Re-distribution of wealth, what is it, and why it matters

First, thanks for everything, please keep up the good work! I would be interested to see your explanation of tax, what is is for and why it is needed. There is a lot of talk about not taxing corporations, and about a flat tax rate for everyone else. There has also been a lot of talk about removing inheritance taxes. I'd like to see a clear reasoning of why re-distribution of wealth is important, why the U.S. in particular has lost it's way, who taxes are for and why. I think people in the the U.S. especially have no clear vision of why tax matters and why re-distribution of wealth is important for society.

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Redistribution of wealth, especially via the tax system, is widely practiced and has been for a long time. Its cause is located in the social consequences of great inequality of wealth distribution: these include social tensions and conflicts between haves and have-nots over the divergent qualities of their lives (and those of their families) depending on where they fit into the distribution of wealth. So basically to keep these tensions and conflicts from exploding into civil war - very dangerous for the wealthy since they are always a small minority where wealth is very unequally distributed - redistribution is demanded by the non-wealthy and accepted by the wealthy as a lesser evil than risking losing their wealth in civil conflict. But redistribution, even after being accepted, is grudgingly accepted, resented, evaded, and eventually undone by the wealthy until, once again, the rest of society rebels and demands redistribution.

Because capitalism as a system has always generated ever wider gaps between the wealthy and everybody else (see work by Thomas Piketty and his fellow economists over recent years), capitalism has been beset by demands for wealth redistribution in virtually every country. The results vary from country to country depending on the relative strengths of political forces, cultural traditions and so on. Tension over redistribution infests every capitalist country. Over time it becomes difficult for people living in them to see the basic absurdity of capitalism plus redistribution. It breeds social tension, conflicts, struggle and eventually violent upheavals.

Far more rational that endless redistribution struggles would be to not distribute unequally in the first place. Then redistribution and all its unwanted social consequences would become unnecessary. But to do that rationally preferable social arrangement requires ending or going beyond capitalism to a system that has built in mechanisms to distribute income and wealth much less unequally than capitalism fro the outset. An economy based on worker coops, where the distribution of net income in each enterprise is decided democratically by all the workers there, would never distribute net incomes chiefly to a few (top executives and major shareholders0 at the expense of the many....and thereby avoid the social need for conflict-ridden struggles over taxes and their redistributive effects.

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  • Richard Wolff
    responded with submitted 2017-03-19 20:05:32 -0400
  • Aron Cox
    published this page in Ask Prof. Wolff 2017-03-19 11:02:12 -0400