The inevitable result of these principles would be that the class of employers, who now stand between the capitalist and laborer, and, by means of usury laws, sponge money from the former, and labor from the latter, and put the plunder into their own pockets, would be forced aside; and the capitalist and laborer would come together, face to face, and make such bargains with each other, as that the whole proceeds of their joint capital and labor would be divided between themselves, instead of being bestowed, in part, as now, as a gratuity, upon an intermediate intruder. The capitalist would not only get all he now gets as interest, and the laborer all he now gets as wages, but they would also divide between themselves that sum which now goes into the pockets of the employer. What portion of this latter sum would go to the laborer, and what to the capitalist, would depend upon the circumstances and bargains in each particular case. The probability is that for the first few [36] years after these principles went into operation, capitalists would ask and obtain a pretty high rate of interest. The competition among laborers, in their bids for capital, would produce this effect. But as the general safety of the system should be tested, and as laborers should gradually make accumulations, which would serve as some security for loans, and as the business of banking should be increased, the rate of interest would gradually decline, until—probably within ten or twenty years—capital would go begging for borrowers, and the current rate of interest would probably not exceed three or four per cent. And all the proceeds of labor and capital, over and above this interest, would go into the pockets of the laborer.--Lysander Spooner (1846) Poverty: Its Illegal Causes and Legal Cure,
In Poverty, Spooner attacks usury laws, promotes free banking, and (as I discussed earlier) insists on complete debt forgiveness after a debt is due and been repaid to one's capacity. Thereby, Spooner hopes to promote a more equal economic regime -- he explicitly has in mind the conditions prevalent in early nineteenth century New England -- in which banks and capitalist employers are reduced in significance and a lot of us are independent economic agents with our own capital. He is a fierce critic of conditions that generate poverty and extreme wealth inequality. He argues that his scheme will generate not just higher average income, but also more equality. He thinks the rich will be less productive than autonomous, middle class economic agents. He expects independent workers to more productive than wage-earning workers. He seems to think most firms will be limited in size.* Let's call this a Spooner economy.** This is relatively lightly regulated and with firm property rights and few sources of rent-seeking behavior.
Somewhat surprisingly he does not advocate for an estate tax, and this undermines part of the grounds of his egalitarian optimism. That is, Spooner thinks high returns to capital are primarily due to the structure of the banking sector, the bad regulation of credit, and capitalist modes of production. But he seems to miss the possibility that the wealth of the wealthy may grow at a faster rate than the growth in wages of the rest of us due to the growth of the economy (Piketty's famous formula, r > g). It is an open empirical question, if in a Spooner economy, Piketty's formula holds.
Before I return to Piketty, let me note that Spooner is a critic of financial intermediaries which both (a) profit from other people's labor and (b) because of lack of access to capital among the poor, make (i) wage-labor necessary, and thereby (ii) produce an economic hierarchy that sustains a small class of capitalists and a large working class. (As should be clear he is also a critic of forms of credit that create permanent indebtedness among the working poor.) In addition, and this is clear from the quoted passage above, his moral criticism of financial intermediaries is that the relationship between creditor and debtor becomes an impersonal one; it's not 'face to face.' To adopt Steve Darwall's framework, in a Spooner economy, economic agents relate to each other in the second person. For Spooner production is a joint enterprise among independent and mutually interdependent economic agents with each getting its fair share.+ It is a remarkable vision, especially because it is articulated just as the industrial revolution and the large corporation are taking off full steam.
A natural extension of Spooner's position, while taking unequal initial conditions, or unfair historical legacies, and higher returns to capital seriously, absent significant estate taxes, is a basic capital scheme (as distinct from a basic income scheme). There are many variants on this. Ordinarily basic capital is understood as a 'one-off lump sum of financial capital paid to the individual on maturity' by the state (White 2011). If one recognizes (i) that the largest investors are better positioned to profit from the cost of discovery (Brown et. al.: 2008) and (ii) that better endowed institutions tend to have higher risk-adjusted returns on their investments (Piketty 2014: 570-1), then ordinary basic capital scheme is not sufficient. One should find a way for the non-rich to grow along with the wealthy.*** In reflecting on a Piketty (without fully endorsing all of Piketty's claims), the influential mathematical economist, Debraj Ray, suggested (recall here) that "all [the world's] inhabitants must ultimately own shares of physical capital." (2014) By 'physical capital' Ray means land and financial assets. That is to say, if we want to make the growth of capital a joint enterprise each of us should (have a) share in its growth.
*It's unclear if recognizes that there may be barriers to entry in capital intensive industries; he also seems rather diffident about potential economies of scale.
**It's very similar to a Smithian economy, but Adam Smith is more friendly toward worker regulation and progressive taxes, including estate taxes.
+Some other time I will return to the benefits of impersonal mutual cooperation.
***Again, it's not clear if these empirical relations hold in a Spooner economy.
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