Nineteenth Century Ownership, Twentieth Century Taxes, Twenty-first Century Products

Ownership rules date back centuries but there is no reason these cannot be changed to match the changes we have seen by the twenty-first century. Similarly, taxation can be adapted and actually utilized to improve some aspects of society

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Laws and traditions change slowly, over the course of centuries. But technology determines many aspects of our social life and economic activities, so we may well have very outmoded laws and traditions, as compared to our economic activities. Perhaps this disconnection has grave impacts on any new socio-economic system we might try to invent.

Back in the nineteenth century, ownership was usually simple. One object or piece of real estate, one person. This pattern dates back for more centuries than records exist. There were often exceptions to this, such that a higher status person might simply demand the property, and it became that person’s. Furthermore, the king or a noble could have an objection to the property, for example if it was not being used, and take it away and give it to someone else. A disfavored person might have some or all of his property taken away. But in general, ownership was fully powered, in that you could do with it what you wanted. Real estate might have more conditions on ownership than personal property.

In the days when nobility owned much of the land, they all knew that a hungry population is a rebellious population, and in order to keep the social system intact, they needed to use land, especially farmland, productively. If someone did not do that, others could step in and take it over. Abandoned property could be taken over by someone who would use it, in line with the general principal that efficient use of resources promoted social stability.

The rise of trading companies changed the scope of ownership, but the same general principle remained. Efficient use of property promoted social stability. Trading companies could bring back resources from foreign nations or regions, and that would improve the standard of living in the home country. When manufacturing began to become large-scale, the same principle remained. A large company could produce more efficiently, and therefore promoted the general good. There was little social complaint back then about the accompanying fact that a few individuals could, through this mechanism, accumulate vast wealth. The complaints started when monopolies came into existence and companies, instead of being used to promote the general welfare, were used to depress the general welfare while enriching the few individuals on the top of the economic pyramid.

Even back in the days of nobility owning most of the property, it was clear that economic power equaled political power. The nobles with the greatest landholdings typically had the most influence over the king’s decisions, or even who became king. Sometimes this was done via military means, and other times simply political means. As economic power shifted from nobles to owners of companies and corporations, nothing changed except the use of military means declined.

The basic idea that economic ownership entails the responsibility to promote the general welfare still exists, but often it is only a slogan and an excuse, rather than a guiding principle. Technology has armed society with an array of ways to create new ways to have ownership, more in touch with this principle, but there is little activity in the direction of developing a new system based on them. Neither is there much activity in the direction of coupling human activity with appropriate compensation. Ownership of tools promotes efficiency of work, but ownership of great corporations has no justification based on the idea that each person should receive rewards in society as a measure of their own contributions. Instead, the value of high level people’s contributions is exaggerated out of all bounds, by factors of hundreds and thousands, and no equity in compensation exists.

The exaggeration of compensation, based on ownership rights, has been with us since the time of the nobility. Then as now, it fed the psychological state of the large owners. Ideas for distributed ownership would not have worked well then, as technology had not yet arranged for universal education, detailed record-keeping, excellent communication, and more, all of which make other alternatives possible.
One alternative is ownership of companies and corporations by employees. There is an obvious connection between ownership and motivation for working diligently and creatively. The same motivations that exist in modern corporations, if they live up to high standards, where employees who do well and improve efficiency or solve problems or otherwise contribute more than others are rewarded more, can be augmented by an ownership stake in the company or corporation.

Another means of distributed ownership is via large, possibly independent, agencies, responsible for absorbing part of the production of sectors of the economy, and investing in old or new companies in order to obtain returns on the money. Pension funds are examples of this process.

What is the possible rationale for maintaining the nineteenth century legacy of ownership rules that are not necessary in the twenty-first century, and which do not necessarily promote efficient use of production nor a just return for the effort expended by individuals. Tradition is nice, and has a role, but this is not one of them. Basically there is no justification whatsoever for our current rules for ownership.

Taxation has been around for thousands of years. The nobility, of whatever sort existed, taxed the wealth of others. The amount of tax was often chosen on the basis of how much an individual had, and of course there was always corruption, inequity, nepotism, and other social ills involved with it. The twentieth century saw the innovation of the income tax, which was supposed to be a more scientific way of taxing. Other taxes also were instituted in the twentieth century, notably the employment tax, where each employee and employer pay a tax which is supposedly used for an insurance or retirement fund. The previous type of tax, based on property, has remained around. Its main form has been on real estate, but taxes on other kinds of property are very common as well. Another category of tax is a transaction tax, in that tax is paid to some agency or organization whenever some trading, sale or possibly also exchanges, occurs. These three taxes are built around the idea of collecting money with the least objection by those taxed.

More recently taxes have been imposed, similar to transaction taxes or property taxes, on something the government wishes to discourage but not prohibit. The most famous of these is on tobacco. Very similar are criminal fines, which are imposed on individuals who do not follow the set of laws promulgated by a government agency. They have the same purpose as taxes to discourage certain activities, although there are other purposes as well, such as compensation for injuries.

Thus we have a large panoply of taxes, and fines, doing two things: raising money for the government to spend, and punishing activities that are illegal or discouraged. Taxes can also be used to correct flaws in our socioeconomic system. We do not have to restrict taxes to those legacy uses that the twentieth century bestowed upon us. Unearned income can be taxed and the money used, via a separate channel, for common uses not related to consumption. Wealth accruing from unearned income can be retroactively taxed in the same way.

One key to unearned income is the mass effect. Someone may do some work, create something, and have it reproduced at low cost thousands or millions of times, and the compensation the individual receives is based not on the amount of effort that was devoted to it, nor the level of talent or creativity involved, but instead on the multiplier that is used to produce the mass copies of it. There is no justification for this, other than some twentieth century legacy methods of compensation.

For example, someone can sing a song in a coffeeshop, and exert a certain amount of effort on it, and have a certain amount of talent. There would be some compensation for this. Another person can exert the same effort, have the same talent, but sing their song on mass media, and receive ten or a hundred or a thousand times as much compensation. Why? We do not need to preserve these rules for compensation when the mass effect kicks in. Effort and talent based compensation is enough to continue to motivate individuals to produce excellent work.

The same holds for all other kinds of effort that is swallowed up by the mass effect. This mass effect does not multiply the effort needed nor does it expand the talent involved. There is no connection between the effort and talent involved and the compensation involved when this mass effect takes over. In the twenty-first century this mass effect is becoming more and more common, and rewards are going out of balance more and more. The mass effect occurs in a large number of places, and is a complex phenomenon, but the basic point of it is that there are other ways, more efficient in the use of resources and just as motivating for those who care about their work, to compensate, without such gross disruptions of society that are caused by these huge disparities in rewards. Taxation, if taken out of the twentieth century framework, can be used delicately and precisely to correct the disruptions caused by the mass effect and bring society back to a more just and reasonable foundation. Similarly, ownership is tainted by the mass effect, and needs to be adjusted in a way that will promote long term benefits for our society.

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