Whatever the reasons, Mr. Saverin demonstrated a serious problem with the idea that it would be easy for the government to raise more money by increasing the taxes on the rich,. It is not easy to pin down the rich and take their wealth. They are mobile and have the power to escape.
Furthermore, the loyalty of the rich is to the markets, generally speaking, not to a place or a political system. Sure, many of the rich will pay a high price to be American, but the higher we raise that price, the higher the number of rich who will leave. Keep in mind that this includes rich companies as well as rich individuals.
If you have read the other works on "The Other Side Of Capitalism," you may have asked yourself who are the rich and who are the poor. Now you have the answer. The rich are those who have the resources to escape from where they are in order to chase opportunities or avoid problems. The rest are poor whether they are called "middle class" or not. That is why the rich are "external" and the poor are "internal," no matter what their personal feelings may be.
So the poor are those who do not have the resources to escape. Generally, they are those who travel very little outside their own country and who make their livings primarily in the currency of their home country. Also, they are generally net borrowers – their debts exceed their cash. (Some would say that their debts exceed their "assets" rather than their "cash," but the events of the Great Recession show for example that house prices can vary widely. One's assets may not be worth as much as one expects when the crunch comes and you have to pay in cash. Your safety net can disappear and you will not know it until it is too late.) Most of the poor belong in the "internal" markets.
Let us not take this metaphor too far about the rich being "external," however. Google is an American company and Warren Buffett is an American citizen, for example. They probably take their American roots very seriously. At the same time, however, Warren Buffett will move capital from America to China if he sees opportunities there. Also, it is commonly known that Google's growth prospects are better in China than in the U.S. As a result, Google finds itself squeezed between freedom of speech and hitting its expected financial goals. We cannot expect Google to be a strong advocate of free speech and the American way if it has to compromise with the Chinese.
The same is true of Warren Buffett, though let us not pick on Mr. Buffett in particular – think of George Soros or Bill Gates if you prefer. In the same way, you may want to think of Ford or Caterpillar rather than Google. The common factor among them is that all of them need to go where the growth is in order to maintain their riches. To the extent that their businesses grow faster in China, for example, their political and business outlook becomes more Chinese and less American.
The consequences of this include not just the growing disparity of income and wealth between the rich and the poor, but the growing divergence in interests and prospects. The interests and prospects of the poor are internal. That is their focus.
The interests and prospects of the rich are increasingly external, yet the rich control not just their own wealth, but also the money of the poor through jobs, bank accounts, retirements accounts, lending, and interest rates. If the best returns are found in other parts of the world, the rich will want to invest everyone's wealth externally. The poor might prefer to earn some lower returns in order to maintain jobs locally. Since the rich control the money, their interests prevail.
The rich and the poor are no longer pulling together in the U.S., they are pulling apart. The rich will move on to their external interests and take the money with them. There is no way to bring them back because the loyalty of the rich is to the global markets and the loyalty of the poor is to their internal markets.
This is not so obvious in the United States because the nation is so rich. It becomes obvious in the case of some of the leaders of poor countries, where they impoverish their own people and ruin their national currency so that they can become rich in dollars or euros and invest their wealth elsewhere. That is what happens when the rich control the currency split between rich and poor. Better for the American people to anticipate and control this process before the rich do.
The best way to do that is to cut the cord and start using separate currencies now. If the rich cannot own or control the currency of the poor, then the link is broken and they cannot misuse, misappropriate, or threaten the wealth of the poor, and they cannot threaten the economy. With separate currencies, their mistakes and misdeeds affect primarily themselves.
The rest of society can never adequately tax or punish the rich because the rich usually influence policy more than the poor. (Most politicians are rich, or are becoming rich, after all.) Also, the rich can run away if all else fails them. Therefore methods that use law in the attempt to solve these problems are only temporary and are only partially effective.
We should not hate or despise the rich for all this any more than we should hate or despise gravity for pulling us down. It is a natural result of their positions and identities, and most of us would like to be rich, too. What we need to do instead is separate ourselves from their external interests and keep them from using our own capital against us. We cannot do that while there is only one type of money and the rich have control of it. What we need are separate currencies controlled by the internal majority.
TheOtherSideOfCapitalism
(tosoc.org)
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© 2012 TheOtherSideOfCapitalism
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