Wealth Redistribution
When we hear the term "Wealth Redistribution", we can easily formulate an intuitive description of the concept. That intuitive description is not wrong, but it is not precise. This chapter makes the intuition precise. We will discuss the need for wealth redistribution, its conceptual implementation, and the problems tackled by wealth redistribution.
An Overview
Intuitively, wealth redistribution is taking some of the wealth owned by citizens and distributing such collected wealth among all citizens.
When thinking about wealth redistribution, the intuitive one-line description merely conveys the thought, but fails to answer many questions. Some people may even question the validity of such a concept, some may question the feasibility of implementing it. Overall, there are many aspects that the one-liner does not address.
The primary questions are about the ethical validity and legality of wealth redistribution. The section "Need for Wealth Redistribution" answers these two questions. It discusses the need, more specifically, the ethical need and validity of conducting wealth redistribution. It discusses that doing so is perfectly legal in an ideal society.
The section "Conceptual Details of Wealth Redistribution" discusses the kind of wealth that is subject to wealth redistribution, identifies the givers in wealth redistribution, and identifies the receivers in wealth redistribution. It clarifies that wealth redistribution is not a one-time event, but an ongoing activity. It specifies the proportion in which wealth is given and received. Finally, it mentions, with reasons, that wealth redistribution is a fully automatic activity conducted by the ideal society.
The section "Problems Tackled by Wealth Redistribution" points out that the presence of wealth redistribution puts a lower bound on how poor a person can get. But, its effect is small, and hence, wealth redistribution alone does not solve all wealth inequality related problems. Other Utopian systems are also required to actually make the society ideal.
Would current societies support wealth redistribution? What would the current wealthy feel about wealth redistribution? The section "From the Current Perspective" discusses these questions.
Need for Wealth Redistribution
What is the need for wealth redistribution?
As discussed in the "Clarifying Utopia" chapter, it is in the best interest of society to allow its citizens to possess wealth individually. The need for wealth redistribution becomes clear when one considers newborn citizens and the wealth that such citizens can possess in their lifetime.
Let us assume that a country automatically bestows citizenship on any child born within the borders of the country or bestows citizenship to a child born to a parent who is a citizen of that country regardless of the country of birth of the child. Thus, newborn children are citizens, and citizens are owners of the society.
Moreover, we can also assume that upon the registration of birth, in addition to granting citizenship, the society creates an "account" for these citizens. This account will have no money in it at this stage. At the time of birth, these citizens have no wealth at all; they are the poorest of all citizens.
The relatives of such newborn citizens may give them some money as gifts, and that money can be deposited in the account. If this child was born to parents with below average wealth, it is unlikely that these parents will be capable of passing on to their children any money that even comes close to being the average wealth in the society. That inheritance also comes after the passing of the parents, which in most cases is several decades after the birth. There is a low probability that a randomly chosen citizen would get close to average wealth just by means of inheritance. Only the heirs of wealthy parents have this opportunity; that too much later in their life.
Such a citizen will grow up, become an adult, find employment, start earning money, and possibly accumulate some of it. Will the accumulated money of any such citizen reach the average wealth in the society? Based on the discussion in the "Reasons for the Rich Getting Richer" chapter, this has a very low probability for citizens born to poor parents. If society does nothing, then such citizens never have an opportunity to own, possess, and use a fair share of the privately owned wealth within the society.
Note that the fair share is the same as the average wealth of citizens in the society. Also note that citizens who are children of parents with below average wealth also have a less than 50% probability of accumulating wealth that equals the average wealth of citizens in the society.
Society expects every citizen to be law-abiding. Most important aspects of being a law-abiding citizen is not harming others, not stealing others' property and paying taxes.
These expectations also apply to newborn citizens as they grow up. What should a newborn citizen expect in return from society?
The most basic part of this expectation should be that newborn citizens get their fair share of the privately owned wealth in the society; after all, they too are the owners of the society, and it is not their fault that they were born after all the privately owned wealth was divided up among previously born citizens. As owners, newborn citizens have a claim over the wealth of the nation; and this includes the privately owned wealth in the nation.
The only way that newborn citizens will be guaranteed to be able to possess their fair share of the privately owned wealth in the society is if the society gives it to all such newborn citizens. When we say "society gives it", we mean "wealth redistribution".
The above discussion expresses the need for having wealth redistribution for the newborn citizens.
At the time a society sets up a wealth redistribution system, existing citizens will have differing amounts of the privately owned wealth in the society. All these citizens also are owners of the society, and their most basic expectation from the society should also be to get their fair share of the privately owned wealth in the society.
Fairness implies that a society should not discriminate between existing citizens and citizens born later. Hence, the wealth redistribution system designed by a society should not discriminate between citizens based on when they were born.
In fact, an ideal society should not discriminate at all. This is because the society would not be an ideal society if it discriminates between citizens in fulfilling the citizens' most basic expectation that they get to possess their fair share of the privately owned wealth in the society.
The above discussion expresses the need for having wealth redistribution for all citizens of the society.
Do we have the authority to implement wealth redistribution?
By axiom 3, citizens are the owners of the society and everything in it. As owners, citizens have the authority to decide about everything in the society. It is by this authority that societies allow private ownership of some of the wealth in the society. It is by this authority that all the laws and regulations in a society get created, amended and discarded. It is by this authority that societies levy taxes. It is by this authority that a society can expect its citizens to be law-abiding. It is by this authority that a society can punish those who violate the laws and regulations.
By this same authority, a society can and should conduct wealth redistribution.
Conceptual Details of Wealth Redistribution
In this section, we will discuss the conceptual details of wealth redistribution. The implementation details are explained in the "UFI Book".
Only the privately owned wealth is being discussed in the context of wealth redistribution.
Societies have a concept of ownership. Some things are owned by the society and some things are owned by entities within the society. To put it simply, if it is owned by the government, then it is owned by the society, otherwise it is owned by some entity within the society and hence it is classified as privately owned.
Since all wealth that is owned by the society is always available for the use of the entire society, this wealth is not a candidate for wealth redistribution. As an implication, only the privately owned wealth is subject to wealth redistribution.
Note: All this privately owned wealth is owned by different kinds of legal entities within the society. Citizens are the main kind of legal entity. There are other kinds of legal entities that also own some of the privately owned wealth in a society. For example, there are self-owning entities like trusts and foundations, which own wealth but no one owns them; they are just managed by some humans in meeting their established objectives. Examples of non self-owning entities are the privately owned organizations and the publicly owned organizations; these are legal entities owned by other legal entities.
Note: If a trust or a foundation is owned by some other legal entity or entities, then it should be classified as just a privately or publicly owned organization.
The receivers of the wealth redistribution will only be citizens.
No other legal entity within the society will receive it. This excludes organizations, trusts, and foundations from receiving wealth from wealth redistribution. This also excludes pets, and other artificially created sentient beings.
As per Axiom 1, Utopia is for the benefit of all humans. So, first we need to adequately take care of the benefits of humans, and besides wealth redistribution there are many other things to be accomplished to sufficiently address the benefits of humans. We can think about expanding the scope, as an intellectual exercise, but we cannot actually expand the scope of wealth redistribution till we have adequately taken care of humans.
It is possible to put forth an argument that the self-owning entities, like trusts and foundations, are intended for the benefit of humans, and hence they too should receive wealth redistribution. But, that argument is flawed because it fails to observe that by including all citizens as recipients of wealth redistribution, we are already benefiting all citizens, and hence there is no need to give any part of the wealth redistribution to the self-owning entities.
The givers for wealth redistribution will be only the citizens and the self-owning entities.
All privately owned wealth, that is not directly owned either by some citizen or by some self-owning entity, is owned by some privately or publicly owned organization. Any wealth owned by a privately or publicly owned organization is indirectly owned by citizens and self-owning entities combined. Hence, we need to consider only the things owned by citizens and self-owning entities, and that will account for all the privately owned wealth in the society.
The wealth owned by self-owning entities is subject to wealth redistribution because these self-owning entities can exist only within the society, they can function only within the laws and regulations of the society, and they enjoy all the protections of the society, and hence they have a duty to fulfill towards the society, and that duty includes paying any and all kinds of taxes that the society imposes on its citizens and other legal entities.
The fair share of each citizen is equal to the average wealth of citizens.
Every day, we can calculate the current value of the wealth possessed by every legal entity. From that, we can know the wealth of every citizen and every self-owning entity. From this, we can calculate the total privately owned wealth of the society. We will also have data about all citizens, including births and deaths. Based on this data, we will know the number of citizens. From these numbers, we can calculate the average wealth of citizens in the society.
AverageWealth = TotalWealth / NumberOfCitizens
On any given day, if we were to do full-scale wealth redistribution, then on that day, everyone will give up all their wealth and receive an amount equal to AverageWealth. Obviously, we will not do such a thing because it does not address the claim over the wealth of the citizens that are born after this day. However, this sort of consideration provides us with the AverageWealth as the fair share of each citizen.
If we choose any amount other than the AverageWealth, then that choice will have some level of unfairness.
Citizens will gradually receive their fair share from the day they are registered as a citizen till the day they cease to be a citizen of the society. Every day, citizens will get one day's worth of their fair share.
The obvious way a person gets registered as a citizen is that they are born a citizen of the society. Similarly, an obvious way a citizen ceases to be a citizen of the society is when they die. There are other ways in which people can become citizens and cease to be citizens of a society; see the "UFI Book" for some such cases.
Society maintains birth and death records. On a daily basis, we examine the death records in the past few years, and based on the age at the time of death of all deceased citizens in those past few years, we can calculate the most recent average number of days in the life span of citizens.
To compute a day's worth of the fair share of average wealth, we will use the number of days in the life span of citizens as follows:
DailyFairShare = AverageWealth / AverageLifeSpanInDays
The number of past few years to consider for the above computation is a policy parameter that citizens can collectively set. Its initial value can be 10 years. We can give this policy parameter a meaningful name, like "AverageLifeSpanReferenceYears".
Note that the fair share for each day is the same for all citizens. In order to be fair, we should not use any criteria to discriminate in giving the fair share to citizens. The above computation does not contain any such criteria. Thus, the wealth collected for wealth redistribution is equally distributed among all citizens. Thus, the rich and the poor get exactly the same amount every day.
The amount of wealth to be given for wealth redistribution will be proportional to the wealth possessed.
Fairness implies that when doing something, it should not be discriminatory. So, everyone needs to contribute to the wealth distribution.
On a particular day, we can compute the amount of total wealth in a society, and then we can compute the amount of wealth that should be shared on that particular day. Since citizens and self-owning entities possess this total wealth in different proportions, their fair share in giving for wealth redistribution is in proportion to the amount of wealth that they possess.
On any particular day, for a citizen or a self-owning entity, the daily contribution amount towards wealth redistribution is given by the following formula:
DailyContribution = CurrentWealth / AverageLifeSpanInDays
Wealth Redistribution will be automatically implemented.
In the context of wealth redistribution, the word "automatic" implies that the amount shared by the sharer will be automatically "taken" by the UFI, and not voluntarily "given" by the giver. The "sharers", in this context, are the citizens and self-owning entities. There are two good reasons for automating this activity.
Here is the first reason: If sharing one's wealth was a voluntary duty, then many people will fail to fulfill it because they simply cannot do it. If it were a duty, then someone has to take some amount of effort in fulfilling it. This effort is mostly in the form of meticulous accounting. Some citizens may be capable of doing all that work, and also interested in doing it. But, most citizens would neither be interested in doing it, nor would they be capable of doing it. For example, young children would be incapable of fulfilling this duty. We would like the less capable and the more capable to be on par with the effort that they can and need to expend in fulfilling this duty. This leads to the thought that we should automate the collection of money for wealth redistribution. Automating this task ensures that no citizen, due to their inability to do proper accounting and planning, will ever fail to fulfill their duty.
Here is the second reason: We do not want to deal with the very real possibility that many people will make mistakes in the calculations and give less than the amount that they ought to give, and hence will arise a need to set up an auditing system and personnel to catch such mistakes committed by individuals, and after catching those mistakes that system will have to force corrective and punitive actions on them.
Thus, we will set up a system that does all the calculations and "takes" the money for wealth redistribution, rather than citizens having to "give" the money after doing all the calculations. The "UFI Book" discusses this in great detail.
A daily implementation makes the wealth redistribution a continuous stream of money flow within the society. Every day, very little of one's own wealth is shared with others. Every day, very little of one's entire fair share of wealth is received. The daily frequency does not cause abrupt ups or downs to the net wealth of any citizen. It is predictable and it is gradual.
One final point regarding the implementation: The cost of implementing the wealth redistribution is not paid from the money taken for wealth redistribution. The cost is funded from the general expenses of the society, and those are funded from wealth-based taxes.
Problems Tackled by Wealth Redistribution
With the presence of wealth redistribution, every year, every citizen and every self-owning entity contributes 1 part out of AverageLifeSpanInYears parts of their wealth towards wealth redistribution.
If the AverageLifeSpanInYears were 100 years, then every year, we will redistribute 1% of the privately owned wealth within the society. If the AverageLifeSpanInYears were 50 years, then every year, we will redistribute 2% of the wealth. More realistically, the AverageLifeSpanInYears is closer to 75 years, and hence, every year, we will redistribute about 1.33% of the wealth.
If one considers these percentages on a daily basis, then the percentages get divided by 365, and that results in a tiny percentage, which translates to tiny amounts of wealth on a daily basis.
What good will daily wealth redistribution in such tiny amounts achieve?
The existence of wealth redistribution puts a lower bound on how poor a citizen can get; because, every day, each citizen gets their daily fair share of wealth. Wealth redistribution alone is capable of reducing the speed at which the rich keep getting richer.
However, wealth redistribution is not sufficient to achieve Utopia. On a daily basis, the amount received by each citizen, due to wealth redistribution, is not enough for even a day's worth of living expenses for a citizen of average standard of living. This is because, even our current average standard of living is not just based on wealth and its depletion; it is based on the work we do and the various benefits and conveniences that we derive from such work.
Wealth redistribution combined with wealth-based taxes will halt the increasing wealth inequality. Over time, it also will bring the distribution of wealth closer to normal distribution; currently this distribution is skewed towards the rich.
Currently, citizens can get into negative wealth; that is, citizens can land in a situation where they owe someone an amount that is more than everything that they own. This sort of situation can lead to bankruptcies. In the past, this sort of situation has led to indenture and servitude. Wealth redistribution, combined with "Lending and Borrowing" features mentioned in the "UFI Book", implies that citizens cannot ever get bankrupt.
Wealth redistribution alone does not make an ideal society. Other systems are required.
From the Current Perspective
Currently, societies do not engage in wealth redistribution at all. When a society does not undertake wealth redistribution, society is willfully denying the poor citizens an equal opportunity in possessing the privately owned wealth within the society. This is because there is a low probability for a very poor person to earn a high income for a sufficiently long amount of time to accumulate enough wealth so that the citizen can become a citizen of average wealth.
So, current societies will need to accept that wealth redistribution is desirable. Acceptance of the need for wealth redistribution demonstrates that people desire to live in a much better and fairer society, and for that they are willing to be net givers if they happen to have more than average wealth.
Would current societies support wealth redistribution?
Based on the current levels of wealth inequality, about 70% of people will have wealth less than the average wealth. Hence, about 70% of people will be net receivers of wealth and about 30% of people will be net givers of wealth. There will be a few percent of people whose wealth will be very close to the average wealth.
The 70% of citizens, who currently possess less than average wealth, would readily support wealth redistribution; because it is in their self-interest.
For those citizens who possess wealth that is very close to the average wealth, wealth redistribution makes no material difference in their current situation. In forming their opinion, from a self-interest perspective, they will consider the probability that their wealth decreases and compare that with the probability that their wealth increases. But, if these individuals consider their children and their future generations, and their descendants' probabilities of being above or below average, then their choice would lean towards wealth redistribution.
What would the current wealthy feel about wealth redistribution?
In any society, there will be a minority percentage of people who currently possess significantly above-average wealth. All of these will be net givers if we implement wealth redistribution at this moment. Based on their immediate self-interest, many of these will not be in favor of wealth redistribution.
Of all the people who will be net givers, some may find it hard to see the fairness in wealth redistribution. They need to realize that the wealth that they have either inherited or accumulated and now possess is possible only because they live in a society that protects property and property rights, and also because they have some advantage over others, and they live in a society that helps them use this advantage to get rich, and hence they could be rich. Once they realize this fundamental nature of being part of such an enabling society, they would better appreciate the give and take nature of society. It is then that they would be able to empathize with a child born in the poorest 25% of the families, realize that it is not the child's fault that they are born without a silver spoon, and thus realize the fairness of wealth redistribution.