A Piece of the Cake
The close link between property ownership and political stability in a democracy is undisputed.
However, today we find ourselves back in the late-18th century, where the more perceptive political economists had already reached this conclusion. That same prudential view of ownership and the risks of capital concentration resurfaced, of course, in the great era of social and financial reform from the end of the 19th century through the ’60s.
The question now is how to open the capital property system to those historically excluded from it. This is the vast majority of citizens, the historical propertyless, the ones Louis Kelso called the “hereditary poor”. They were poor, he said, because they did not own the things that produce material wealth in an advanced industrial society, in a word, productive property.
The catastrophe of 2008 has occasioned very little demand for radical financial, fiscal or ownership reforms.
Quite the opposite, in the aftermath of the crisis the financial behemoths once declared “too big to fail” have grown even bigger and richer while the ordinary citizen’s life has become more precarious than ever.
In Germany, for example, even before the meltdown in 2007 the richest 20% of the population owned 80% of all capital assets while 50% owned either no assets at all or had only “negative assets”, a euphemism for debt. Thus, even Germany’s social market economy constitutionally founded as a society of owners remains a society in which the majority of citizens own little or nothing.
At the same time, the German philosopher Peter Sloterdijk complains that “a good half of the population of every modern nation is made up of people with little or no income, who are exempt from taxes and live, to a large extent, off the other half of the population, which pays taxes.” Such, in his view, the unproductive increasingly live at the expense of the productive. He does not ask why half of the population is economically dependant on charity from the other half.
Why do a few own the material resources on which all depend?
Marx tried to account for this growing discrepancy between productiveness of input factors by attributing capital productiveness to labour. Machines he declared “work gratuitously, just like the forces furnished by nature without the help of man”. But nature does not gratuitously provide either capital instruments or confer ownership. Finance performs these functions. It does so by allocating capital credit needed for investment.
But there is a condition attached: to qualify for a capital acquisition loan the borrower must put up collateral as insurance that the loan will be repaid. Only the already rich can meet this condition. If the poor had the requisite assets, they would not be poor. Catch 22! Thus, working poor are invisibly but effectively shut out of acquiring the non-human things that produce more and more of industrial wealth. They remain caught in the labour productivity trap. The ongoing industrial revolution leaves them farther and farther behind.
Redistributive taxation, unpopular and inefficient as it is, becomes more and more necessary to support mass consumption and keep the labour dependent majority housed and fed. Governments per force must tax the wealth of those who have it.
The alternative to redistribution is a policy promoting asset formation and wider ownership.
The social ideal should be to make charity unnecessary by enabling people to produce their own living instead of leaving them to the mercies of public welfare. Welfare is humiliating and detrimental to human dignity, as you rightly point out — otherwise there would be no “working poor”.
That’s why every citizen has a rightful claim to A PIECE OF THE CAKE!