| >> the growth rate is naturally a multiple of the labor growth rate
> There's nothing natural about it How to say it differently? We've previously agreed that capital must have positive returns (discount rate/time value of money). Labor gains do not compound (each year, I can only provide 1 year of labor. Gains from labor not consumed become capital for future investment). Capital gains do compound (next year, I have original capital plus capital gains plus labor gains minus consumption to invest). Compounding naturally leads to higher rates of growth for capital than for labor, because compounding multiplies productivity and inflation gains of labor, and surplus gains from labor also become capital. Propose a different system, please, preferably one that has a demonstrated history of raising hundreds of millions of people out of poverty. > In that very particular and thoroughly unrealistic case, I would say no. Good, now we have a starting point. We have established that some inequality is allowable and natural, and is caused by saving funds rather than spending on current consumption. Now how about if we allow capital gains that just offset inflation? (Still good, right? no need for more taxes?) How about capital gains that just match the time-value-of-money/discount rate? (I'd still say Society has claimed its predefined share, but you may differ - fine, introduce capital gains taxes) How about if I let Henry Ford use the money for 40 years to make his factories more productive (4X), double his workers wages (2X one year, voluntarily), give his customers discounts (model N was $3000, Model T dropped from $850 to $300), largely create the American middle class, and pay lots of taxes to the government as a company, as workers, as the owner of the company, and as capital gains? Ford paid 100% of initial capital as dividends in the first year (https://www.quora.com/How-did-Henry-Ford-start-Ford-Motor-Co...). That's the kind of return that generates great wealth for investors and society (or obscene wealth, if you prefer). And if it turns out that left me with, say, 200 billion dollars (Henry Ford net worth adjusted for inflation), what did I do wrong? How did it become immoral or unfair that Henry Ford paid all the taxes society required (up-front and as capital gains) while making every party better off (customers, workers, even non-parties to the transactions who benefit from the tax revenue or make money off all those worker wages)? Please identify at what point that turned against the welfare of society? Why would having 100 or 10,000 Henry Fords that provide similar benefits to hundreds of thousands of people (and reap similar $200 billion rewards) be a bad thing, even if they could each individually buy a mega yacht or two? Is it by crossing some arbitrary wealth threshold? Or just when spending some of that accumulated wealth - maybe it was when Ford bought a yacht in 1917 https://www.thehenryford.org/collections-and-research/digita... It was at least partly for business purposes, so maybe he got a tax deduction. Can't find length or cost on it, so I can't tell if it crossed that 250'/$275M immoral line. Sorry. |
No, we have not. It might have positive returns, but then again it might not. There's certainly no reason for society to help it along.
> Propose a different system, please
You're trying to set up a false dichotomy here, between a system in which capital is absolutely unfettered and privileged relative to labor, vs. a welfare society where capital is not allowed to exist. Yet another dishonest freshman-debate tactic. Here in reality, there's a whole range of tax and other legal choices under which capital can still flourish without turning into oligarchy.
> How did it become immoral or unfair that Henry Ford paid all the taxes society required
Are you unaware of how Henry Ford and others like him were helped along by the government? Where did his raw resources come from, and under what property-rights regime were they mined from the commons? On what publicly subsidized transportation systems did those raw materials reach him? Most egregiously, who was paying the goons who broke union leaders' heads to keep labor costs down? The "taxes society required" were a bargain compared to the value received and externalities allowed. As great as Henry Ford might have been, if he had been taxed appropriately in the first place he wouldn't have been nearly as rich. Even more to the point, his offspring who had never had to earn their massive wealth in a meritocratic free market would not have been able to extend that wealth into a true dynasty.
I have no problem at all with people getting just as rich as they want through fair trade. What I do have a problem with is whole dynasties persisting because of corruption, privilege, and ignored externalities. In a real free market billion-dollar fortunes would still be possible, but they'd be rare and temporary.