Circulation of wealth

Malcolm Ramsay malcolm.ramsay at
Thu Dec 23 23:19:37 GMT 2010

In a previous post, Foundations of social justice, I wrote about the political 
changes which I believe would be necessary to bring our current system of 
government into line with the requirements of social justice. I don't believe 
there's any way to bring those changes about directly, but I think it can be 
done indirectly; by creating a 'private' society with a similar structure to our 
existing system but based on slightly different foundations. It would be close 
enough to what we already have that it would be consistent with the historical 
legacy, but it would avoid the features which create a bias towards injustice in 
our current system. It's aim would not be to challenge the existing system, but 
to fill in some of the gaps in it .... and eventually supersede it.

It can only do that, of course, if it can attract enough people that it can be 
regarded as a genuine alternative. I've no idea whether or not what I'm 
proposing will be able to do that, but the only way to find out is to try. 
Conventional wisdom would say it doesn't have a chance, because attracting 
people usually involves appealing to their self-interest, but what I'm 
suggesting does exactly the opposite: it asks people to surrender some of the 
rights they have, under the existing system, to act selfishly - because those 
rights are the root cause of most of the inequality which is so deeply 
entrenched in our world.

I am talking here about a small number of specific rights, which members would 
be expected to formally surrender to the society, either by deed of covenant or 
through a legally-binding contract. For the most part these are rights which, 
for practical purposes, exist only as a result of perverse actions by the state: 
specifically, the right to bequeath inordinate amounts of wealth to your 
descendants; and the right to earn interest (above inflation) on surplus money. 
For many people in this group these are rights which might seem irrelevant, 
because they don't expect ever to be able to exercise them - but I believe they 
are important anyway, for a number of reasons which I'll try to explain.

Critics of the status quo often attack the people who benefit from it - bankers, 
landowners, businessmen and the rich in general - as though they are actively 
and maliciously doing down the poor. Sometimes no doubt they are, but for the 
most part they have no need to - the system works in their favour simply as a 
result of how it has developed, and all they have to do to benefit from it is 
follow the path of least resistance. Most of the time they're guilty of no more 
than turning a blind eye to the fundamental bias in the system - and they 
justify it to themselves with the argument that they're only doing what the poor 
would do if positions were reversed.

And that's a valid argument, because it seems to be largely true; when people 
escape from poverty they are keen both to make their own wealth secure, and to 
spare their offspring the experience of poverty - but in doing so they help to 
perpetuate the factors which create that poverty. Economically there are two 
principal reasons for social inequality: one is the fact that we use a medium of 
exchange which, in its base form, can be taken out of circulation by anybody who 
has a surplus - which allows the rich to charge everybody else (through interest 
on loans) for the privilege of using it; the other is the 'inheritance trap' - 
the fact that landowners can designate their successors without regard to the 
public interest, which allows accumulations of wealth to persist long after the 
person who earned it has died.

These two factors act to hugely distort the natural circulation of wealth. 
Reformers generally focus on the distribution of wealth, but it's the 
circulation which really matters; as long as that's healthy the system will 
automatically come back into balance, but if wealth is not circulating properly, 
redistribution will produce only a temporary solution. And focusing on 
redistribution can blind us to a simple truth: that control of the system is not 
just in the hands of the rich. Wealth constantly flows - naturally - from the 
rich towards the poor, in the form of payment for services, and a healthy 
economy therefore has a tendency towards equality. There is also a constant - 
natural - flow from the passive towards the active (the industrious and 
creative) which creates a counter-tendency towards modest inequality. 

Those two different types of flow create a dynamism in a healthy economy. But, 
as we know, there is also a constant - unnatural - flow from the poor to the 
rich, in the form of rents and interest, which stifles much of people's 
creativity and keeps them in poverty. Cutting off those unnatural flows would 
allow the system to return to a natural equilibrium, within a generation or two, 
without the trauma of redistribution. But because they result from laws and 
customs (of inheritance and money creation) which are deeply embedded in our 
society, there are no simple ways of cutting them off (or, rather, there are 
technically simple ways, but because they can only be implemented by government 
there are no simple ways of bringing them about). 

'Within a generation or two' doesn't make for a very inspiring call to arms; but 
we're looking at a problem which has its roots in the distant past, and which is 
so intractable partly because of the weight of history. It's over 350 years 
since the time of the Diggers and the fundamentals of the problem have not 
changed. If we put all our effort into working for immediate reform, and fail, 
we will leave future generations with the same problems that we've inherited 
ourselves; and those problems will perhaps persist for another 350 years. But if 
we take steps - what steps we can - to make things better for future 
generations, we might find that it also helps us in the present.

The steps I'm proposing - individually surrendering the rights which create the 
problem - will only (individually) make a small contribution; but they cost us 
very little and they don't prevent us working for more immediate reform. And, as 
I envisage them, they will create a virtuous circle. I said above that members 
would have to surrender the right to bequeath inordinate amounts of wealth to 
their offspring, but they would not be prevented from bequeathing 'a fair share' 
- that, however, would be conditional on their offspring also joining the 
society. Anyone joining would therefore be, in effect, permanently withdrawing 
their own wealth - however small it might be - from the pool that the rich 
monopolise, and adding it to a pool which would be governed by fairer laws.

In itself, if only relatively poor people join, this would make for very slow 
reform, possibly taking centuries - but there are various side-effects which 
might speed it up. To some extent, people who care about issues of equality face 
a moral dilemma over earning money, because accumulating wealth can be akin to 
joining the enemy. There are all kinds of ways of reconciling that of course, 
and many people who have escaped from poverty find ways of helping others; but 
when it comes to making their will, most of them, I'd guess, find it easier to 
push aside a vague feeling of guilt than risk the resentment of their children. 
However, if they've made a legally-binding commitment, years earlier, which 
limits what they can leave, then they are spared that dilemma. It might be a 
minor factor, but for anyone who has made a commitment of the kind I'm 
suggesting, accumulating money becomes a positive contribution to the cause of 

The most important side-effects, however, will come from the legitimacy it might 
add, both to demands for reform, and to direct action such as squatting - that, 
I believe, could bring about major reform within fifteen years or so. To 
understand that, it's necessary to look at the relationship between law and 
justice, and the relationship between the courts and the other branches of 
government - I'm going to leave that for another post.

Malcolm Ramsay

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