Wednesday, January 20, 2016

I fight against inequality, on the side of the opportunity enablers, not on that of the wealth redistribution profiteers

Around the world, government market interferences and many other inequitable arrangements, is  generating a dangerous inequality that will come back to bite us all... innocent or not.

But I come from a country, Venezuela, where a Minister of Education belonging to Hugo Chavez 21st Century Socialism stated: “The campaign against poverty should not help to move up the most needy to the middle class, since that could cause these to become ‘escuálidos’”, meaning opposition. 

In my homeland I now fight for the sharing out of all net oil revenues in equal parts among the citizens. That so that the government who currently  receives 97 percent of Venezuela´s exports, don't use those revenues to enrich itself and torment the citizens.

Thinking back, what got me started on that, was an experience as the first diversification manager at the Venezuela Investment Fund that was supposed to manage oil revenues, 1974,  a post to which I resigned after only two weeks, having convenced myself it was all just a cover up for politicians and technocrats to do what they wanted with our oil revenues.

So, as you can understand, I have experiences which lead me to believe that the worst part with taxes, is quite often not the tax evader, nor the taxman, but the tax revenue abusers. And so, when thinking about the need of fighting inequality, the last thing I want is for that fight to fall into the hands of any wealth redistribution profiteers... be those profits financial or political.

So what could we do? Perhaps all of us citizens could deposit annually 10% of our income and 1% of wealth in a Big Pro-Equality Pot, and thereafter just share it all out in equal parts among all of us citizens. There should be no or absolutely minimum government intervention, and the operations could be contracted out to the debit card company that charges the lowest fees. Any citizen paying into the pot more than what he receives, should of course be able to deduct that difference from his ordinary taxes.

The beauty of that wold be that since the Pot would be strictly a citizen to citizen responsibility, which did not involve any Sheriff of Nottingham taxman, it would be so much easier to apply social sanctions for its avoidance.

But, much much more important than any ex-post wealth redistribution, is the ex ante enabling of opportunities, since only that could  help us all to move forward.

For instance I have been fighting for soon two decades, against the credit-risk-weighted capital requirements imposed by bank regulators that favors the access to bank credit of The Safe, like the “infallible sovereigns”, the AAArisktocracy and housing. And that thereby odiously discriminates against the access to bank credit of "The Risky", like SMEs and entrepreneurs.

What got me started on that was when in the mid 90s I began to suspect that a dangerous credit-risk aversion was being imposed on our banks by the Basel Committee for Banking Supervision. And then reading the following passages from John Kenneth Galbraith’s “Money: Whence it came where it went”.

“The function of credit in a simple society is, in fact, remarkably egalitarian. It allows the man with energy and no money to participate in the economy more or less on a par with the man who has capital of his own. And the more casual the conditions under which credit is granted and hence the more impecunious those accommodated, the more egalitarian credit is… Bad banks, unlike good, loaned to the poor risk, which is another name for the poor man.”

“For the new parts of the country [USA’s West]… there was the right to create banks at will and therewith the notes and deposits that resulted from their loans…[if] the bank failed…someone was left holding the worthless notes… but some borrowers from this bank were now in business...[jobs created… It was an arrangement which reputable bankers and merchants in the East viewed with extreme distaste… Men of economic wisdom, then as later expressing the views of the reputable business community, spoke of the anarchy of unstable banking… The men of wisdom missed the point. The anarchy served the frontier far better than a more orderly system that kept a tight hand on credit would have done…. what is called sound economics is very often what mirrors the needs of the respectfully affluent.”

What could we do about that? Obviously getting rid of those credit risk weighted capital requirements for banks, and just have one single capital requirement, perhaps 10 percent, on all assets.

But unfortunately, when I hear about “we have to fight against inequality”, I hear much too often the voices of inequality profiteers, not at all interested in either enabling opportunities or redistributing efficiently.

PS. There's a world of difference between a redistribution of wealth cost of let us say 2 percent and one of 80 percent.

PS. #WEF #Oxfam #Davos What is the wealth of 62, $1.76 trillion, divided by 3.6 billion? What happens the day after if that inequality is gone? The problem is not that some are wealthy but if how they became wealthy blocks the opportunities of other.

PS. My Tax Paradise

PS. In fact “The wealth of 62 richest equals that of 3.6 billion poorest” is a deviously false and odiously divisive statement 

PS. Universal Basic Income is being studied and the redistribution profiteers will do all they can to have it fail.