Jul 30, 2016

How to share the profit of capitalism?

With big income inequality and the real threat of job loss, it is more and more pressing to explore how to share the profit of capitalism. For example, when robots drive our vehicles, who is going to share the profit from the robot companies?

Here is a list of how profit of capitalism has been shared:
  1. No sharing. The capitalists exploit as much as possible and keep the profit. 
  2. Total takeover. The capitalists are exiled. The state takes over. The state takes the profit. 
  3. Small scale sharing where some employees are given shares. 
  4. Government redistribution through income/wealth tax, and giving some, only some, of the tax to the poor. 
  5. Big scale government sharing of the profit for the government itself. The government sets up big sovereign wealth fund to invest, reaps profit and keeps the profit for itself. The profit of capitalism is shared between the capitalists and the government. 
  6. Big scale corruption. The politicians get oiled by the capitalists. Profit is shared between politicians and capitalists. 
  7. The government sets up big sovereign wealth fund to invest, reaps profit and keeps the profit for itself. At the same time, the politicians manage the sovereign wealth fund and pay themselves handsomely. The profit of capitalism is shared between the capitalists, the politicians and the government. 
  8. Big scale sharing of the profit with everybody. The government, as an agent of the citizens, invests huge money, reaps big profit, AND returns the profit to every citizen equally. 
In all these approaches except the last, the normal average citizen gets nothing.

In most of the current debate about poverty and inequality, people focus on point 4 --- how to tax the rich. While important, this is not enough and has very limited effect.

The last approach is the best. It makes everyone a capitalist. There is no limit on how much everyone can get. Carefully managed over the long term, it will not be impossible that everyone makes a annual profit of $20,000 or more from the sovereign wealth fund.

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