George W. Bush’s Ownership Society is a good idea. Regardless of whether you are conservative or liberal, Republican or Democrat, Red or Blue, widespread ownership of wealth producing capital should be considered an attractive goal.
Private ownership of wealth is the first premise of capitalism, and the bedrock of democracy. People that own nothing are powerless – subject to oppression and manipulation by politicians and clerics. Genuine democracy requires a population that is financially secure and independent.
The problem with the Bush proposal to privatize social security is not the cost. Borrowing money to invest is good business practice. It is done every day. That is what banks are for – to lend money for profitable investment. Money invested wisely pays dividends. It creates wealth. It pays salaries and generates profits. Money invested wisely in research and development improves productivity. This enables more wealth to be created at less cost, so that salaries can grow and profits increase while consumer prices fall and the environment is improved.
The problem with the Bush proposal is that it is too narrowly focused. It does not go far enough. The goal is too modest. The approach too limited to really achieve an ownership society, where the average citizen receives a substantial portion of their income from ownership of wealth property – i.e., from interest, rent, dividends, or capital gains.
If we are to achieve the ultimate ownership society, both the eligibility and the funding mechanisms need to be expanded far beyond the privatization of a small portion of the Social Security Trust Fund. To begin with, the Social Security system should be left alone. If there is enough economic growth over the next half century, Social Security will be financially sound for the indefinite future.
Two basic things are needed: increased investment, and increased saving.
- Increased funding for investment in technology development is needed to support an increase in the rate of productivity growth that will produce economic growth to payback the investment many times over.
- Increased savings is needed to prevent inflation during the investment-payback interval.
That is it. Increased investment in research and development, education and training, and in replacement of obsolete plant and equipment can produce substantial increases in the rate of productivity growth. This, in turn, can generate and sustain substantial increases in the rate of economic growth. Wise investment pays for itself many times over. This is the basic principle of capitalism that makes individuals and countries rich.
Increased savings can be achieved by a number of methods, but the most certain and fast acting mechanism would be a savings tax (similar to the current payroll tax for Social Security and Medicare) that would be indexed to the inflation rate. The biggest difference between a savings tax and the current payroll tax is that the savings tax would be put into individual savings accounts and would earn interest (perhaps tax free) at market rates.
This is an idea that has been around for almost 30 years. In 1976, I published a book called Peoples’ Capitalism: The Economics of the Robot Revolution. This was at the beginning of my scientific career in the study of robotics and intelligent systems. In those days, people had begun to worry about the potential impact of robots on society in general, and the manufacturing industries in particular. Reputable organizations were predicting that robots would completely replace humans in the manufacturing industries before the year 2000.
Peoples’ Capitalism was proposed as a means by which humans could live prosperous lives even in a world where wages and salaries paid to human labor would be diminished in importance. A method for generating the investments necessary to produce the required growth in productivity was proposed, along with the institutional mechanisms that would be required to finance these investments and distribute the benefits to individual citizens in an equitable and financially sound manner.
Unfortunately, this idea has been largely ignored for three decades. But in the context of the Ownership Society, it is more relevant today than ever before. Peoples’ Capitalism would create the ultimate ownership society wherein poverty would no longer exist, and prosperity would be universal.
Every Citizen a Capitalist
Every Person Financially Secure