Distributive Capitalism explained

I suspect I will forever regret having named my economic theory ‘Distributive Capitalism’ because of what the name implies.  It implies wealth redistribution, but it is actually a wealth creation concept.

Under wealth redistribution efforts money is taken from one group of people that produces and is given to others who do not.  It has the effect of motivating people to not work, since they can count on an endless supply from ‘other people’s money.’  Yet, as Margret Thatcher once noted, ‘at some point you run out of other people’s money.’  So it is with the United States and by default Puerto Rico.

Third, fourth and fifth generation welfare recipients have no idea what it means to work for a living.  They have lost all concept of self discipline and cause and effect.  For them, government is an ATM machine and if it is broken, its because someone (usually the ‘rich’) are stealing from them.  I am of the mind that you cannot claim theft of something you did not own, nor were entitled too in the first place.

Distributive Capitalism (DC) is essentially a system designed to wean people off of the entitlement mentality, while cutting the cost of government and teaching people how to fend for themselves again.  It is a bridge from where we are today, to where we should be; a world where social programs are a thing of the past, because they are no longer needed.

DC has a few moving parts, which can be adapted to fit most small or medium size countries, maybe even some large ones.

1- A national investment trust.

2-Personal savings and retirement accounts

3- A service requirement for those able.

Starting with the latter, any person wishing to participate in the program (it is completely voluntary, unlike wealth redistribution); must provide service to the government at zero cost or extremely low wages.  Not minimum wage mind you, but a mark much lower than that.  The time in service is not intended to be where you make your money, the time in service is intended to help government save money, while continuing to provide basic services.

It is also a basic training program in self sufficiency.  If you want to receive money from the trust, you have to earn it by helping the government save money, by offering service.

In every government office there is someone today being paid a wage or salary for doing nothing more than just answering the phone.  Office buildings need to be painted, furniture needs to be moved, streets need to be cleaned, garbage picked up and other basic low skill maintenance work that needs to be done.  All of this costs money or perhaps better said, costs taxpayers’ money.

In a service program, average citizens would spend one weekend (or two week days/nights) a month and two other weeks out of the year working in one of these jobs.  The service hours concept is obviously stolen from the National Guard and Reserves.  Actual training for disaster response and assistance would also be included.  Those providing service must do so for a number of years.  The result is, a good portion of the work done by government, would be done by these volunteers or extremely low waged persons.  This would not be their full time job.

Those whose full time jobs intersect with service jobs like Guard and Reserve components, active duty military and police and firefighters; could be given credit automatically or during low wage hours only.  That part is flexible.  Those offering reserve duty in ‘combatant’ or ‘under fire’ scenarios, should be granted credit for that work automatically to encourage more people to support critical services.  Those in service in under fire or combatant positions should be given double the credits or shares for the same hours than non-combatants.  This includes police and fire fighters.

For each year of completed minimum service each person receives a ‘credit’ or ‘share’ in the national trust.  The more credits you have the more money you earn.  Thus encouraging people to continue service after the minimum.

Individuals also put money away from their normal full time job.  I recommend 10% automatically deducted, but that number is not etched in stone and go higher or lower.  Employers meanwhile, instead of paying unemployment, social security, Medicare, etc would pay one lump sum each pay period into the employees personal account.

The total amount paid right now per employee is about .35 cents per dollar of wage in cost for payment of social programs.  I suspect, that the percentage per dollar could be lowered if the money is going directly into a personal account instead of the great abyss of government, so I would recommend setting it an amount equivalent to 25% of an employees wage each pay period.  A natural born citizen can opt out of the program, but all immigrants must complete service in order to be a member of the trust and a full citizen.

Those who opt out cannot receive any assistance from government.

That personal account, which  I call 3SAs for Social Services Savings Accounts; is divided into two parts: retirement and insurance needs.  It turns out that with less than 300 dollars a month in savings at 9% compounding interest you can be a millionaire in 40 years.  Well, most people don’t get 9%, especially these days.  This plan will probably not make every citizen a millionaire, but will guarantee a good retirement for everyone who participates beginning at an early age.

The combination of the personal contributions, employer contributions and the earnings from the national trust would give even a minimum wage employee more than 400 dollars a month in retirement savings and more than 400 dollars a month in the other half of the account, which is your insurance needs account.  This second half is just as important.  This is your unemployment insurance, life insurance, health and major medical and your disability insurance which can be combined with your retirement.

At the current minimum wage ($7.25 per hour) and employee can make $290 per week.  At that rate, the employee would put away 29 dollars a week and the employer would be depositing 72 dollars per week.  Give or take that is one hundred dollars a week into an individual 3SA or about 400 a month, half to retirement, half to insurance needs.  The money coming from the national trust, based on credits earned, would then augment that.  With just an additional 400 per working adult from the trust a person would be in the range of having a very happy retirement after 40 years, maybe even sooner.  It would not take more than 20 years for the retirement account to grow to the point where retirement income would exceed their personal income if they were still working at minimum wage.

The service hours lower the cost of government, the payments lower the long term cost of entitlement programs, augment the personal savings and retirement and keep the money out of the hands of politicians.

So what is the national trust?

The trust is nothing more than an investment board of directors.  In Alaska, they have something called the permanent fund that takes a portion of oil profits, invests them and then pays money to each citizen once a year. Not every place has oil, so governments could theoretically use a portion tax revenue to start the trust and profits from other mineral and natural resources development programs or even taking a percentage of vice revenue.  The point is that the money that is deposited in the trust is then invested in a wide range of instruments from extremely low risk/low return to extremely high risk/high return.  There will be loses.

The trust can invest in local businesses as a partner, not as a government entity and thus collect profits instead of taxing, but it also assumes the risk of business failure.  This would also help stimulate the economy by helping local business prosper and new business to come to the jurisdiction where this is being applied, thus creating real jobs.  The trust also benefits from compounding interest.  A portion of the money is reinvested (I recommend 50% of all new earnings and initial deposits, plus everything already in the trust) a portion goes to help cover the cost of government, (thus helping to lessen the need for taxes) and a portion goes to the individual accounts of participating citizens.

As time goes by, the trust should grow so big that taxes are no longer needed and everyone has their basic social needs met.  This does not prevent people from having other savings or IRA programs and it provides more flexibility in how people use their accounts to take off work for child birth or to return to school or even to care for a sick loved one.

Over multiple generations it will end poverty for all who participate.  This is because inheritance will not be taxed and any money left over in a persons account when they die, will be spread out among their immediate heirs’ accounts.  Imagine that, a government program that could actually work.

Comment below or If you have questions or would like to follow our progress follow us:

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About worleyf

Semi-retired Media Relations guy, former radio and TV reporter and legislative aide. Middle of the road Libertarian (as if that actually existed) who reviews current news items and stories, and offers an alternative point of view.
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3 Responses to Distributive Capitalism explained

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