Spreading the wealth - Is it moral, Or is it just the right thing to do?

Posted by admin on 2008 October 25

Obama makes an offhand comment about “spreading the wealth,” or as they say in Alaska “spreadin’ the wealth,” of which McCain is making hay as well you might expect. And not a bad argument he has, he speaking of growing opportunity instead, but of course his own health care plan requires almost the same redistribution of wealth as Obama’s tax plan.

It’s a valid moral question, and it’s right that we should ask: is it right to take a higher fraction of a person’s income for taxes as said income grows higher and higher? In my heart I have suspected that it is right, and moral to do so, and not only because society would surely crumble in the absence of this practice. But never until now have I begun to see why it is right, now in this post-derivatives world, where we have found out what our money is really made of.

In a nutshell, people were printing money. Counterfeiting you might call it, only legally, and on a scale never imagined by small time operators like Al Capone. The irony of virtual cash, begun as a way to ease the fall of the Dotcom boom, made possible only by the tools of that boom itself, because none of these exotic financial “instruments” would be possible without computers and the Internet.

I had always suspected that extreme wealth was a kind of accident of our society and our systems, and now I have a foothold onto a theory as a result of the calamity that threatens to bring our society and our systems to a halt.

Imagine you’re a single person in the world, with no communication or contact with anyone else. How wealthy could you be? You could never be as wealthy as Bill Gates, the only wealth you could amass would be as much food as you could gather or kill for as long as you could keep it from going bad. You would have no money, money is only useful for trade, otherwise it doesn’t exist, not even in the form of gold.

You wouldn’t even have sex!

Now imagine there are two people, you and someone else, of the gender you prefer, one would hope. Now you can have a little more wealth. The two of you can help each other get food, you can have sex. You don’t need money, simple trade will suffice. Life is a bit easier than when you were one, this is the beginning of societal wealth.

Once you get up to be a tribe, everyone can be wealthier still. Division of labor means people can start focusing on what they’re good at and trading the products of their skills with others, so everyone has more spare time, more security, more sex.

At the village level, you get even more of all of that, and now you start needing a little money to keep track of transactions. The richest man may have a dozen wives and hundreds of cattle. This kind of wealth would simply be impossible if he were a single man in the wilderness, yet he often believes he owes his success to no one, that it’s all his hard work and prowess - he equates his wealth with his success, though his wealth is partly the symbol of his success.

As society grows larger, money is more and more important. It acquires rules of its own, and a life of its own. It becomes a powerful tool society uses to get things done. Some people are good at understanding and working within the rules of money, and some people learn how to use it as a proxy for war and domination.

In Ancient Roman times, noble families held most of the wealth. Their families had started Rome, and owned most of the land and wielded almost all of the power. To be in the Senate, a man had to have a certain amount of land and a certain amount of money. In the beginning, a man even had to buy his way into the Army, owning most of his own weaponry and supplies, and his own donkey or mule to transport it.

This was because the Army was used by the State to go out and take wealth from other people. Most of that wealth was in the form of gold and silver, and most of it went directly to Rome, with the rest of it going as booty to the general, who divided it among his armies according to the heirarchy of their service. The Roman Senate, in turn, stored some of the spoils of war, spent some on public works, some on maintaining stable markets for food, some on the masses to help them stay fed and entertained, and then the rest went into more conquests.

But money wasn’t the only measure of a Roman’s wealth. The Roman’s invented a cultural wealth called auctoritas, which was a measure of a man’s prestige and influence. A large portion of auctoritas came simply with family, the oldest noble families generally having the most of it, though it also depended on wisdom, judgement and works. A man could generate a great deal of auctoritas for himself and future generations by spending his wealth on public works, like roads, theaters, temples, etc. He could also lose auctoritas by not spending money on games and feasts for the People.

Men could amass huge fortunes in a number of ways. Noble families owned income generating properties, but sometimes even noble families would fall on hard times. Marriage to a noble daughter could increase a newcomer’s auctoritas, and such marriages therefore were bought for a high price. A man good at leading armies could get money by stealing it from neighboring countries, and as a governor a man could confiscate taxes for himself. Some men loaned money, but charging interest was looked down on and could cost a measure of auctoritas.

Marcus Licinius Crassus, one of the richest men toward the end of the Republic, loaned money but never charged interest. He preferred to loan money for political favors, or even to have his debtors default so he could acquire collateral property to sell at a profit. Crassus invented some of the first modern fire brigade techniques to enhance his speculation in real estate. If there were a fire raging in the city, he would buy up land ahead of the fire at a cheap price, and then send in his teams of fire fighters to save the properties which he could then sell at a large profit.

Marcus Junius Brutus was heir to the infamous Gold of Tolosa, which had been stolen from Rome (which had in turn stolen it from the Tectosages) by Quintus Servilius Caepio. Brutus made a large fortune enormous by lending money at exorbitant rates, and also by maintaining armament factories in northen Italia (if I recall correctly). Neither of these were considered acceptable ways for a patrician to make money. And it’s a good thing they did frown on usury, because if everyone had been doing it, their monetary system would not have been able to sustain it.

The wealth of these men was only made possible by their society, and by the systems their society developed to maintain and enhance itself. And a large part of their wealth, in my opinion, was only possible because of their manipulation of the system.

Now today we have seen that kind of manipulation magnified by many orders of magnitude. The kind of money people have been making off of subprime mortgages, hedge funds, derivatives, and credit default swaps is obviously a glitch in the system. Most of it is imaginary money that never existed. Some people were able to convert that money into real goods because everyone trusted it for a while. But in the end, they were no different from counterfeiters: they printed their own money, backed by nothing.

My story has gone from zero societal money to billions of dollars of societal money, and it’s clear that people gain a financial benefit merely by being a member of society with all its rules and customs about money and property. Anyone who is a US citizen who thinks they alone are responsible for their own fortune has forgotten what the word “fortune” means. Without society, they would be just a hapless person in the wilderness.

It’s also clear, to me anyway, that there is such a thing as systemic money, money that only is available because of quirks in the system, money that some people are able to tap because they know how to game the quirks of the system, or because they are simply fortunate enough to benefit from those quirks.

In light of this, it seems right to have a progressive income tax because as a person’s income increases, so does the fraction of systemic money in that income, money that needs to be skimmed off and put back into the system for the health of society, because it comes from society.

In the absence of data or formulae, this sounds like rationalization, fitting the facts to the theory rather than finding out what’s really happening. But I think I’m onto something here. I don’t know how to go about proving it, or even how to measure this “systemic” money. I don’t even know how much of my own income is systemic compared to someone who makes half as much or twice as much as I do.

But having found the limits, we ought to be able to find a curve that fits in between those limits. It may not even be proportional to the total income, but more to where that income comes from. And there are other reasons to impose higher rates on much higher incomes. Society has an interest in fostering business creation and growth, but no society can last very long by allowing the wealth gap to increase year after year.

In the end, this is why we must have a progressive income tax, and my theory is only a tool for arriving at a just and fair equation for how to do that. If only I could turn it into an actual theory with actual equations.