Rich Man, Poor Man, Beggar Man, Thief – but Who Is Who in the Capitalist Economy

The thesis of this paper is that a free-market capitalist economy is biased against supplying basic needs of poor consumers and also biased against creating inventing and using green technology. We begin by identifying the patterns of perverse logic in the system of market supply and in the process of technological advance under capitalism. The first pivotal problem is that economic decision makers place too high a value on the time of the current generation of workers. Hence capitalist markets create and use technologies to produce goods and services that are geared to saving worker and consumer time, instead of being geared to conserving scarce non-renewable resources. A second bias arises because of the existing inequality of wealth and the differential price of time between the rich and the poor. Demands for positional goods for the rich, which are time saving and resource using, crowd out demands to meet basic needs of the poor. Entrepreneurs react by satisfying the dominant, but wasteful, market demands of the rich, both in current supply and by responding to incentives to invent new products and processes that appeal to the rich. This has a further consequence in accentuating inequality, as prices fall and quality rises for products subject to innovation, and in driving up the relative price of skilled labour yet further, refueling the cycle of labour saving innovation at the expense of the environment. Policy to redress these perverse pressures must be far more radical than those currently under discussion in either the ‘Green’ or the ‘Poverty’ forums. We argue for rethinking definitions of private property rights, to attach more importance to use rights than to ownership rights, where the corollary is that lack of use can cause loss of ownership. Although a wealth tax is an obvious first step in reducing the power of the rich to distort production towards resource intensive goods, it is never likely to be sufficient. Within consumption and production, policy should aim to increase the rate of utilisation of all durable consumer goods and productive capital. This requires incentives which promote rental markets for privately owned durables and restore shift working to ensure better capacity utilisation. The taxation of production could also change: incentives to business should be restructured to maximise the use of renewable resources, particularly of unskilled labour, and minimise the use of materials intensive techniques leading to the depletion of reserves and the creation of waste products. Finally the rewards to invention and innovation, whether through R&D tax credits or the award of intellectual property rights, must circumvent the present bias of invention for today’s rich in order to address the needs of today’s and tomorrow’s poor.