested wealth in large holdings controls the country’s industrial system, directly by ownership of the plant, as in the mechanical industries or indirectly through the market… Civilized countries now fall into two main classes: those who own wealth invested in large holdings and who thereby control the conditions of life for the rest; and those who do not own wealth in sufficiently large holdings, and whose conditions of life are therefore controlled by these others.”
Thorstein Veblen (1857 –1929) was an American economist and sociologist, a prominent critic of capitalism. Regarded as the founding father of the institutional economics school and leading intellectual of the Progressive Era in the US.
“A state of nature people would not have much in the way of life, liberty, or property.” and “The long life, spacious liberties, and extensive property of the average American citizen are the creation not of that American alone but of society-a vast aggregation of individuals, living and dead-and of geographical luck (size, topography, location, natural resources, climate)”
Richard Allen Posner (1939 – ) is an American jurist and economist, senior lecturer at the University of Chicago Law School, the most cited legal scholar of the 20th century.
“Gross output per hour of work in the U. S. economy doubled between 1909 and 1949; and some seven-eighths of that increase could be attributed to technical change…” Solow determined the increased capital needed for the improved economic performance over the years he studied was responsible for one-eighth of the improvement. He found that output per hour (measured in 1939 dollars) increased from 62 cents to $1.27 between 1909 and 1949, and only eight cents of this increase could be attributed to increases in capital. The knowledge and the resulting technological advancements over the period were responsible for the rest. This knowledge is a common social resource.
Robert Solow, Nobel-Prize winning economist. In his Nobel Prize lecture, he summarized the main finding of his landmark 1957 paper on economic growth with the above statement.
“If we are very generous with ourselves I suppose we might claim that we ‘earned’ as much as one fifth of [our income].” The rest “is the patrimony associated with being a member of an enormously productive social system, which has accumulated a vast store of physical capital, and an even larger store of intellectual capital-including knowledge, skills, and organizational know-how held by all of us-so that interaction with our equally talented fellow citizens rubs off on us both much of this knowledge and this generous allotment of unearned income.”
How much of this inherited share of output should be returned to society from individuals “is a matter of values to be decided by political processes.” Based on Simon’s view that more than 80% of income is from social contributions or less than 20% is earned by individual labor, a tax rate greater than 80% would be justly due, to return benefits to its source. This would only be appropriately applied where it would be beneficial to society, such as where high concentrations of wealth or income exist, not in the case of the poor or middle class.
“It is immediately obvious that little growth in the American economy can be attributed to the actions of particular individuals.” “A large firm is inherently a social and political enterprise. It is inherently social in the sense that its very existence and functioning depend on contributions made by joint actions, past and current, that cannot be attributed to specific persons: the arrow of causation is released by ‘social forces,’ history, culture, or other poorly defined agents.” “…without the protection of a dense network of laws enforced by public governments, the largest American corporation could not exist for a day. It would slowly languish if the labor force were not suitably educated. Who then provides for the education of its skilled workers, its white-collar employees, its executives? One of a firm’s most critical resources is language. Language comes free, provided by “society” and millennia of evolution.”
“Concepts, ideas, civic orientations like the famous Protestant ethic, the condition of science and technology: these are social. Who has made a larger contribution to the operation of General Electric–its chief executives or Albert Einstein or Michael Faraday or Isaac Newton?” “Insofar as a right to property is justified by the principle that one is entitled to use the products of one’s own labor as one chooses … the principle would lead to the conclusion that the control and ownership of the economy rightfully (largely) belongs to ‘society.’ If so, means must be found for ‘society’ to exercise the control to which it is entitled by virtue of its collective ownership.”
Dahl proposed redistributive measures and employee-owned enterprises as ways for society to exercise this control. “changes in the way the economy is likely to be perceived in the future would almost certainly help to make distributive issues more salient.” The “ill fit” between conventional “private” views of economic institutions and their “social and public” nature, he observed, “creates a discordance that probably cannot be indefinitely sustained.”
Robert Dahl, 1915-2014, was an American political theorist and Sterling Professor of Political Science at Yale University, former president of the American Political Science Association, often described as “the Dean” of American political scientists.
“Essentially, we work no harder and are no more intelligent than our ancestors from the near or even the ancient past. And yet…the amount of output the economy generates for every person—is twenty times higher today than it was in the early nineteenth century. Most of the growth was not coming from the conventional inputs of labor and capital, what workers and employers supply…[instead from] the cumulative knowledge and technological capacity of our society.
In today’s economy, many people get rewarded far out of proportion to what they actually contribute. At the same time, many also get far more than they need to “incentivize” their effort.”
Gar Alperovitz, was professor of Political Economy at the University of Maryland, and is a former Fellow of Kings College, Cambridge University; Harvard’s Institute of Politics; the Institute for Policy Studies; and an ex-Legislative Director in the U.S. House of Representatives and the U.S. Senate. He is also the president of the National Center for Economic and Security Alternatives and founding principal of The Democracy Collaborative
“nearly 90 percent…of [1960s] GDP was contributed by innovation carried out since 1870”
William Baumol, New York University professor of economics, ranked as among the most influential economists in the world (by IDEAS/RePEc).
“There are large gains to social interaction above and beyond what the individuals … could achieve on their own. It is only [assets] value in a large system which makes these assets valuable. Hence, there is a surplus created by the existence of society as such which is available for redistribution.”
Kenneth J. Arrow, economist, mathematician, and political theorist, Nobel Memorial Prize winner in Economic Sciences, economist, mathematician, and political theorist, Nobel Memorial Prize winner in Economic Sciences
“Our marginal products are not ours alone.” Rather, they “are due almost entirely to the cumulative process of learning that has taken us from stone age poverty to twenty-first century affluence.”
George Akerlof, Nobel Memorial Prize winner in Economic Sciences, Professor at the McCourt School of Public Policy at Georgetown University and Professor of Economics Emeritus at the University of California, Berkeley
“Just as the importance of land in production changed dramatically as the economy moved from agriculture to industry, so too does the movement to a knowledge economy necessitate a rethinking of economic fundamentals.”
Joseph Stiglitz, economist, public policy analyst, Columbia University professor, recipient of the Nobel Memorial Prize in Economic Sciences and the John Bates Clark Medal
“All the Property that is necessary to a Man, for the Conservation of the Individual and the Propagation of the Species, is his natural Right, which none can justly deprive him of: But all Property superfluous to such purposes is the Property of the Publick, who, by their Laws, have created it, and who may therefore by other Laws dispose of it, whenever the Welfare of the Publick shall demand such Disposition. He that does not like civil Society on these Terms, let him retire and live among Savages. He can have no right to the benefits of Society, who will not pay his Club toward the Support of it.”
Benjamin Franklin, a Founding Father of the United States, political theorist, politician, scientist, inventor, civic activist, statesman, diplomat, author, and printer. As a scientist and political theorist, he was a major figure in the American Enlightenment.