Here’s a serious problem with any Just Deserts economic scheme. In order to build factories and tractors and other stuff useful for the production of useful goods, there has to be some arrangement for this building. Somehow people have to mine the materials, process them into components, put them together and make the useful stuff. They want something in return for their effort. Perhaps they will take promises of future payment, but more likely they want payment concurrently with their work. So, where does it come from?
One way is for someone who has something of value stored somehow can use it to pay the workers. This we can call capital. If there is some new system of economic rewards, and nobody gets to be extremely well-off, how is this storing of value going to take place? To put it another way, rich people in the wild west system take their money and invest it in productive goods, which are then used to make useful goods. With a system that does not allow anyone to become extremely rich, what alternative methods would the system have to introduce to continue the production of useful capital?
In earlier times, the question was irrelevant. If someone needed something productive, like a pot or a spear, they could make it themselves, or barter something they had for whatever it was they needed. Besides self-help and bartering, an individual who needed something and had nothing to barter could expect a ‘big man’ of the clan to provide it as part of the trappings of his position, or a group would form to provide an early form of charity. Specialization came creeping in to these situations, with someone doing a bit more of spear-making or pottery than they needed for themselves, and theirs were better so they spent more time doing their specialty and less on the more generic tasks, relying on barter to fill any gaps. There was still no need for anything that might be called capital.
Once agriculture was in vogue, there had to be governance, which could control who tilled what fields and who reaped what fields, and who received the crops. The governance could be a continuous thing, making on-the-spot decisions every time something had to be done, or it could simply lead to customs and later rules, so someone might be attached to a particular field and do everything needed to bring in the crops, together with whatever shared work contributed to it, such as irrigation. Once the love of one’s children and the generalization of providing for them became amalgamated with governance of the agricultural areas, inheritance can begin, and then capital exists, but only in the form of real estate.
Differential productivity and acquisitiveness can play a role in establishing wealth. If the bartering process does not lead to a roughly equal distribution of goods, because of the productivity of some specialist craftsmen or hunters or farmers, and if they choose to be motivated by personal gain or desire for familial gain, they can orchestrate the bartering arrangements to grow wealthy. If the governance people do not step in to prevent this, wealth will become disparate in the area of personal property, assuming that is accepted by the clan.
Even as early as primitive agricultural times, the dominant feedback loop relating to wealth and governance can start to churn. Those who have wealth and are motivated more by acquisitiveness than charity or the ‘big man’ tradition, can make arrangements with those who govern if they are also so motivated. Rules and decisions by those in governance can favor gradual increases in disparity, provided those in governance share in the bounty.
Thus capital formation can be surmised to have occurred several millennia ago, in primitive tribes, once greed becomes more dominant in a small subset of the population of a small cohesive group than the earlier traditions of caring for all. Since there is a tremendously strong feedback loop to increase it once it does become established, there is no question as to why it still exists despite all the transformations that civilization has seen pass by.
Other psychological processes aid in its persistence, such as the imitation of those who are in charge of governing. Once they adopt the habit of increasing their wealth, charity and gifting those less fortunate become less dominant in the minds of successive generations. This is especially true of those who are most subject to this example, the children of the governed and the wealthy. Whether or not it becomes a universal goal is not too important, as long as the general population becomes accepting of that. And this particular transformation brings in a third specialty group, the theologians or teachers or whoever is responsible for promulgating the cultural traditions. They may also become part of the subset which becomes wealthiest or may only be in a lesser tier, but they provide acceptance of this practice in the minds of the large body of population, and thus disparity, meaning the accumulation of privately controlled capital, can continue to exist and at times grow.
Step forward in time, and the realization that capital used productively can assist in the accumulation of wealth, in the minds of those who favor it, can lead to the growth of the prosperity of the group, or the larger organization if groups have become associated into cities or something even larger. Providing all the hunters with spears which fly straight and don’t break means hunting is more productive. Providing all farmers with seeds and implements means more crops. Dwellings, once they become non-nomadic, can become more robust and comfortable, and convenient for such things as storing grain, another form of wealth accumulation.
As the association of groups becomes larger, the feedback loop for wealth accumulation develops even more disparity, and the use of wealth as productive capital sets up another feedback loop to increase disparity even more. These are very natural loops, based on human mental patterns, which indicates why they exist everywhere and in all time periods. There should be no illusions that something so fundamental can be eliminated or replaced. The most that can be hoped for with a Just Deserts economic system or any other is the modification of it, so the same basic human instincts can be satisfied, but not to the degree that the earlier systems have allowed. The two natural feedback loops must continue to work, but there needs to be some siphoning of the results of them which does not break down their functioning.
There are two avenues which can be invented to preserve the formation of capital, which is essential to the improvement of prosperity of the population involved. Would they actually work?
One is to simply reduce the effects of the feedback loops by something like a tax. Could a tax be designed so that the generation of productive capital is not diminished, while reducing disparity? Quite possibly, disparity reduction will have its own collateral effects in the generation of more productive capital, but would that compensate for the loss of productive capital in the original holders of wealth?
Consider a snapshot in time. Some productive capital exists and serves to increase the prosperity of the population. Much of the prosperity goes to the wealthy subset of the population, where it is turned into both unproductive capital, meaning consumption of luxury or things analogous, and productive capital, meaning that which can be used to promote future prosperity. If the unproductive capital is taxed highly, but not prohibited, that might not reduce the generation of productive capital. Some unproductive capital is needed to continue the motivation of the wealthy to generate more. Thus, one possible mechanism is the taxation in some appropriate way of non-productive use of capital, but not to a prohibitive level. This might be done by some progressive scheme.
The second way would be to accumulate capital directly at the source, such as a tax on output. This would reduce the total amount flowing to both the wealthy and the remainder of the population, but perhaps not affect disparity as much as the first way. However, this method diverts some output to the control of those involved in governance, who are participants in the wealth disparity system engendered by the two feedback loops. It divides up the wealthy into two classes, one of which has more access to large amounts of capital than the other. The first scheme does the same, possibly in a different mechanism, in that taxes on non-productive uses of capital must go somewhere, most likely controlled those in governance, and this opens the door to similar misuse.
Both schemes for better use of the output of productive enterprise suffer from the same failings. One is that a smaller group of potentially wealthy individuals gain control over much more of the output of productive activity. Another related one is that, beside diversion into corrupt loopholes, the utility of the taxed or diverted capital might not be as high as if some highly motivated individuals, highly trained as well, were in charge of it. Something else must be found or some further adaptations of the two schemes mentioned here need to be concocted.
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