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Ethical Wealth Distribution within Capitalism

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The notable Nobel Laureate Michael Spense in a joint study with Sandile Hiatshayo stated, “Capitalism is Failing US Middle Class”. The revelation made in April 2011 to the Council on Foreign Relations, long suspected by the rank and file on Main Street is now reluctantly being acknowledged by “mainstream” economists.

In a similar observation, United Nations in a study released 5 December, 2006, titled “The World Distribution of Household Wealth”, observed: “The richest 2% of adults in the world own more than half of global household wealth. The richest 1% of adults alone owned 40% of the world’s assets in the year 2000, and that the richest 10% of adults accounted for 80% of the world total. In contrast the bottom half of the world adult population owned barely 1% of global wealth.”
 
What is wrong with the picture? Is there anything wrong with the picture ? Absolutely!This sounds like a pyramid scheme whereby the base at the bottom bears the brunt of the efforts while the rewards congregate at the top. It is time for the dreaded “C” word, Communism. Any mention of upliftment for the base of the pyramid is immediately
countered by the C word and proponents of change silenced, be it state funded Health Care, Education or Pension Plans, they are all deemed Communist by the torch bearers of Adam Smith. Let me punch the elephant out of the room and set the record straight by differentiating between the two “C’s”, the “evil” Communism and “glorious” Capitalism.
 
Under Communism property is State Owned and disbursements made according to need with guaranteed returns but low incentives giving rise to inefficiencies and lack of innovation. Under Capitalism, property is owned by private owners free to enter and exit markets at will, giving rise to innovation, efficiencies and growth.
 
That brings us to the question of what is wrong with the two “C’s”, and what should be the function of governments. In short, both Communism and Capitalism ignores basic human weaknesses. Greed, jealousy, anger and fear. Communism failed because its proponents believed all humans are altruistic and would whole heartedly toil for progress if guaranteed basic necessities. Once the basics were guaranteed, humans lost incentive to produce and inefficiencies crept in with few sparks of innovation by the technocrats and intellectual elite. Under Capitalism, scarcity and demand is key to churning basic human emotions to propel competition at the bottom of the pyramid by the owners of Capital at top, with all spoils of growth making a beeline to the C-Suite, with false promises of prosperity “trickling down” and raising all boats at the bottom of the pyramid. Now coming to the question of the “function” of the government” should it not in reality be a government “of the people, by the people, for the people”, and should guarantee, Liberty, Equality and Justice of all forms , including economic, for all its citizens.
 
This is not happening now. Democracies, the ideally glorified form of government, capable of accommodating both Communism and Capitalism, no longer belong to the people and has almost become a charade like a TV game show.
Citizens vote to vent their frustration in yearly cycles, the actors change while the stage remains. The stage of
Capitalist Democracies and Unethical Distribution of Wealth. Why else would politicians spend millions to run for offices that pay a few thousand. The answer is obvious. The millions are a high stakes bid to win a jackpot with a high stakes return, that of many millions more in an election cycle before a new actor takes center stage with promises of change for an assured payoff from the top. This charade and cycle of Capitalism and Democracy is inherently unjust and an open secret. A fate that befell Communism, before its fall is ominously on horizon for Capitalist Democracies as well. That of access to wealth of a privileged few and a shrinking middle class with increasing polarization and discontent.
How can wealth be distributed ethically among all participants in an economy that is productive and efficient ? To answer that question, I ask how much is a human life worth ? How inequitable is the distribution of wealth ? How important is a particular cog in the wheel ? Let us begin with the premise that all humans are of equal worth though they may possess varying skills and capabilities. If all humans are of “equal” worth,should not wealth be distributed among all citizens equally ? This is where the reward system of Capitalism comes in. Incentives can vary to encourage productivity, but not to the detriment of the greater good of the society. How ? I would suggest by quantifying a just ratio for the distribution of wealth in a Capitalist Democracy. There is a minimum
wage floor for all participants in a labor market but no maximum compensation limit ! As such the bottom of the pyramid ekes out a living surviving on crumbs while the party is alive and well in the penthouse.
So what should be the Maximum Compensation Limit, and how should wealth be distributed ? Given the average life span and productivity cycle of a Homo Sapien it is quite liberal to assume a hard working individual should have to work no more than 45 years in a lifetime, that between the ages of 21 to 66. That being the case, no one
individual in an organization with employer-employee relationships should receive total annual compensation from all forms in a year exceeding 45 times the pay of the lowest paid individual in that organization. Whoa ! That’s a Maximum Wage Ceiling, 1:45,quite liberal I must say, but still not enough for the bottomless pit of desire of those at thetop. So, the Top paid employee/owner of an organization can only get paid an amount annually that the lowest paid cog in the wheel can hope to earn in a lifetime. Fair ?
Iwould say so. No matter how hot shot a Brain Surgeon, Rocket Scientist or CEO one may be their efforts are quantifiably only 45 times better than the housekeeper, cook or the gardener. Why ? Because it is the housekeeper, the cook and the gardener with their capabilities that enables members with higher capabilities pursue their specialties.
A ratio within the 1:45 framework can be set for all occupations within an organizationsubject to Minimum Wage Floors, with raises or pay cuts being directly tied to thebottom line of a company across board. This would not only ensure a just and equitable distribution of wealth within a Capitalist Democratic framework, but would also preventmany C-suite ills like insider trading, excessive risk taking, economic boom and bust cycles, recession and layoffs. Just by government quantifying and putting a lid on one of the most destructive of all human emotions, excessive greed a paradigm shift can occur within Capitalism. In the long term sensible growth, consumption and productivity

will not only be beneficial to ensure social stability, but will be also be instrumental in eliminating poverty and prompting environmentally sound business growth with the greater good in mind.
 

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