Monday, 2 February 2015

Feudalism and capitalism

Anyone who seriously declared themselves a supporter of feudalism would rightly be laughed out of whatever room they were in. The idea that people should obtain a higher or lower position in society solely because of their parents is horrendous. It does not treat people properly, let alone equally. Furthermore, it does not give foster equal opportunity and is an inefficient way to use talent and resources.

However, while capitalism is contrasted with feudalism as an economic model it seems that some of the problematic aspects of feudalism lived on. A recent journal article, summarised in a guardian article, has shown that most wealth gets passed on, along with other types of privilege that go with it.

Perhaps (ignorant historical conjecture klaxon) as part of the bargain in the slow transition from one type of economy to the next the fact that capitalism allowed the transfer of wealth and resources through generations. This meant that those who were wealthy could continue to pass on their wealth.

So there is a certain similarity be`tween free-market capitalism and feudalism where people are free to pass on privilege. The libertarian ideal of even less regulation and taxation does not seem likely to interfere with the passing on of wealth – it actively allows it even more than current societies. So what are the alternatives?

Anti-capitalist egalitarians might want to make it impossible for some to have more than others, and support the removal of the market economy in order to achieve this.

Supporters of meritocracy might want to remove the opportunity for people to obtain anything unless they have earned in (what they consider to be) the appropriate manner. Markets would be highly important for the purpose of determining what people should obtain, but they should not be able to pass on that wealth.

What the two views above often share is a distaste for the passing on of wealth. Those who wish to pass on their wealth are violating the ideals of either social equality or just deserts.

These views are far too extreme, however. Wanting to live in a fair society should not mean you should not desire to help those you love and care about. Whatever the source of this motivation, it does not seem to be a bad thing to want to help another person, even though it is often a very partial and economically inefficient position to take.

The liberal egalitarian approach that I take steers the right course through all these waters. As well as allowing people to act on their legitimate desire to give to others

Nevertheless it is right to tax resource transfers which are gifts between private individuals at highly progressive rates. Those who benefit the most from such transfers should pay a lot of tax on such transfers. The main reason is that this is a very good form of tax revenue—it does not stop people from working and investing if they are taxed on unearned wealth. Indeed, you would expect people to work and invest more if they are less confident of getting hold of significant familial support. Plus the people who benefit from large unearned transfers are (by definition) very fortunate people who can and should pay a lot more in tax than those less fortunate than them.

As a further advantage, taxing all such gifts would make the positions in society open more on the basis of talent and effort rather than family support.

The main point I wish to make in this blog is that while I argue for my CLIPH-rate tax proposal from a liberal egalitarian basis it actually mimics a lot of the features of the meritocratic one. By taxing all income including gifts and inheritances, and taxing unearned income at a higher rate than earned income, it should generate a highly meritocratic society.

I also believe it would generate an egalitarian society where everyone interacts as equals, though again this desire is not my own primary motivation for supporting the proposal.

The CLIPH-rate tax is therefore a form of capitalism that would truly break away from the vestiges of the old order and its hierarchies. 


dougbamford said...

I hope to discuss desert a lot more in the future.

I also wanted to note that asserting that there is nothing wrong with the desire to help loved ones does not commit me to a quite ridiculous right-wing argument:
That it is ‘natural’ to want to help your family members and as a result it is therefore wrong to interfere with this process with taxation.

This is a terrible argument firstly because it is always a good idea to be wary of any argument featuring appeals to what is ‘natural’ as what is natural is not always going to be a good thing all things considered. Second, the tax system should not just be designed to allow people to do what they ‘naturally’ want to do.

I put the above argument in a comment in the hope that it is against a straw man rather than a serious view that people hold.

Physiocrat said...

What is actually passed on it land title. Nothing else has an enduring ability to generate a revenue stream from generation to generation. Buildings and machines ie capital, decay or become obsolescent.

Bearing in mind that a land title is a bundle of rights granted by government and protected by government, it seems only natural that people should pay for the value of those rights.

dougbamford said...

Henry, yes, feudalism was mostly about land. But extend your argument, bearing in mind the fact that other types of thing have enduring value (shares, bonds, artworks, savings accounts, jewellery - if they are looked after to a minimal degree).

In that case people should pay for the value of those rights as well?

The most valuable companies in the world are technology companies which do not own a lot of land - they own patents and brands. They can make a lot of money. I think you should update your economic theories so they reflect this century and not the 18th.

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