[Company Logo Image]

Home | What's New | Feedback | Help

Capital is concentrated

In Capitalism there is labor and capital. Capital supplies the ability to fund improvements in productivity. Improvements in productivity provides the ability to increase capital. In the extreme case there would be no need for labor. Everything could be automated and everyone could spend their time pursuing leisure.

While waiting for that day to come, we need to decide how to distribute the benefits of the increases in productivity. We could spread the benefits uniformly to everyone - communism. Or we could concentrate the increases in capital into the hands of the individuals who achieve the most increase in productivity. Or, we could strive to achieve some middle position in order to maximize the rate of improvement in productivity.

Who drives innovation? The very poor have a hard time getting sufficient resources to drive change. The very rich achieve very little marginal reward from innovation. It is those in the middle who have the most to gain by innovation. Therefore, in order to achieve maximum improvements in productivity, society should strive for a small number of people at the extremes and maximize the number of people in the middle class - those with both the ability and the need to innovate.

How do we organize things to spread the wealth in an optimum manner? Let's design the system for a zero growth world. Let's design the system for responsible individuals.

In a zero growth system, the individual needs to save sufficient capital to fund their retirement years and to repay society for their early childhood support. So, on average everyone needs to support about three people - their working self, their retired self and their childhood self. Since everyone is not responsible, we need rules which require everyone to do the responsible thing.

So, if everyone is required to save into a 401K type retirement account during their working years and if that 401K account is invested in part into the stock market to provide funds to support the growth of business and innovation, then we should be able to maximize the rate of improvement in productivity.

If in addition, we remove the tax on dividend income up to an increasing limit, we allow anyone able and willing to save into the stock market to reap the rewards of both labor and capital.

Send mail to webmaster@KwBSolutions.com with questions or comments about this web site.
Copyright © 2006 - 2009 Knowledge Based Solutions