12 December 2007

Future Abundance

Yesterday, Hillary Clinton and Warren Buffet spoke out against ending the inheritance tax. Good for them. As I grow older, I'm more inclined to think that we ought to get rid of income tax and capital gains tax and simply tax estates at 100%. If even the rich knew that their children would have to make it on their own, they'd perhaps be less sanguine about a social system calloused about the plight of the poor. And, each generation would be forced to make it on its own - something that would be easier to do in the absence of tax on work and investment. (Reflecting on Paris Hilton's life style of inherited wealth, I'm reminded of the quip from the 1980s: cocaine is nature's way of saying that you have too much money.)

What Clinton and Buffet are working against, is compound interest. Left unchecked, wealth can accummulate across generations to create enormous wealth, a group separate from the average joe. But this raises real concern raises for me a curious possibility.

Put on your futurist hat for a moment. Let's assume that population growth slows, even stops. (In much of the industrialized world, birth rates have fallen below the 2.1 babies per woman level needed to keep population levels stable. Literacy and economic opportunity have proven to be the surest forms of birth control.)

Meanwhile, assume that the economy continues to grow, returns to capital compounding as wealth builds. Assume that policy makers make a sincere effort to reconcile themselves with the need for sustainability and we create an economy not hell bent on eventual collapse.

Doesn't this suggest a future in which abundance is common? Where everyone is born with a net worth of millions? (Just do the math. Einstein said that compound interest is the most powerful force in the universe. If wealth grows by, say, 7% a year against a stable population, it is only a matter of time before wealth is a given.)

Of course, your initial reaction to this might be incredulity, just as generations ago a human being would have been incredulous at the thought of the availability of more food than one can eat, year around. We all are stuck in our own time and find the notion of changes to it inconceivable, but in truth every state has been transitory.

There is a great quote I've heard from Russell Ackoff and Peter Drucker (two of the finer minds of the 20th century). "Profit is to a company like oxygen to a person. It's necessary, but by no means the purpose." Money is to a person what profit is to a company. Every life is a meditation, and ours tends to be focused on money and goods. But what would we be confronted with if we were suddenly to find ourselves living in abundance? Where would your focus go then? What would it mean to be a success if money became irrelevant by its abundance?


ThomasLB said...

But if everybody has money, will money be worth anything anymore?

Diamonds, for example, are only valuable because they are scarce. If they were lying along the road where anybody could pick one up, then you couldn't give them away.

In a world where everyone has piles of cash stashed everywhere, will anybody be willing to trade goods or services for it?

Life Hiker said...

100% estate tax? I love the estate tax, but only for those who have more estate than me - ha, ha!

If there was such tax I would be a lot more generous to my kids before I died. That might be a good thing.

I still think we need a nice tight estate tax without the loopholes that the wealthy use to avoid it for several generations...and if it included me, a well off but far from rich guy, so be it.

As far as your conclusion goes, I'm not so sure I agree that everyone having wealth is such a good thing. Perhaps in conjunction with technology that produces "things" sans labor that would be OK. Then status would be achieved from positive creativity, I would hope...or would our culture just go into the sewer? Hard to bet on that!

David said...

I agree with you here Ron. Passing money on should be restricted if we would actually lift the current annual taxes (or some of it anyway). I know this won't please you coming from me.