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The Social Contract in a Dignitarian Society

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Today, working conditions in the overseas plants of global corporations are coming under similar scrutiny. It's not much of a stretch to imagine this kind of awareness being focused on the plight of the "nickel and dimed" in the United States. Once it is widely understood that the working poor are involuntary benefactors of society, acceptance of this injustice could change just as the world's tolerance for apartheid did. Feeling indebted to people who are less well off is not something that many are comfortable with.

In addition to having an equitable system of compensation, a dignitarian society would be one in which most people owned property. On the face of it, this would seem to require some redistribution of assets, and historically this has led to social unrest if not violence. But if instead of attempting any kind of wholesale reallocation of wealth we limit ourselves to tax policies that gradually effect a marginal shift, we may be able to chart a nonviolent democratic path to a society in which everyone has an honest chance to realize the proverbial American dream.

One thing is certain: inclusion works, exclusion doesn't. Equal opportunity is the path to inclusion while rankism is an instrument of exclusion. Systematically removing the rankist barriers that imprison the underclass is the counterpart of removing the segregationist laws that for so long kept people of color out of the mainstream.

Models of "Democratic Capitalism"

Following in the footsteps of Thomas Paine, who was among the first to advocate that society had an obligation to address material inequality and poverty through a system of public welfare, many political thinkers have suggested mechanisms of economic inclusion. The following paragraphs present several such possibilities. But more important than the details of any particular plan is the commitment to finding and implementing one. As Paine argued in Agrarian Justice, written in 1797, societies in which it is virtually impossible to escape from poverty forfeit not only social cohesiveness but also moral leadership.

It is wrong to say God made both rich and poor. He made only male and female; and He gave them the earth for their inheritance. Payments [from the national fund are to] be made to every person, rich or poor. It is best to make it so, to prevent invidious distinctions....[Those who] do not choose to receive it can throw it into the common fund.

In his forthcoming book Re-Birth of a Nation: American Identity and the Culture Wars, Richard Baldwin gives new impetus to the idea that political independence has to be rooted in economic independence. Baldwin's proposal, which incorporates aspects of several other plans, calls for the establishment of Individual Capital Endowments (ICEs) for the young. In his vision, every child is taught money management--perhaps even to run a model business--as part of primary and secondary school education. (Finally, a compelling reason to learn arithmetic!)

On reaching adulthood at age eighteen, everyone is provided with enough capital resources to pay for a college education or start a business and to make a down payment on a home. Baldwin's basic thesis is that the way to end de facto segregation under which the poor suffer is to train all young people to be capitalists.

Baldwin's ICEs are modeled on Michael Sherraden's Individual Development Accounts (IDAs), which in turn are based on the now ubiquitous IRAs. IDAs grow over time with the goal of ensuring that every household has a stake in society and a cushion against unemployment or illness. In the same spirit, Bruce Ackerman and Ann Alstott, in their book The Stakeholder Society, have proposed that as Americans reach adulthood they receive a onetime grant of $80,000 financed by a tax on the nation's accumulated assets.

All these plans give expression to the dignitarian principle that everyone's success is dependent on contributions from untold others and that accordingly, everyone is obligated to contribute to a fair starting point for everyone else. This idea is analogous to the principle of revenue sharing in professional sports, which levels the playing field by offsetting the advantages that accrue to wealthier teams.

The major issue that any such program must confront is funding. I include an excerpt from Richard Baldwin's proposal not because it's the answer (there cannot be any definitive answer absent a dignitarian process), but rather to suggest that economically feasible solutions do exist and to start a conversation that can lead to one that is politically acceptable. Baldwin calls his plan democratic capitalism.

What distinguished America as a very young nation was the almost universal possession of capital assets by immigrants of European origin. The primary domestic function of the federal government before the Civil War was to provide sufficient capital, in the form of land, to underwrite the economic independence of families. Subsequent examples of governmental transfer of capital to individuals are the Homestead Act and the GI Bill.

A modern proposal along these lines is Individual Capital Endowments, which would be allotted to each child at birth. A reasonable sum might be the cost of tuition for a four-year postsecondary education at a state university plus the equivalent of a 10 percent down payment on a median-priced home. Under present conditions, that would require about $200 billion annually--a substantial investment but manageable for the American economy.

One source of funding for the program would be estate taxes, which at current levels provide about $30 billion a year, 15 percent of the total needed. Estate taxes are out of fashion but if we seriously want to create a dignitarian society, we need to reconsider them. No matter how brilliant and hard-working an individual effort is, capital accumulation is always to some degree a public creation built in part on contributions from others. It is therefore appropriate that a portion of it be shared with society. This applies to any accumulation of assets, no matter how large or small. In particular, there is no reason that a progressive reform of the estate tax could not yield 25 percent of the annual funding needed for [Individual] Capital Endowments.

Approximately 50 percent could come from non-tax dollars. Every corporation with publicly traded stock would annually contribute 1 percent of its total outstanding shares at the end of the prior year. The final 25 percent would come from taxes levied on privately held productive capital assets such as closely held companies and real estate--a "wealth tax" rather like that proposed in Ackerman and Alstott's The Stakeholder Society.

This mode of financing the program would produce a gradual, systematic, and broadly based redistribution of assets without punitive taxation or serious disruption of financial markets. Over a period of 20 to 30 years, the cumulative shift of assets would reach socially significant proportions.

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... by Robert Fuller on Tuesday, Oct 29, 2013 at 4:56:26 PM
Why do people talk about "inequality", in the face... by Ad Du on Tuesday, Oct 29, 2013 at 9:53:45 PM
 "No matter how brilliant and hard-working ... by Ad Du on Tuesday, Oct 29, 2013 at 9:42:45 PM
The Belief in SignificanceI do not have a lot of t... by Eric Lucas on Wednesday, Oct 30, 2013 at 3:53:39 AM