Dear Friends,
It seems to me, another thing most countries could do to improve their economy, would be to establish a Capitalist Security System (CSS). Such a system would be completely different than the typical social(ist) security system (SSS) we have now. Some of the ways they differ are, CSS would invest and add to the stock of capital available for growth; while SSS steals from the capital stock, CSS would add to generational wealth; while SSS steals from generational wealth, CSS gives every man woman and child a stake in society; while SSS gives people a stake in more powerful government, to take the taxes needed, etc… If a country redirected the funds now going into all the SSS in that country were instead turned to a CSS, that nation’s economy would reap huge rewards, incentive wise, in productivity and capital available for new companies. Everyone would benefit with each successive generation reaping ever larger rewards while contributing to the economic success of their countries.
We all know how SSS works but I’ll explain it for those who might not be sure.The Social(ist) Security System is a system, where the government takes money from those young enough to work and the businesses that hire them, then gives some of that money to those who have reached an age deemed too old to work. The money goes through various bureaus of government and some of the money stops there to fund those bureaus. Some of the money gets caught in the sieve of corruption and conniving that surrounds every government bureaucracy and stops there funding corruption. The rest gets to those on government pension. The system is expensive because so many hands are in it, it fuels corruption with government money, it is unsustainable, it takes capital from producers and redistributes it to non producers… among many other problems.
A CSS would operate very differently. A Capitalist Security System would not invest in government’s power, as does typical social security, Capitalist Social Security would instead invest in the power of the market through dividend paying stocks. Initial funding would be through legally required investment of a portion of one’s income, or perhaps a .5% tax on consumption, (Sales tax). It would be run by an algorithm that buys dividend paying stocks the world over based on several criteria, one of which would be longevity of the business model and of dividend history. The fund would grow by reinvesting the dividends and selling stocks that under perform via dividends. Once the first generation reached the requisite age, then it would pay out 50% of the dividends to the retirees and reinvest the other half. A person’s portion of the income stream from the fund would transfer to their heirs upon their death as the pensioner see fit. The heir could then start receiving payment immediately or allow their portion to grow and get larger payments later, say when they retire.
It would probably be administered by a bureaucracy in government, but it doesn’t need to, it could be administered by some financial firm, the operation of the CSS fund being awarded by competitive bid based on the firm’s fees. There would have to be special tax exemptions for the fund. One tax exemption would be to stop the double taxation of dividend income. Either tax the company or the investor, not both. In the case of CSS the company would pay the income tax, (if there is one) and the fund would face no tax penalty. The investor should not be taxed on the income he or she gets out of the fund, since the corporation already did, and the fund itself is just an agent of the investor. In the case of the CSS fund the investors would be everyone.
The economic advantages should be clear for anyone to see. One would be the strong incentive for companies to reinvest in plant equipment and training. Else they run the risk of being sold by the CSS fund which would be the kiss of death to a company’s stock price. The huge fluctuations in the stock market would be diminished due to the fact the CSS fund wouldn’t sell it’s stocks in a panic, the incentive for companies under such a system would be to pay dividends as well as grow the company. Another advantage would be that pay for corporation bigwigs would face downward pressure, because if too much is sucked off today the power of shareholders to demand more of the company’s profits given to them as dividends is far too diluted by various factors, but if a giant fund such as the CSS showed displeasure at the high pay of a CEO the firm would toe the line. Perhaps most importantly, in the real world, SSS must eventually fail, because government will eventually run out of other people’s money to take, but a CSS would be self sustaining and grow organically. The list of economic advantages is endless for a Capitalist Social Security System.
With human like robots coming on the scene sooner than people realize, (20-40 years) this will be a phenomenon that will eventually drive the unit cost of labor to zero. A zero cost of labor will usher in a completely new paradigm for humanity. Maybe for the better and maybe for the worse but it will be different than anything that has come before. For a leader in government to see this and envision a means to stave off the possible starving masses, that such a situation could give rise to, shows vision. A Capitalist Social Security System could be just such a means to keep future generations, who will have lost the ability to sell their labor in the open market for wages, a means of sustenance. A means of sustenance that will grow with each generation. Like I said, “ another thing most countries could do to improve their economy, would be to establish a Capitalist Security System.”
Sincerely,
John Pepin
